The concept of presales has been integral to trading and selling since ancient times, evolving in various forms over the centuries. However, in the last 20 years, presales have significantly transformed the real estate industry. With strong industry rules and regulations that continue to strengthen to protect consumers, there are still some risks despite the overwhelming positive attributes. Start off knowing some of the most asked questions by new presale buyers.
1) What is a presale?
A presale (aka pre-construction) is when a developer of a building (condo, house, duplex, office, etc.) sells before the product is completed. Most common presales are strata-titled apartments (condos) and townhomes. Usually this will be for a fixed price with a percentage of deposits paid prior to the completion date.
2) What is the difference between a pre-sale property and a resale property?
A pre-sale property is a new development sold by the developer before construction is completed, while a resale property is an existing property that has been previously owned and is being sold by the current owner. Pre-sale properties offer the opportunity for customization and may come with warranties, while resale properties offer immediate occupancy and may have established neighborhoods and amenities.
3) How safe is a presale?
Presales are generally very safe. Most are governed by REDMA (Real Estate Development Marketing Act) which ensures consumers are protected against fraud and other potential risks. Other factors that help to mitigate risk are the Right of Resccission (7 days rescission period to do your due diligence and cancel for any reason with full deposit reimbursement) and full disclosure via provided the disclosure statement.
4) What is a disclosure statement?
A disclosure statement is a document provided by the developer to pre-sale property buyers that contains important information about the development, including project details, unit specifications, amenities, financing terms, and risks associated with the purchase. The disclosure statement provides specific project details approved by the regulatory bodies prior to sales and construction.
5) What are the benefits of buying a pre-sale property?
Some benefits of buying a pre-sale property include the opportunity to customize finishes and upgrades, potential for appreciation in value before completion, and access to new construction features and amenities. For a full list of pros and cons, click here.
6) What should I consider before buying a pre-sale property?
Before buying a pre-sale property, consider factors such as the reputation of the developer, location and neighborhood amenities, financing options, deposit requirements, completion timeline, and potential risks associated with pre-sale purchases. More importantly, personal factors must be realized such as personal finances and time frame of completion.
7) How do I finance a pre-sale property purchase?
Financing a pre-sale property purchase typically involves obtaining a mortgage loan from a lender. Buyers will need to provide a deposit upfront and secure financing for the remaining closer to completion, however it never hurts to get pre-approved before or during the process. Some presales work with banks to offer builder rates for long-term rates hold. If offered, a rate can be locked in for the duration of the construction process until completion and can be used as a safety net in case interest rates increase. If interest rates decrease, a buyer can opt for the reduced interest rate or shop elsewhere for better rate packages.
8) What is a deposit and how much is typically required for a pre-sale property?
A deposit is a sum of money paid by the buyer to secure the purchase of a pre-sale property. Deposit requirements vary depending on the developer and project but are typically a percentage of the purchase price, ranging from 10% to 25% and are usually broken up into installments spanning several months to a couple of years.
9) What happens if the developer fails to complete the project on time?
If the developer fails to complete the project on time, buyers may be entitled to compensation or remedies under the terms of the pre-sale contract or BC's Real Estate Development Marketing Act (REDMA). Remedies may include extending the completion date, canceling the contract, or seeking damages. Keep in mind that developers also have rights to extend the completion date which include factors beyond their control. This info will be explained in the disclosure statement.
10) Can I use my own real estate agent when buying a pre-sale property?
Yes, you can use your own real estate agent when buying a pre-sale property. A presale expert like myself can help you navigate the pre-sale process, review contract documents, negotiate terms, and represent your interests throughout the transaction, making the entire process easy and stress-free!
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