Buying a Vancouver Presale Condo

Presale Condo Buyers,

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Are you in the market to Buy a Vancouver Presale Condo? We have been helping our clients for so long we always make it very easy for you.

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Mike’s Blog for Buying a Vancouver Presale Condo

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Vancouver BC Presale Condo Buyers

HOW TO BUY A PRESALE CONDO IN VANCOUVER

Buying a new or off-plan property in Vancouver is highly regulated by the Provincial Government with some legislation called the Real Estate & Development  Marketing Act.

WHAT IS A VANCOUVER PRESALE, AND WHY BUY ONE? – FAQ’s

Vancouver’s new condo (or presale condo, as it is often termed) market offers an array of exciting opportunities for buyers—from those aspiring to homeowner status for the first time to experienced real estate investors. 

7-DAY RESCISSION PERIOD BC – PRESALE CONDOS & PRECONSTRUCTION HOMES

The 7-day rescission period for presales in BC is a regulation that specifically applies to purchasing presale condos and new homes across the province. Presales are condos, townhouses, and other properties offered for sale before construction.

CAN A PRESALE BOUGHT HIGH RATIO BE COMPLETED ON LOW RATIO?

Financial leverage and presale condos in Vancouver.

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Mike’s Presale FAQs

Helping my clients find their dream home or the perfect investment property in Vancouver greatly satisfies me. Please find below more useful resources for Buyers.

Purchasing a property is a huge decision, whether it be for the home of your dreams or as an investment, it’s important to be aware of your options as the real estate market and financing options are constantly changing. A presale property is when a buyer purchases a property before it is built or complete, ultimately purchasing the right to a property that will be built in the future. A resale property is what you think it is – a pre-existing home. It’s a standard sale where a person is simply selling their home. Presale or Resale, hosted by Vancouver New Condos, Mike Stewart PREC and the Vancouver Real Estate Podcast, breaks down why buying presale and resale properties in Vancouver and when they are the right choice for you.

PRESALES ARE BETTER, SAYS MIKE STEWART see all the reasons why.

As with investor buyers, presales are not for every Buyer who intends to occupy the property, but they can be very good for many buyers.

7 ADVANTAGES OF PRESALE CONDOS FOR OWNER OCCUPIERS

  1. Selection & Customization – For owner-occupiers, the pre-construction purchase of a condo allows for, in many cases, a level of variety and customization not available on the resale property market. Want a 23rd-level view suite with 2 parking and 3 lockers? Want to take two 1 bedroom suites and make them into a completely unique large 2 bedroom? You can get exactly what you want by buying a presale condo.
  2. Simplicity – An owner-occupier can put a small deposit down on a presale and continue living in their existing home until the presale is ready for occupation. Any issues with the newly completed property should be covered by the 1-year developer’s warranty.
  3. Financial Leverage – Owner occupiers buying a pre-sale in a rising market also can benefit financially. The buyer may have bought the presale at a time when real estate prices were lower than when the property was completed. This may allow the buyer who previously was a high ratio borrower to become a low ratio borrower, thus saving thousands of dollars in Mortgage Insurance premiums.
  4. Leverage for Non-Canadian Residents – Normally Non-Canadian residents have to put down a 35% nonpayment (please confirm with a mortgage broker) when buying an existing property in Vancouver all at the time of purchase. When one buys a presale in Vancouver the deposit usually 20% irrespective of country residence.
  5. Warranty Protection – Owner/Occupiers can rest easy knowing that they are covered by the BC Government administered 2-5-10 year warranty program.
  6. Newness – Many buyers enjoy being the first owner of a product be it a car, a handbag, or a condo. Presales offer guaranteed newness when purchasing a property. Newness, in most cases, means all the mechanical and other systems are at the beginning of their life and should perform as expected and not need repairs or replacement for 15 to 25 years.
  7. Low Ownership Costs – Newer properties tend to be more energy efficient than older properties which keeps utility costs low for completed presale condos. Furthermore, during the 2/5/10 Warranty Period, there is a very small chance a Buyer of a competed presale condo will have to pay high maintenance fees or large assessments to repair the building.

Today we will discuss the disadvantages of pre-construction homes or presale condos in Vancouver for investors and owner-occupiers and what to watch out for with this kind of property.

WHAT ARE THE RIGHTS AND OBLIGATIONS WITH PRESALE CONDO HOMES?

When buying pre-construction condos Vancouver in Vancouver, its easy to overlook the potential negative aspects of this type of purchase or investment (especially for first time home buyers!)

Purchasing a presale condo is not the actual physical purchase of a tangible property. It is actually a contract for the right to receive an obligation to pay for a finished condo at a set point in the future, irrespective of market conditions or the buyer’s financial situation.

WHAT ARE THE RISKS & DISADVANTAGES OF PRESALE CONDOS IN VANCOUVER?

If you’re thinking of buying a presale condo in Vancouver it’s also important to be aware of the potential risks and negatives (for some people) which could include the following:

  • GST and PTT is payable on Presales! – Yes! Federal Goods and Services Tax (GST) and BC’s Property Transfer Tax (PTT) is payable on all new properties in British Columbia. These taxes are payable when a presale property completes. Do keep in mind there are rebates available for qualified buyers on both the GST and Property Transfer Tax. Please consult with your accountant for more details on any rebates available. To get a rough idea as to how much tax will be payable on a presale (Again consult with a qualified accountant to confirm any tax information), I have a great GST/PTT Tax Calculator for New Homes in BC.
  • Buyers Can’t Back Out If Market Falls! – If real estate prices in Vancouver fall and the value of the presale condo at the time it is completed is below what was originally paid for it, the Buyer is still required to complete it! The Buyer cannot back out! If the Buyer does back out on purchasing a presale, very bad things can happen that involve lawyers, courts, judges, and lots of money spent. Make sure if you’re buying a presale, you’re 100% certain that you can complete on it!
  • No Guarantee of a Mortgage! – In most cases, it is possible to get a mortgage on a pre-sale property. BUT there is no guarantee. Consult with your lender, bank, or mortgage broker before purchasing a presale. Check out this great video on Mortgages and Presales for more info.
  • Buyers May Not Get Exactly What They Paid For! – In the contracts to buy presales (which are drafted by the Developers and are not the standard Contract of Purchase and Sale), Developers protect themselves in the fine print, just in case this happens. Make sure to buy from a reputable Developer (Contact me for more info on this!) and read the contract for the presale in detail and don’t be afraid to have a lawyer review the contract!
  • Buyers have to Wait and be Patient! – We live in a society of instant gratification. With presale condos, in most cases, the finished product is not usually ready for at least a year and sometimes to up to 4+ years from when the presale is purchase. Very often, especially when there are a lot other buildings being constructed, pre-sold buildings do not complete on time and completion can be delayed significantly. I bought a presale several years ago that was completed a year late and I was required to rent a property for several months. These delays are common can make planning difficult and it is advisable to have alternatives planned in advance.
  • NO GUARANTEE OF PROFIT! – Making money from investing in condo presales in Vancouver has been very popular. In many instances, investors have made significant profits from investing in Vancouver presale condos. In a rising real estate market, presales can be profitable, but there is no guarantee of profit as there is no guarantee prices will rise and if the market falls, the buyer is still required to complete on the presale. (see above)
  • Difficult to Sell the Presale Before Completion (Assignment of Contract) – In the absence of a rapidly rising real estate market, condo presales can be difficult to re-sell (known as an assignment of contract) as Developers will often not allow the buyers of presales to assign (sell) their presale until the developer has sold out the development. Furthermore, Developers will very often put significant restrictions on the marketing of assignments, including not allowing them on Realtor.ca
  • Leverage Can Work Against You – Real estate prices go up, but they also go down, If the value of the presale condo goes down below what you paid for it, you still have to complete on it (see above), and you cannot back out. If you need to get a mortgage on a presale condo that is completed and it is worth less than you paid, you may have to find the money to make up the difference between the contract price on the presale condo and the actual market value of the condo when it completes. When buying a presale condo, always consult with a mortgage broker or lender to see about getting a mortgage on the property if prices go down.

Remember Folks! When you’re looking to buy a presale condo in Vancouver, ALWAYS consult with your Realtor, Lawyer, Accountant, and Mortgage Lender!

See our Vancouver Home Buyers Blog for all you need to know about buying and selling a home!