Presale Markets

Paper Summary:

This thesis focuses on the presale real estate market and the role finance plays in this niche sector, particularly to answer the question, "How can I price an asset in the presale marketplace?" The paper also examines the following issues: why there is a presale real estate market and how it works; the presale market in the U.S., Asia, and Europe; the effects of down payments; the option value theory and real estate presale; and why can the asking price for an unfinished building be more than that for a finished building? In addition, the paper considers other financial aspects of presales, both for the buyer and the purchaser.

From the Paper:

"In order to understand the dynamics of presale property, it is important to be knowledgeable about the development process itself. When a developer has executed an option agreement for a potential development site, they must complete a preliminary market feasibility study. This is a study to determine the demand based on demographics such as population and to determine the residential needs of an area. This type of analysis is critical for the feasibility of any proposed development. The need for housing, the estimated population growth and the annual income per household are all important demographic information for helping to determine the presale pricing and contract."

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