Purchasing a presale offers many advantages, particularly in the competitive Lower Mainland housing market.
In British Columbia, the popularity of new multi-family home developments continues to rise and for good reason. Despite rising interest rates, presales can still offer profitable returns as property values increase during the construction period.
For prospective buyers looking to purchase a first home or for those who want to invest in the province’s red hot real estate market, there are numerous advantages to buying a presale condominium or townhome.
To help understand the rewards of investing/purchasing a presale home, and ultimately, help buyers determine whether a presale is the best option, here is a comprehensive guide to smart presale investing.
What is a presale?
A presale gives homebuyers an opportunity to purchase an asset that hasn’t been completed or built yet. A pre-sale is a contract for the right to receive, and an obligation to pay for a finished unit, such as a condo, duplex or townhome, at some point in the future. (Completions normally range from 3 to 8 years). A developer will sell all or some of the units prior to starting construction.
How do I pay for a presale?
To secure a presale, homebuyers first have to provide a deposit, which is usually a percentage of the final purchase price (deposits normally range between 10 % to 30 %, but some developers may sometimes offer incentives that can be as little as a 5 % deposit). That deposit is required when the agreement is first signed, and will be held in trust by the developer’s lawyer or its real estate representative’s brokerage. That deposit guarantees the purchase and also a responsibility to complete the sale.
From time to time, buyers may have to make additional payments or ‘instalments’ at various construction milestones, which is all detailed in the Purchase and Sale Agreement. The final payment (the remaining balance of the purchase price) is required upon completion, when the property is ready for occupancy. At this point, that’s when the buyer becomes the owner of the property and receive the keys to their new home.
The top benefits of buying a Presale:
- Lower Cost: One of the most noteworthy benefits of buying a presale is that buyers typically get the best price — so the potential for appreciation is high; especially given B.C.’s desirability and livability appeal. Builders and developers may even offer early bird incentives to attract buyers, such as discounts on the purchase price or upgrades.
- It’s Brand New: One of the biggest advantages for most buyers is the idea that it is a new home that no one has ever lived in. Besides that, new homes typically won’t require any repairs for a significant time period upon the completion of the project,. In addition, new homes are more energy efficient, and they offer open floor plans with brand new finishes.
- Customize your home: Many buyers like the ability to customize their new home. Buyers can often choose from a variety of finishes, fixtures, and layouts to create a personalized living space that suits a variety of personalities and lifestyles.
- Extended closing timeline: Buying a presale usually features a longer closing timeline, which is ideal for buyers who can’t move in right away. This can also provide more time to secure financing, saving buyers from the stress of having to arrange a mortgage in a hurry. Instead of a traditional purchase, where a buyer pays the full price or secures a mortgage and then move in, a presale gives buyers extra time to get their finances in order and/or save for a larger down payment and closing costs, which can include legal fees, moving expenses, and more. P.S. Some first time home buyers can avoid British Columbia’s property transfer tax.
- Peace of mind: All new homes in British Columbia come with a 2-5-10 year warranty insurance – It’s one of the strongest construction defect insurance coverages in the country. This warranty protection means that homeowners will face minimal to no expenses on defects covered by the warranty for the first few years.