Let’s get down to the brass tax of a new build and Pre-sales. As I’m sure you are seeing all of their beautiful marketing. That place looks so nice and enticing. But make sure to take a step back to understand the advantages and disadvantages of buying a pre-sale condo. Especially in a market like Vancouver and its surrounding areas like Port Moody, North Vancouver, Burnaby and New Westminster.
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1.) Beautiful New Condo Building
Can you imagine yourself as the first owner of that new place? Everything is shiny and clean, has a great design and top technology. Many new buildings in Vancouver are LEED certified and are built to be greener and more environmentally sustainable in design, construction and operation than older buildings. Typically they too have state of the art fibre optic cabling too. Great for options when it comes to your digital needs like phone and internet.
2.) Get Set Up For Notifications On Pre-sales
If you are interested a specific Pre-sale building be sure to get your Realtor to let you know when new offers are coming up. Being a buyer of a new condo comes with some benefits, especially if you are one of the first. This usually means you can pick one of the best available. Some developers offer early buying bonuses or incentives as well.
Buying a Pre-sale sometimes means you get to choose between color schemes, upgrades and on some projects have the ability to customize or even combine units. Maybe there are a few choices of floor too.
4.) The Upside of a Rising Market
In a rising market pre-sales can appreciate in value considerably before they are even built. Many investors have made fortunes speculating in the Vancouver Pre-sale market! Some developers will allow you to sell your pre-sale contract as an assignment before completion (read your contract and Developers disclosure statement to see what is allowed).
5.) Time to Save
With many projects being 2 or more years away from completion when you make your purchase, it gives you lots of time to save up a larger down payment. This is especially useful for first time home buyers who are on a tight budget.
6.) Your New Home is Under Warranty
There is a 2/5/10 New Home Warranty on the Building. Read this guide here:
Appliances are brand new as well and come with their own manufacturer’s warranty.
1.) 5% GST is payable on New Construction. The purchase price does NOT include the GST which has to be paid on top of the purchase price. You do not have to pay GST on re-sale condos unless they have been substantially rebuilt.
See if you qualify for a rebate HERE
2.) It’s important to have your REALTOR do a proper due diligence on the Developer.
How long have they been in business? What is their reputation for quality of workmanship? Do they pay out their subtrades on time? Have the principals ever filed for bankruptcy? Do they have a reputation for completing projects on time?
3.) Developers Can Make Substitutions and Alterations:
The Developers contract is written by their Lawyers and is very much in their favour and allows them to make necessary changes within certain parameters.. During the course of building a large project alterations may be necessary for any number of reasons which may require changes to your floorplan. Usually the contract will allow a variance (usually +/- 3% ) of unit size without compensation and if its greater than that amount the price of the unit will be adjusted. The Developer also has the contractual right to substitute appliances and building materials at their option and as necessary. It’s highly advisable to have your Lawyer read both the pre-sale contract and the disclosure statement.
4.) The Downside of a Declining Market:
After signing the pre-sale contract you have a 7 day cooling off period to review all the documents and do all your due diligence. This is called the rescission period. Once that 7 days is up the contract is Firm and you are committed to purchasing the condo once it is completed, regardless of market conditions at that time. If the market has gone down, you still have to pay the price agreed to in the contract even if that means you are losing money. If you can wait and hold until the market goes up again, you wont. The problem arises if you are relying on a mortgage because Lenders will only lend based on its current market value at the time the mortgage is taken out. If there is a short fall you have to make up the difference.
The Developer only estimates the completion date, so you need to be prepared for delays. Especially in large-scale projects, delays may be necessary for any number of reasons and the Developer has the contractual right to do so.
6.) Deposit Money is Tied up
Typically most developers want a 20% deposit paid out in increments (30% for foreign Buyers). That money is tied up potentially for several years and usually doesn’t earn you any interest either.
Lucas McCann is a licensed real estate agent and specializes in helping buyers and sellers with their Real Estate needs.