How does Presale Work?
Presales have become very popular in Greater Vancouver in the recent years. One of the reasons is because the market has been steadily appreciating and many buyers have received very positive returns on their real estate investments.
TOP 3 BENEFITS OF BUYING PRESALE:
Benefit #1: Options
Presales allow Buyers to have options - number of bedrooms and bathrooms, exposures, and floor levels. If you like the location and the building, you can choose which floor plan works best for your lifestyle and budget.
Benefit #2: Deposit Requirements
Presales generally have staggered deposit requirements, meaning you do not have to come up with 20%+ right away. For buyers who know they can save up enough down payment and would like to do it over time instead of all at once, presale is a great option.
Benefit #3: Tax Savings
If you are a home buyer intending to move into the home after completion for a minimum of one year, and you are a Canadian citizen / resident, you are exempted from Property Transfer Tax as long as your new home is under $750,000. Property Transfer Tax is calculated as follows: PROPERTY TRANSFER TAX: 1% on first $200,000; 2% on balance
This is a saving of up to $13,000.
Depending on the development you are buying into, sometimes buyers can make some customizations to the home and/or have some control over other details such as the location of the parking stall. This is not an option when you are buying a finished home.
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TOP 3 RISKS OF BUYING PRESALE:
Risk #1: Timing
Wood frame developments typically take approximately 2 years to build, where concrete developments can take more than 3 years. Developers provide an estimated completion date but delays are allowed and common in pre-construction projects. For buyers who have a very concrete timeline, this may not be the best option there is no guarantee on the exact completion date.
Risk #2: Flexibility
When you commit to a presale purchase, you are committed for the entire term of the construction period, which can be years. If your plans change during construction and you need to “cash out”, there is no guarantee that you can do it. Assignments may not be allowed by the developer and even if they are, developers typically charge 1% to 2% of the assignment price as a fee.
Risk #3: Discrepancies
What you see may not be what you get. The Show Home you saw in the Presentation Centre may be perfect, but nothing is ever perfect in reality. Once the building completes, you will definitely find flaws and deficiencies. The finished size may be different than what was promised to you, and the materials may be different than what you saw in the Show Home. Developers reserve the right to substitute materials and appliances at their discretion. That’s why it’s so critical that you have us go over the contract and the Disclosure Statement with you to ensure you know what you’re buying into.
There are other risks associated with a presale purchase. However, they can vary from project to project; therefore, we pride ourselves in being presale experts that have gone through many Disclosure Statements and worked with a variety of different developers.
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“We are committed to using our extensive knowledge in multi-family and pre-construction sales to help our clients find creative and comprehensive solutions to reach their goals; whether you are an investor, downsizer or first-time-home-buyer. ”
We provide all of our buyers an analysis of the development - beyond what you hear in the Presentation Center. We want to ensure you know about the future developments in the area, current resale values, potential rental numbers, as well as which floor plans / configurations are most desirable in this particular development. We also go over the entire Disclosure Statement and provide our clients with a detailed summary. We explain important clauses to our Buyers, including assignments, size variance clause, and potential completion delays.