Presales Must-Knows 

Presales 101

So exactly what is a Presale?

The term Presale refers to real estate developments being sold before the completion of construction.  In Vancouver, this is typically new condo or townhouse developments being marketed and sold by Developers or marketing companies hired by the Developers.  Presales are also often referred to as “pre-construction”, "new construction" or simply “new condos”.

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.

To buy or Not to buy a Presale?

Buying a presale has both potential risks and rewards. 

Potential Pros:

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.

Potential Risks

There are various risks involved with purchasing a Presale development.  Weighing the potential risks vs rewards should be done to decide of buying a Presale is right for you.

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.

Why do we have Presales?

Developers sell presales in order to help secure the financing they need to complete construction.  Although the deposits held in trust aren’t directly used for development costs, they are shown as collateral to the project financiers who supply the money for building.  Most developments need a certain minimum percentage of sales before they can get their financing and start building.

Presales 102

What is an assignment?

An assignment is the transfer, or addition to the purchase contract to another name before completion.  There are 2 typical forms of assignments.  One being an assignment without profit which is done when moving the contract into the name of your company or a family member.  For example, a young buyer may assign the contract into their parents names because they buyer can no longer afford the complete the purchase.

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.

What is a “rescission period”?

The Real Estate Development Marketing Act (REDMA) ensures that each buyer is given a 7 day right of rescission.  This is cancellation period that is legally mandatory for the developer to give each buyer.  Any deposits paid are fully refundable if the rescission is exercised within the 7 day period.
 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.

Wood or Concrete?

Both offer different construction techniques that come at different costs.  Wood frame buildings are limited to 6 stories in BC, but most are 4 or less.  Wood frame is cheeper to build than concrete so it should come at a lower price.  Concrete offers a more sound proof and durable construction method that typically last longer with less upkeep; however it is also priced higher.  There’s no right or wrong answer on which to buy, as it depends on the needs and priorities of each individual buyer.

Trust Accounts?

A trust account holds money with one party, in the interest of someone else.  They are used to protect the buyer from losing their deposits altogether if something goes wrong.  Usually, they trust accounts are held with a law firm and the deposits are not released to the developer until the completion of the building and sale.

Can I earn interest on my Deposits?

Some trust accounts are set up to pay interest to the buyer, while others are not.  This varies from Presale to Presale and review of the contract and disclosure statement are needed to find out. With interest rates at the low levels they currently are, any interest earned is minimal.What is a condo fee?Condo fees are payments made to cover the common expenses of the strata building.  They cover items such as common area electricity, gas, amenities, landscaping, garbage removal, building insurance and more.

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.

Development in Phases?

Some larger developments are built and sold in phases.  What this means is they’re selling multiple buildings, 1 or 2 at a time, and the overall development will consist of many.  Phases sometimes share common amenities and condo fees, and other times don’t.  This is important to be aware of, as shared phases can create unique situations.  For example your condo fees may be paying for a workout gym that’s not built until 6 months later in the next phase.

Mortgage Pre-Approval?

If the Presale you’re purchasing is close to being completed, you will likely want a pre-approval to ensure you’re qualified for financing the purchase and have secured a desired mortgage rate.

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.

Quick Contact

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Sara Beikoghli Rennie & Associates Realty Ltd. 
51 East Pender St. Vancouver BC V6A 1S9 

Mobile: 778.680.8685 Phone: 604.681.8898 Fax: 604.681.9899 Email: