How are presale properties are different from resale properties?
Here at Realink, we’ll provide some insights into the purchasing process and benefits of purchasing presale homes.
A pre-sale is when a developer offers condos to the public, very often before construction of the building has started. Some key differences include:
- Presale buyers only need to pay a deposit.
- Buyers will still pay the full price, but they don’t need to take out a home loan on the property right away.
- The deposit typically ranges from 5 to 10% of the purchase price, and further 10 to 15% increments throughout the project construction stages.
- Buyer’s deposit will be held in a trust account until the building is completed.
- If for any reason the developer does not finish the building (even if the developer runs out of money), the full amount will be returned to the buyer.
Here’s an example of how deposit and payment schedule might work (each presale contract is different, dollar amount and percentages shown here also serve as an example, for a typical presale condo in the Metro Vancouver area):
- $10,000 upon writing an offer
- Remaining 10% of purchase price when the 7 day rescission period ends
- Additional 5% due at the 12-month mark
- Additional 5% due at the 18-month mark
- In this example, a total of 20% is due over the course of 18 months as the deposit
So what are the benefits of buying a presale property vs. resale property?
It’s a Brand New Home
With presale homes, buyers are getting a brand new home that no one else has ever lived in before. Everything including the appliances, water, heating, mechanical and other systems are also brand new at the start of their warranty period, so there’s no worrying of immediate service and repairs as with many resale homes. Presale home buyers get to enjoy a worry-free, settle-in new home experience that many quality developers are aiming to provide.
New Home Warranty
Under the Homeowners Protection Act of BC, homes built by Licensed Residential Builders are covered by a mandatory third-party home warranty insurance. This Home Warranty Insurance Program as it is sometimes called 2-5-10 warranty. This warranty includes: a minimum of two years on labour and materials, five years on the building envelope, and ten years on structure of the building.
Extra Time Before Down Payment
When purchasing a presale home, buyers will make smaller, staggered deposit payments, allowing extra time to save additional money to put towards the down payment. Some financial institutions may guarantee and hold the interest rate for as long as 36 months. So even if the interest rate increases before the home sale closes, the mortgage rate is still guaranteed.
Ability to Customize Home
Some developers offer different customization options in the initial stages of construction. Buyers can often customize their home with options like color scheme, interior design style and other upgrades as offered by the developer.
Property Transfer Tax Exemption
Under the current BC law, all newly built homes with value worth up to $750,000 are exempt from the BC property transfer tax (which translates to a saving of up to $13,000). This exemption applies to home buyers who are Canadian citizens or permanent residents, and will have to qualify for occupancy requirement by living in the home as their primary residence for one year after the purchase date (more detail information can be found here on the BC government website).