All the Information
A Pre Sale is a future house, condo, or townhouse that has not yet been built, purchase brand new, directly off the developer or developers sales team. Typically these are sold before construction begins, or during the construction phases, depending how the developer wants to release them.
The cost can vary greatly for a pre sale, depending on whether it’s a home or condo, what type of materials are used, the value of the land getting built on and more.
Every Pre Sale operates slightly different depending on the developer, so deposits can range between 10-20%. Typically, $10,000 is due upon singing the contract, and the balance of the deposit is due within 7 days. Some developers will offer a spread-out payment over the course of a few months, this would be more typical if the deposit is greater than 10%.
After the deposit has been made, developers typically allow you the remainder of the construction period (1-2 years) to make the remaining down payment.
Another lesser-known cost you will have to pay is GST. Unlike a home you buy from another home owner, the government charges an additional tax on new construction. This payment can be made through your lawyer.
Unlike building your own home where you pay as it gets built, a pre sale home or condo is built spending the developer’s funds. The money you pay gets held in a trust account with a lawyer until the building is complete. If a developer were to go bankrupt or out of business before the building is complete, you receive your money back from the trust account.
You’ll want to think carefully about how you want your new property to look. Developers often have a set of floor plans you can choose from, and allow you to choose from a selection of flooring, paint jobs and finishings.
There are limits to what you can customize, so speak with your trusted real estate agent with experience in pre sales for guidance on requesting customizations.
BC’s Real Estate Marketing Act gives you 7 days from signing the contract to make sure the purchase is right for you. If you want to change your mind for ANY REASON, you may cancel the purchase within the first 7 days.
Another option is to sell your presale prior to completion. This is known as assigning your contract. Each developer will have guidelines and rules around assigning the contract, typically allowing them, but charging you a % on your purchase price. Assignment fees range between 1-3% of what your purchase price was as stated on your contract. If it’s possible you will consider selling your Pre-Sale prior to completion, I will help find you something with a low assignment fee.
Unlike an existing home, Pre Sales have not typically been built at the time of signing a contract. So expect to wait 1-3 years for construction to complete before you can move in.
The housing market is in constant fluctuation, so there is a chance the value of your Pre-Sale could rise between signing the contract and the building completing.
You also have the benefit of having a brand-new unit, coming with a full 2,5,10 warranty which covers:
- 2 years on labour and material
- 5 years on the building envelop including water penetration
- 10 years on the structure.
As far as financing goes, you don’t need to have a mortgage approval in place at the time of the purchase agreement (outside of the deposit required) so financing only needs to be put in place upon completion.
Since housing markets fluctuate, the value of your Pre Sale could fall between signing the contract and completion. If home values fall, you might not be able to sell your new home right away without incurring losses.
There is an allowance for small deviances in the floor plan or square footage during construction. So your new home might not be exactly the same as what was in the plan.
You will need somewhere to live during the construction period, so be prepared to stay where you are or find housing in the interim period.
There is always a chance your developer could go out of business before construction is completed. If this happens you will receive your money back, but you won’t have a home.
Before choosing the right pre sale for you, the very first step is to research the developer to make sure they are reputable. Once we’ve determined they are legitimate, you will want to look at:
- Estimated strata fees per square foot
- Assignment fees
- Estimated completion dates
- Deposit structures
- Parking & Storage
As your realtor, I will assist in ensuring all these items are suitable for what you are looking to purchase.