Completed buildings that still have homes unsold are also often referred to as Presale since they’re still being purchased brand new and directly from the Developer.
Potential increase in value before completion: This allows the buyer to put down only deposits and potentially watch the home increase in value before even having to complete the sale, take on a mortgage, condo fees or property taxes. Many people in Vancouver have done very well financially buying into presales and selling them after they’re built in markets where home values have been increasing.
Brand new home: The appeal of having a home that is brand new and never lived in is a big draw for Presales.
Wider selection of choices: A good building, in a good location, by a reputable developer will always have relatively strong demand for it. Purchasing at the presale stage allows you to choose from a wider selection of available floor plans, size ranges, views, floors of the building, outdoor spaces, customizations & more. Waiting until the building is finished and purchasing on the resale market will not present as much selection and you will have to pick from the listings available at any given time, which may not be your ideal choice in the building were you to have more selection.
The latest trends & technologies in the building: The newest developments tend to be on the leading edge of the newest interior design trends, construction trends, environmental building techniques and more. Buying into a new presale instead of an existing building may simply give you more “new stuff”.
Time to save: Being able to pay deposits in spread out installments, and not having to start payments for mortgages, condo fees & taxes often allows a buyer to ease into home ownership when buying a presale. This works particularly well for first time buyers currently living at home, as it gives them an excuse to save up and time to plan out all of the details.
Time delays: Presale developments come with estimated timelines and can vary a lot. When purchasing, you need to be flexible with your completion needs and aware that it may be earlier, or more often later than you’re expecting when you make the purchase.
Deposits being held up: Your deposit payments are held in trust accounts and legally protected by the Real Estate Development Marketing Act (REDMA). Although they are protected by this, it’s still money not in your pocket and should the development have delays or not complete your money has been tied up for long periods of time.
Changes from the original terms: Although most developers try very hard to deliver on their promises and keep a good reputation, there are times when things can change and the final home will be slightly different from what you expected. Presale contracts generally protect a developers right to make some changes to items such as interior materials, appliances, common areas (such as amenities) & even the overall size of the home you purchased.
Loss in Value: Despite what some people may tell you, prices do not always go up. Just as you can make a large profit from buying a presale, you can also take a large loss. If the value you agreed to goes down before the completion of the development, you will likely still be responsible to complete the sale at the agreed upon price. Although there have been situations where developers have agreed to lower prices and adjust to current market prices, they are not obligated to do so and a buyer should expect that they will be paying the price they agreed to when purchasing.
Developers asking for more money: This has been a rare existence in the Vancouver Presale market, however there have been some developments where developers have under budgeted for their costs and asked purchasers for more money & a new contract. Reviewing the background of the developer and their reputation with past purchasers can help safeguard against a potential situation like this.
The other is an assignment for profit which is like selling the home before it’s completed to someone else, and having them take over the terms of the contract and complete the sale when the development is ready.
Not all Presale contract allow assignments, and those that do will usually have restrictions and fees associated with them.
This gives the buyer time to read all of the fine print, have the documents reviewed by their Realtor and/or lawyer and go over any other issued you need to before the sale is firm and legally binding.
When purchasing a Presale, you are given “estimated” condo fees only as it’s not possible to determine the exact costs of a building that is not built. When the development is complete, the final condo fees can be different than what you were told at the time of purchase.
Reviewing the estimated budget, and taking a closer look at the type of costs in the building such as amenities & utilities will help estimate whether the development is likely to have high condo fees later.
If the completion of the Presale is further out, you still may choose to get one. Since the mortgage will not commence until the purchase completes, you will not need to have financing arranged until that time, however having a pre-approval still has advantages as it gives you a clearer idea of expected monthly costs and a secured rate for a period of time.
Most Presales will have onsite mortgage information that allows you to get a long term rate hold (up to 3 years) secured through those particular lenders. This safe guards you against potentially rises in interest rates during the construction period, and is a much longer rate hold than a typical mortgage broker, unassociated with the development can provide.
They may also have a blanket approval done on the development which approves lending on the current pricing, which safe guards you in the event property value decreases before completion.
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