Buying A Presale Condo? (11 things you should know)
The Real Estate Market of Surrey offers an array of exciting presale investment opportunities for buyers—from those aspiring to homeowner status for the first time to experienced real estate investors.
If you’ve ever wondered how to buy a presale condo but were put off by the process’s unfamiliarity, this guide is for you.
First-time homebuyers and those new to the presale or pre-construction condo market frequently have similar questions, all of which are simple and easy to answer.
You’ll know exactly how to buy a presale condo once you’ve digested the information below. The only thing left to do is find the best presale condo for you.
Please don’t hesitate to contact Ravi Bhindi at 604-825-8881 if you have any questions.
What is A Presale Condo?
Buyers are offered the opportunity to purchase units at a reduced price, knowing they will eventually pay the full price when construction is finished.
Although buyers must eventually pay the entire price of the presale condos, a mortgage loan is not required until the unit is completed.
If the market rises while the presale is being developed, buyers will be able to leverage their initial presale investment.
What is the Deposit Structure of a Presale Condo?
A presale occurs when a condo developer sells the development’s suites before it is fully finished, and in some cases, before work has even begun. The right to the future property is purchased by you, the buyer.
While you are eventually responsible for the full purchase price of your property, you are only accountable for a deposit and do not have to take up a mortgage on the home right once.
This presale deposit typically varies from 5 to 10% of the purchase price at the time of purchase, with the remaining 10 to 15% paid in instalments throughout the construction process.
Did You Know? Until the project is completed, the developer does not have access to the deposit money, which is stored in a trust account.
This means that your deposit will be returned to you if a construction problem arises or if the developer declares bankruptcy.
Here’s an example of a deposit schedule for presale condos. Keep in mind that each presale contract is unique, so this is just an example of a deposit schedule:
- December 1, 2021: You find the ideal presale condo and put down $10,000 when you make an offer.
- December 8, 2021: The remaining 10% of the purchase price is due after a 7-day rescission period.
- An additional 5% of the purchase price is due on August 1, 2022.
- An additional 5% of the purchase price is due on January 1, 2023.
Presale Condos: Are they Safe to Buy?
While the risk is low, developers have filed for bankruptcy in the past.
That’s why the British Columbia government has regulated the Real Estate Development Marketing which governs the pre-sale market in British Columbia, providing buyers with a high level of protection.
4 Suggestions for Buying A Pre-Sale Condo:
Read the fine print of Presale Agreement:
Your developer will provide a disclosure statement that lays out what you will be buying, including common areas, storage, parking, appliances, estimated start and end dates for construction and proposed bylaws.
Make sure all of this information matches up with your expectations of what you are buying.
Please Note: As a Buyer, you have 7 days after the offer has been accepted to cancel the contract to purchase the property. known as the “7 Day Rescission Period”
During this period, if you change your mind about the purchase, you can cancel the contract and get your deposit back.
Understand All Financial Implications:
Talk to a mortgage broker. A mortgage broker can help you determine what you may be approved for, what type of interest rate you can get, and how much you can afford to borrow.
They can help also help you Get Pre-Qualified Based on your financial situation
Take Good Care of Your Credit:
Now is not the time to take out a vehicle loan or rack up debt on your credit card. You may want to speak to an accountant about how this purchase will impact your taxes.
Don’t forget to factor in a rise in mortgage rates when you’re calculating possible.
Did you know?
Anything above 650 is considered good, which means you have a low risk of defaulting on your mortgage and are a good candidate for a mortgage.
Hire A Professional Team who’re Experienced with Presale Condos:
One way to mitigate your construction risk is to hire a professional REALTOR® & real estate lawyer and who can help you review the Disclosure Statement and explain all of the terms and fine print.
An experienced realtor will know a lot about the developers good will and a competent lawyer will be experienced in reviewing the developer’s disclosure statements, which are a lot more complicated than most people realize.
Ipresale Condos has a dedicated team of experts (i.e., lawyers and REALTORS) who specialize in pre-construction sales and will help you make an informed decision on whether or not purchasing a pre-construction condo makes sense for you.
11 Benefits of Buying A Pre-Sale Condos:
1. Low Cost of Ownership
You often can secure the purchase of a presale for as little as a deposit of 5 to 10%. giving you additional time to save up for the next payment or the balance on completion.
2. Presale Condos Have Flexible Payments
Most Presales Developments have a project completion timeframe of 2-3 years, during which you can prepare your home for sale, allowing for a stress-free and comfortable move.
3. A Brand-new Place to Call Home
Purchasing a presale condo entail becoming the first owner of a brand-new home. You won’t have to deal with issues that previous owners may not have addressed. This is one of the most significant presale advantages.
4.Extensive Warranties with Presale Condos
The BC government requires new homes to register in the 2-5-10 Year Home Warranty Insurance program.
Home warranty insurance on new homes includes a minimum of 2 years on labour and materials (some limits apply), 5 years on the building envelope, including water penetration, and 10 years on the structure of the home.
5. Choice of Customized Finishes
A lot of new developments hire very talented designers to create a unit layout that is ideally suited for the lifestyle of the owners.
As a result, you typically have the ability to customize colours and finishes of your home, as well as an option to upgrade your ﬂoors and appliances.
6. Building Equity from Day 1 in Presale Condos
Because the price of your condo is locked in at the time of contract signing, you have the opportunity to profit from a rising market if the price of your condo rises after construction is completed.
7. 7 Days to Back Off (Rescission or Cooling-Off Periods)
As a buyer, you do have the right to cancel the contract to purchase the property for 7 days after the offer has been accepted.
There is no penalty for canceling the agreement once it has been accepted, but any cancellation after that time could be considered a breach of contract and subject to legal action.
8. Property Management Services
For Ipresale Members we provide property management services without any fees including: helping you set rental rates for your area, setting up a solid and complete lease agreement according to your terms, collecting rent and other maintenance issues after you have secured a presale condo unit with us.
9. Low Hassle Investing
Presale properties are subject to the same real estate market trends as existing properties, with prices rising and falling in lockstep.
The difference between holding a presale and an existing property lies in the fact that an investor can benefit from the potential capital appreciation without the worry of tenants, the cost of property taxes, and the monthly maintenance fees.
10. Newly Built = Popular with Tenants = Higher Rent
With the right neighborhood, builder, and price, a newly-built condominium is immediately marketable since there’s no need to repair, repaint, or touch up the space.
It’s also much easier to find a tenant who is ready to pay higher, so you have a turn-key business that’s ready to rent as soon as you are.
11. Attractive Presale Offers
Depending on the nature of the real estate market, some developers condos will allow you to put down as little as 10% on your purchase. This can be an attractive option for people who don’t have a lot of money saved up, but it’s also a good option for anyone who wants to get into the market without paying interest on a mortgage.
A lot of thought should go into the decision of whether to purchase presale or resale property in City of Surrey.
However, with professional connections, your journey will be a lot more informed when it comes time to sign your pre-sale agreement.
Ipresale Condos is not just an agency that sells real estate.
Our agents believe in educating each client deal with their own financial situation. Please call or text at 604-825-8881 or email at email@example.com