Buying Preconstruction Homes In Vancouver – What Are Condo Presales?
Also known as Pre-construction Condos or Off Plan Investments, a condo presale is a contract to purchase a brand new home before construction is completed. Note that in Vancouver and surrounding municipalities, advance sales for new developments typically start before construction is even started and the developer may be required to sell a certain percentage of units before construction financing and building permits are in place. Most lowrise buildings usually take 18 to 24 months to complete and highrises can take 2.5 to 4+ years depending on the complexity and height of the building.
When buying a preconstruction home in Vancouver, BC, the Buyer signs a presale contract and pays a deposit, or a series of deposits. The contract is a legally binding agreement and the Buyer is obligated to complete the purchase once the unit is constructed. On completion the remaining balance can be mortgaged. It’s important to understand that you are not purchasing real estate because the property doesn’t actually exist yet. In essence you are promising to buy a home in the future and the developer is promising to deliver that home at a specific price.
What Information Will The Developer Provide When I Buy A Condo Presale?
For most new developments there will be a sales centre including a show home which is a mock up of one of the floorplans. There will also be architectural models, feature sheets, floorplans and samples of finishing options. There are also usually design renderings and view approximations. You can also ask to look at the architectural drawings. However, some very small projects will not have a sales centre at all in which case you may only have plans and drawings to look at. In every case the developer is also required to give you a copy of the disclosure statement BEFORE you sign a contract.
New Construction Condos Are Incredibly Popular in Greater Vancouver! Why?
10 Reasons to Buy a Condo Presale:
#1.) New Home come with a full 2/5/10 new home warranty.
Buyers appreciate the fact that the unit and common areas are covered by a standard warranty and that everything, including the appliances are brand new. Find Out More About BC’s 2/5/10 Warranty Coverage; it’s the strongest construction defect insurance in Canada.
2.) Better Selection and Price:
Buyers who purchase early, particularly at VIP sales events, will get the best selection and prices and in some cases the ability to customize or even combine units.
3.) Buying a Presale is Easier Than Buying an Existing Home:
Buyer’s are frustrated with low inventory levels of existing homes for sale on the Vancouver MLS system. In most categories there is very limited choice of homes for sale. Whenever a good home becomes available there is often competition from other buyers and multiple offers are common on resale homes. In many ways buying a condo presale is a lot easier than competing against multiple offers because there are many units for sale in the building at one time.
4.) Time to Save:
Some Buyers want the ability to lock in their home and then have months or years to save until completion.
5.) Presale Contracts Are Usually Assignable:
Many investors buy presales with the hope of assigning (flipping) the contract at a profit before completion. Note: that not all presales are assignable and the developer will charge an assignment fee. At this time the 15% Foreign Buyer’s Tax would not be applied to profits from an assignment.
6.) Rental Income on Newer Buildings Is Higher:
Investors who intend to hold onto the property and rent it out anticipate the rents will be higher on a new building.
7.) Rising Market Appreciation:
Investors can leverage a relatively small deposit with the hope that the home will be worth more on completion than what they agreed to pay in the contract.
8.) Rentals Are Allowed:
Most new buildings have less restrictions on rentals compared to older condos which often have tight restrictions on the number of rentals or allow no rentals at all. When you buy a condo presale you will be given a rental disclosure statement which clearly spells out whether the unit can be rented out and which also gives assurance that the rental bylaws of the strata cannot be changed until the date indicated on the statement.
9.) Location, Location, Location:
Cities in the Lower Mainland are more likely to approve new construction projects with higher density along Skytrain routes and major corridors so we are seeing lots of new developments and master planned communities pop up around these highly desired areas. These neighbourhoods not only have easy transit options but have a host of services, shops and restaurants that Buyer’s love.
10.) New Home Property Transfer Tax Exemption:
Canadian residents or permanent residents who buy a new home with a fair market value of $750,000 or less and who intend to live in it as their principal residence may qualify for an exemption of the PTT. There is a partial PTT exemption on homes values fro $750,000 to $800,000)
See if you qualify for the Newly Build Home Exemption
What Is REDMA?
The Real Estate Development and Marketing Act (REDMA) is legislation that regulates the sale of new developments.
Some Key Parts:
7 Day Right of Rescission: Buyers have a cooling off period and can cancel their contract (for any reason) and get their deposit back within the first 7 days after acceptance.
Deposits: Must be held in a Lawyer’s trust account or be guaranteed by a deposit protection contract provided by a third party insurer.
Developer’s Disclosure Statement: Before you sign the contract you will be given this document which includes extensive information about the development.
If you are considering purchasing a condo presale in Greater Vancouver feel free to contact us or better yet schedule a consultation with a Nest Presales New Home Specialist.
