Buying a pre-sale property in British Columbia is a popular option, especially in hot markets like Vancouver, Kelowna, and Victoria. Pre-sale properties, or homes that are purchased before they are completed, offer several advantages, including the potential for price appreciation and customization options. However, the process differs from buying a completed home and comes with unique considerations. Here are four essential tips to guide you through purchasing a pre-sale property in BC.
1. Understand the Deposit Structure
When purchasing a pre-sale property, you’ll need to pay a deposit, which typically ranges from 10% to 20% of the property’s price. Unlike a resale property, where a deposit is part of the closing process, a pre-sale deposit is paid over several stages, starting with signing the contract.
Tip: Budget for Multiple Payments
Ensure you have enough savings to cover each payment milestone, as the deposit is often spread out over the construction period. For example, you may pay 5% upfront and another 5% in six months, with the remainder due later. Be mindful that while your deposit secures the property, it won’t earn you interest until the unit is completed.
2. Be Aware of Market Changes
One of the key benefits of buying a pre-sale is the potential for the property to appreciate in value by the time it’s completed. However, the opposite is also true—real estate markets fluctuate, and there’s a risk that the value of your unit could decrease before you take possession.
Tip: Consider the Long-Term
Real estate is generally a solid long-term investment, but short-term market volatility can affect pre-sale values. Research local market trends and talk to real estate professionals to ensure you're comfortable with the risks involved. Additionally, buying in areas with strong infrastructure and future growth prospects, like Surrey or Kelowna, can mitigate some risks.
3. Know Your Rights and the Rescission Period
BC has specific protections for buyers of pre-sale properties. Under the Real Estate Development Marketing Act (REDMA), you have a seven-day rescission period after signing the purchase agreement. This gives you a window to review the contract, consult with a lawyer, and back out of the deal if necessary.
Tip: Take Advantage of the Rescission Period
Use these seven days to review the contract thoroughly, ensuring you understand all terms, including the construction timeline, assignment clauses, and developer obligations. Go over anything you need clarification on with a lawyer, and make sure that you have a knowledgeable REALTOR® that is well-versed in pre-construction. This is also the time to speak to your broker or bank about securing financing when it comes time to close.
4. Plan for Delays and Extra Costs
Construction delays are common with pre-sale properties, and completion dates can be pushed back months or even years. Additionally, new construction homes often come with added costs at closing, such as GST (5% on new homes), legal fees, and move-in costs. If you’re buying for investment purposes, these delays could impact your cash flow and rental plans.
Tip: Be Prepared for Flexibility
Plan for potential delays by having a flexible move-in timeline or temporary housing options if needed. Additionally, factor in the extra costs of closing a new property, including property transfer taxes, legal fees, and potential home upgrades. Ensuring you have sufficient financial reserves will prevent surprises when your new home is finally ready.
Conclusion: Is a Pre-Sale Right for You?
Purchasing a pre-sale property in BC can be a smart investment if you’re prepared for the unique challenges it presents. By understanding the deposit structure, market risks, and your legal rights, while planning for potential delays, you can navigate the process confidently. Pre-sales offer a chance to lock in prices and customize your future home, making them a popular choice for savvy buyers in British Columbia’s competitive real estate market.
Commentaires