Interested in Pre-Sale Condos in East Vancouver?
Pre-sale condos are condos that Buyers purchase directly from the developer, often before the developer has even started construction. You and the Developer are making a contractual obligation with regards to a specific unit: they promise to build it, and you promise to buy it. The only caveat? You don’t get to see the unit until it’s in your possession.
Buying a pre-sale condo is a different process than we usually see in the East Van Real Estate Market.
Here are the Top 13 things you need to know about buying a Pre-Sale Condos:
1. You need to add a 5% GST to the Developer’s price. The price you see online, or the price given to you at the Sales Centre, will have an additional 5% tax. First Time Home Buyers purchasing a pre-sale condos will qualify for a GST rebate.
2. Developer’s cannot start selling units or advertising prices until the “Developer’s Disclosure Statement” is filed in the Land Title Office. This document details everything about the project – from the people involved, to the components of the building, to the deposit structure, to the legalities of the situation. This document is long, and Buyers should go through it with a fine tooth comb, inquiring with their Realtor and a Lawyer about any details they are unsure of.
3. Presentation Centres will have visuals of what the building will look like, floor plans, examples of the materials and colour schemes to be used and potentially an example suite and 3D model of the building. Use these tools to get a sense of where your unit is in the building, what your outlook will be, how the unit will be laid out and where everything else is in the building (parking, storage, garbage, amenities, elevator, front door, etc).
4. Buyers automatically get 7 days for due diligence. What this means is once you are in agreement with the Developer to purchase the unit, and have signed the contracts, the Buyer gets an automatic 7 days to decide if they will be going through with the purchase. This gives the Buyer time to get financing approval, go through the Disclosure Statement and do any further research on the building and neighbourhood.
5. Know what the Deposit Structure is for the Building. New Developments have a different deposit structure than a typical purchase, which is outlaid in the Disclosure Statement. Typically, the Developer will ask for 1% of the purchase price upon signing the contract (you’ll get this back if you don’t go through with it), another 9% of the purchase price after the 7 day due diligence period, and then a further 5 or 10% a few months later. Buyers should make sure that they will have these funds when needed.
6. Financing will only be a pre-approval. With regards to mortgages, Buyers can receive a pre-approval that they qualify for a mortgage on the property, however, the mortgage doesn’t kick in until the unit is finished. This means that if the Buyers financial situation changes (i.e. lose your job or lose your down payment) that you may no longer qualify for the mortgage however, you’ll still have to complete on the property as you’re contractually obligated. For more on this check our my previous post: Mortgages for Pre-Sale Condos .
7. The Completion Date can be delayed by the Developer. The Developer can delay the completion date of the project (due to construction delays, weather delays, etc) for as long as necessary, and you have no recourse.
8. The Size of the Unit can change. The finished unit can be a different size than indicated to Buyers during the sale. Developer’s have an obligation to deliver the unit to the best of their ability, but certain building and design details may change during construction and the Buyer will have no recourse, unless the unit is materially different (i.e. you buy a two bedroom unit and end up with a one bedroom unit). A change in sqft does not always constitute something that is materially different.
9. Buyers are always allowed to rent units purchased from Developer’s. One of the biggest benefits of buying a unit directly from the Developer is that Buyers will always be exempt from any rental restrictions in the building (a big reason why investors like pre-sale condos). The Developer files a “Rental Disclosure Statement” for the building which allows the developer to rent out the units if needed, and this right is passed on to Buyers (rules have changed recently, where this right is now passed on to the first two Buyers of the unit). Rental Disclosure Statements typically have a timeline of a 100 years.
10. The Project can be cancelled. Developer’s can cancel the project if they don’t receive their Development permit, if they don’t receive financing (which typically happens if they don’t sell enough units during pre-sale) or if they decide to change the project significantly. Buyers will get their deposit back in this situation, though that will be stated in the Developer’s Disclosure Statement.
11. Developer’s Increase their Prices as the Construction Continues. The least expensive time to buy a unit is before the Developer starts constructions, as the prices typically increase with the more units that are sold and with the further the unit is in it’s construction.
12. Buyers may be able to secure extra parking or storage during pre-sale. Developer’s often sell parking and storage spaces as separate entities to the unit. From a value perspective, it is always useful to buy parking and storage, if not more than one, during the pre-sale. You may also be able to specify that the parking spot is a “large spot” or close to the elevator.
13. Units come with a Warranty. Not only does the building have a 2 year warranty on finishings, 5 year warranty on the exterior and a 10 year warranty on the structure, but Buyers get a 1 year warranty on the interior finishings and fixtures, and can ensure the Developer fixes all deficiencies in the unit (i.e. is a cabinet scratched? is there paint on the floor? does the bathroom need more caulking? does the window not latch property? etc).
At the end of the day, buying a pre-sale unit from a Developer gives Buyers a really good chance to earn some value on the unit. Buying a unit pre-sale entails some risk, and given this risk, the units are often cheaper than the same unit when it’s completed. As long as the market see an increase between the time you purchase and when the building is complete, you’ll likely see some value increase on the unit (which of course, is only realized if and when you sell).
Contact us for more information about buying pre-sale. Every situation is unique and we’ll ensure you’re knowledgeable and successful.