Purchasing a presale home means, very simply, that you are buying a home before it has been built. This can apply to either a condo apartment, townhome, or single family home, with condos making up the largest number of presales in BC. Here, we’ll take a look at some of the benefits of buying a presale home.
Because presale homes are, most often, not built yet, the amount of money required to secure the property is fairly low. Generally, once the offer has been accepted and there is an agreement in place, the buyer will be required to make a deposit of 5% to 10% to “hold” the deal. Additional funds will be due throughout the process and will be detailed in the Purchase and Sale Agreement. This allows the buyer more time to save additional funds. The purchase price is fixed early in the process and in a strong market, this can mean you will be buying a property worth more than you paid by the time you take possession.
2- It’s Brand New When You Move In.
Who doesn’t love moving into a home that no one else has ever lived in? Everything is fresh and clean and you don’t have to worry about maintenance or breakdowns.
3- Equity Can Build.
As we noted above, it’s possible in a strong real estate market that your home will have a higher value by the time construction is complete and the buyer moves in. For this reason, presale homes are popular with investors.
All new homes in BC come with a 2-5-10 year warranty. The warranty protection means the homeowner faces only minimal expenses when they live in the home for the first few years. Make sure you understand what is covered during each of the three warranty periods so there’s no uncertainty later on.
5- Property Transfer Tax.
In BC, homes are subject to the Property Transfer Tax which is payable to the Province upon completion. Presale homes valued up to $800,000 are exempt from this tax, so long as they are purchased by a Canadian citizen or a permanent resident who lives in the home for one year. For first-time buyers purchasing homes for less than $450,000, there is also an exemption.
For a home sold for less than $2 million, the tax is based on 1% of the first $200,000 plus 2% on the remainder. For example – if you purchase a home for $850,000, you’ll pay $8,500 on the first $200,000 and an additional $6,500 on the balance, for a total of $15,000. This adds a significant expense to the cost of the home, so be aware of the amount when considering the purchase.
6- Seven Days To Change Your Mind.
In British Columbia, the Buyer has seven (7) days after the offer is accepted to change their mind. This allows time for the Buyer to review the Disclosure Statement from the Developer and to reconsider their decision, should that be necessary. After seven (7) days, the deal is firm and legally binding.
7- You Pick Your Finishes.
The best part of purchasing a presale home is often, you get to pick your finishes. Everything from flooring to lighting, to paint colors, to cabinetry and countertops is installed based on the Buyers personal preferences. Just be careful not to go too trendy or over the top, as this may affect the resale of the unit later on.
8- Higher Rents.
If you’re buying the home as an investment and intend to rent it out, new homes will most often generate a higher rental rate. Tenants, like most buyers, love a brand new home that doesn’t need repairs, paint, or touch-ups and they are generally willing to pay a higher rent to secure it.
While purchasing a presale home can be a wonderful decision, be careful to ensure you fully understand the agreement before you sign it. Does it deal with construction delays? What intervals will you need to pay additional funds to the Developer? What are other pitfalls that need to be considered?
Using a Real Estate Agent who is experienced in presale homes is a great way to ensure you fully understand what you’re getting into before you commit and are bound to a contract you may not like.