Buying a Pre-Sale Home
A pre-sale is a home that is being sold to the Buyer while still in a construction state.
Often we attend a showroom to look at its selection of materials for reference, and are purchasing off a floor plan. There are also times when the pre-sale has been completed for moving in, but has not been sold yet. We refer these to a newly constructed home.
If you are thinking of purchasing a pre-sale, the decision could be quite difficult and factored by a number of reasons. A pre-sale may or may not be suitable for you.
Here are some key questions I’d always ask my client before giving them a recommendation:
Are we flexible for the move-in date?
Are you currently in the process of prepping your downpayment & closing cost?
Are you comfortable looking at floor plans and visualizing?
If you answered yes to these three questions, then a pre-sale might be a suitable option for you!
Let’s look at the advantages of purchasing a pre-sale:
Flexibility: if you are unsure of what your next step is or you are currently still in the process of working out your finance, then a pre-sale might be good for you. In most cases, pre-sale won’t complete until a year (or more) afterwards, which gives the Buyer plenty of time to prepare for the downpayment, closing cost as well as choosing a mortgage that works for you.
Warranty: in B.C., all pre-sales and newly constructed home will have the 2-5-10 year warranty (read more here.) This gives the Buyer a peace-of-mind with much less maintenance work and cost.
Likely to have a higher re-sale value: if you move-in to a brand new home for 10 years, it’d still be 10 years old. However, if you bought a 10 years old home and own it for another 10 years, the property will be 20 years old. Chances are that a 10 years old home will likely have a higher re-sale value.
Let’s look at the disadvantages of purchasing a pre-sale:
Risk: there is no guarantee. Sometimes, a pre-sale might not be what you expected. For instance, you purchased a pre-sale that faces the water exposure. After you took possession, you realized the level you purchased is not high enough so you only see partial water view instead of the whole water view. In addition, there is usually no guarantees of mortgage, as the building has not been completed yet.
Timing: once again, there is no guarantee. The developers will not guarantee on when the building can be completed for move-in. The completion is only an estimate, and delays are common. Buyers would have to be ready to always have a back-up plan.
Price: normally, a pre-sale will cost more than a re-sale home for the price per square foot. The price is set by the Vendors, and is typically non-negotiable. That being said, we’d have to factor in the provincial tax of GST and potentially the Property Transfer Tax! (For tax questions/exemptions, seek to an accountant for advice.)
We hope that you understand better about purchasing a pre-sale!
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Written by Ck Real Estate Team
