5 Presale Condo Terms Everyone Should Know
Buying a pre-sale condo is tricky. It involves a lot of steps and you need to be aware of them so that you can make the right decision.
A presale condo is one that has not been built yet. The developer will sell you a condo in the building, but it won’t be ready for occupancy for at least a year or two. You’ll have to wait for this time to pass before you can move in.
However, there are many things to consider before deciding whether or not to buy a pre-sale condo. Here is a list of terms that will help you to understand the presale buying process:
Term #1: Presale Contract
A presale contract is a contract where a purchaser receives the right to purchase a development unit from a developer when the development is completed.
The purchaser pays an amount for the right to purchase the unit at completion of construction, which is usually paid over several years.
Once the development is completed and the presale purchaser takes possession, they have to pay off all remaining installments (i.e., balance of purchase price) within a set period of time (within 12- 18 months).
The developer then transfers ownership of the property to them and they become owners of their new condo.
If you are thinking about buying into a new development, it’s important to understand your rights under this type of contract before you sign anything.
Term #2: 7- Day Recession Period BC
If you have already signed the purchase and sale agreement, you can walk away from the deal and receive full return of any deposit you paid if you deliver a written rescission notice to the developer within seven days of the day you signed the purchase and sale agreement and received the disclosure statement.
So if you are having a case of buyer’s remorse and want out of the agreement, you have a time limited opportunity to get out.
Term #3: Deposit Structure
Deposit Structure is a form of payment that entitles the buyer to purchase a property. The deposit structure is usually a fixed amount of payment on your presale condo on a fixed schedule. It also depends on the price of the property and other related factors. In some cases, even if the buyer does not have enough money to pay for the whole amount, he can still buy the property by paying a deposit structure.
Example:
Total deposit: 15%
Payment 1: 5% on the date of writing the contract
Payment 2: 5% after 9 days from the last payment
Payment 3: 5% after 12 months from the last payment
Term #4: Strata Fees
Strata fees for presale condos are paid monthly or quarterly to the Strata Corporation of the building.
These fees are used to cover the costs of operating, maintaining and repairing the common areas of the building. In addition, strata fees cover insurance, property taxes, utilities and other expenses.
This strata fees usually kicks in after the completion of a presale property.
The cost of strata fees for a pre construction condo varies depending on where you live and what type of unit you buy.
As a general rule, newer built buildings tend to have higher strata fees than older ones because they usually have more amenities (gyms, pools etc.).
Term #5: Assignment of Contract
An assignment is when a Seller (assignor) sells their interest in a property before they take possession – in other words, they sell the contract they have with the Builder to a new purchaser.
When a Seller assigns a property, they aren’t actually selling the property (because they don’t own it yet) – they are selling their promise to purchase it, along with the rights and obligations of their Agreement of Purchase and Sale contract.
The Buyer (Assignee) of an assignment is essentially stepping into the shoes of the original purchaser.
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The Bottom Line
There are a lot of other variable legal jargon involved in buying the right pre construction condo. Be sure to get a real estate agent / team that has a lot of condo sales experience, as the issues surrounding such a purchase are not as simple as those with a traditional single-family home.
A lot of good advice comes from someone who has multiple years of experience in dealing with presale clients and has a solid team to back it up.
A presale veteran like Ravi Bhindi will often know what’s going on with the building, and will tell you about any mistakes that may come up along the way to completion.
Give Ravi a call at 604-825-8881 to discuss any presale real estate matter or contact us by clicking here
