Aman Nanda

Exploring Vancouver Pre Sales: Benefits and WhyYou Should Consider Buying One

Understanding Vancouver Presale Properties

WHAT IS A PRESALE?

A presale is a real estate transaction where a property developer sells units of a forthcoming development, which can include condominiums, townhouses, or even single-family homes, before the construction process is completed, or in some cases, before it has even commenced. This arrangement allows buyers to secure ownership rights to the property before it is fully built.

Instead of immediately securing a mortgage, buyers typically provide a deposit, which commonly ranges from 5 to 10% of the total purchase price at the time of purchase. Additional payments, usually totaling 10 to 15%, are made in installments over the course of the construction phase. These payments are held in a trust account until the project is completed, ensuring that the funds are safeguarded.

One significant advantage for buyers in presale transactions is that they have the opportunity to secure a property at its current price, which may be lower than its future market value upon completion. Additionally, presale buyers often have the chance to customize certain aspects of their property, such as finishes or layouts, according to their preferences.

 

WHY BUY A CONDO THAT ISN'T BUILT YET?

When considering presale homes, your decision hinges on your objectives. Below, we delve deeper into the factors, but there are three compelling reasons that appeal to every prospective buyer:

  1. Immediate ownership of a pristine property upon construction completion.
  2. Flexibility to tailor your unit according to preferences, an advantage typically absent in the resale market.
  3. Secure a fixed price at the time of purchase, potentially capitalizing on an appreciating real estate market, while avoiding monthly mortgage expenses, property taxes, and maintenance fees.

 

IS IT SAFE TO BUY A CONDO THAT DOESN'T EXIST YET?

In British Columbia, the presale market operates under the Real Estate Development Marketing Act, ensuring significant buyer protection. Here are three crucial points for potential buyers:

  1. You have a 7-day Rescission Period after the offer’s acceptance to cancel the contract, a provincial law safeguarding your interests.
  2. Your deposit remains in a lawyer’s trust account until construction completion, shielding it from construction issues or developer bankruptcy.
  3. Review the Disclosure Statement provided by the developer for essential details about the property, including purchase inclusions, suite dimensions, and the project’s final appearance.
 

HOW DO PRE-SALE PROPERTIES BENEFIT INVESTORS?

1. MAXIMIZE

You can often secure a presale property with a deposit of 5 to 10%. If the property appreciates before completion, you could see significant returns with minimal initial investment. For instance: let’s say you purchase a $400,000 condo with a projected completion in 3 years. You make a 5% deposit of $20,000. After 2 years, due to market appreciation, the condo is valued at $480,000. If you decide to sell the assignment of contract, you walk away with your $20,000 deposit plus $80,000 in appreciation – a 400% return on your initial investment.

Now, if you choose to hold onto the property until completion and the value remains steady, you still benefit. The condo is worth $480,000 when you apply for a mortgage. With $100,000 in equity ($80,000 + $20,000 = $100,000), you can avoid CMHC insurance, usually required for down payments below 20%. Here, you effectively secured a 25% down payment with only 5% initially

2. AFFORDABLE OWNERSHIP EXPENSES

Freshly constructed condominiums from reputable developers typically demand minimal repairs or maintenance from owners/investors for an extended duration post-completion. This contrasts with older buildings, where such assurances may not apply universally.

 

3. Stress-Free Investment

Presale properties track the fluctuations of the real estate market, mirroring the ups and downs of existing properties. The advantage of investing in a presale lies in the potential capital appreciation without the burdens of tenant management, property tax expenses, and monthly maintenance fees that typically accompany existing properties.

 
 
 
 

4. Warranty Security

Every presale construction project in British Columbia is covered by the 2-5-10 Year Home Warranty Insurance. This warranty only becomes active upon completion of the building and typically ensures investors of minimal expenses and hassle-free ownership throughout the warranty period.

FREQUENTLY ASKED QUESTIONS ABOUT VANCOUVER PRESALES

Normally, the deposit for a presale condo falls within the range of 5-20% of the purchase price, paid in installments. This deposit serves to secure your purchase and is kept in a trust account until the completion of the project.

 
 
 

Absolutely. Selling a presale contract, also known as an assignment, is an option. However, it's important to note that this process typically requires approval from the developer and may be subject to specific regulations, including taxes and fees.

While presale condos offer promising investment opportunities, it's essential to acknowledge potential risks, including construction delays, fluctuations in market conditions, or discrepancies between the final product and the initial plans.

The Real Estate Development Marketing Act (REDMA) provides essential protections, including a 7-day rescission period, which safeguards deposits and mandates disclosure statement requirements from developers.

In such instances, deposits are safeguarded and must be refunded to buyers. Furthermore, developers are typically mandated to have insurance or other assurances in place to safeguard buyers' investments.

 
 
 
 
 
 

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