Posted on May 14, 2014

The Ins & Outs of Pre-Sale Real Estate

If you've never bought a pre-sale home before, you may have some questions about how the entire process works: What must you pay to secure your home? Will you be required to make payments while your home is under construction? Will you have any say in the design of your new home? What are the general pros and cons of pre-sales that one should consider? 

We always recommend working with a reputable real estate professional, your bank or financial advisor, and eventually a real estate lawyer when making a decision as important as buying a home or investment property, but here are some of the initial things to think about when deciding if pre-sale real estate is right for you. 

The Finances

Buying a pre-sale home obviously comes with a bit of a wait period while construction is completed, which could take up to a few years. In this sense, pre-sale purchases are sometimes not considered ideal if you are anxious to get into your new home. However, the completion period could actually be a very welcome delay for some homebuyers as it provides time to save up prior to beginning mortgage payments, strata fees, taxes, and more. 

If you decide to buy pre-sale real estate you will be required to put a downpayment on the purchase, which then enters you into a contract with the developer stating that you agree to future deposits defined by the developer (if applicable) and finalize your purchase when the home is complete. In turn, the contract requires the real estate developer to deliver the product that was agreed upon in a certain period of time, and includes a full 2-5-10 year warranty. From time of purchase to handover date, you will not be required to expend any additional funds unless the scope of the project changes, which would require a new contract agreed upon by both parties. This means that you will potentially have years to save your money which you can then put directly into the balance owing, or have a cushion for future mortgage payments and other homeowner costs. In this sense, pre-sale real estate can be a great option for first-time homebuyers looking to get into the market, or even downsizers who are preparing to simplify their life.

The Building & Design

In general, buying a pre-sale home means that you will have much more control over what your home is going to look like - depending, of course, on the specific real estate development as well as available units. You will likely have a much wider scope of selection on the view, the floor, the size, and the floor plan, allowing you to really choose your ideal home. Additionally, most real estate developers provide colour-scheme and interior design options so that you can adjust the design to your specific taste. As well, many pre-sale homes have upgrade options if you'd like features such as higher-end appliances or premier flooring. Some pre-sale buyers even come to an agreement with developers to combine two smaller apartments to create one much larger one - although this is not always an available option as it depends on many factors.

Furthermore, not only does buying pre-sale real estate often mean you will be buying a product that includes the newest trends in interior design, but also the latest environmental standards, saving you money from heating and electricity costs over the years. Your home will also likely not need any upgrades or maintenance work for quite some time, and will be covered by the 2-5-10 year warranty that is required in BC.

The Investment

Depending on the current state of the market, purchasing a pre-sale home could potentially mean that it increases in value during the completion period, meaning you will have already made money on your investment by the time the keys are handed over to you. This fact is what attracts many real estate investors to pre-sale homes, but it is of course good news whether you are planning to flip it or not - equity is never a bad thing. Additionally, if you're an investor wanting to rent out the unit, new apartments in new buildings tend to rent at a high rate because of the modern finishings and various amenities.

If you're interested in purchasing pre-sale real estate in Metro Vancouver, Station Square, the 5-tower development in Burnaby's Metrotown neighbourhood that we are developing in conjuction with Anthem Properties, is beginning previewing of its tallest tower on May 17th. Register for more info at StationSquare.ca