Presale 101: A Step-by-Step Guide to Buying a Presale
Buying a presale property can be an exciting way to secure a brand-new home or investment property before it's even built. Here’s a step-by-step guide to help you navigate the process with confidence:
Step 1: Understand What a Presale Is
A presale is a property that is purchased directly from the developer before construction is complete. Buyers commit to purchasing the unit based on floor plans, renderings, and other marketing materials provided by the developer.
Key Benefits:
- You lock in the price at today's market rates.
- You often have time to save for your down payment while construction is underway.
- You get a brand-new unit with modern designs and warranties.
- You have a lot more choices in floor plans, direction, floor, colour scheme etc. as opposed to re-sale where you might have to wait for the right home to come onto the market.
Potential Risks:
- Market fluctuations may affect property values before completion.
- Construction delays can extend the timeline.
Step 2: Research the Developer and Project
Before diving into a presale, thoroughly research:
- Developer's Reputation: Look for reviews, past projects, and customer satisfaction.
- Project Details: Understand the location, amenities, features, layout, and surrounding infrastructure such as transportation, new roads etc.
- Strata Fees: Estimate monthly fees for building upkeep. Remember, the estimate is based on today's cost. Once the building is done in a few years, the cost would likely might go up.
Step 3: Understand the Deposit Structure
Presale purchases require a deposit, typically spread over several payments. For example:
- Initial Deposit: Often 5% due upon signing the purchase agreement.
- Subsequent Payments: Remaining deposits (e.g., 10%-15%) are spread across construction milestones.
- Total Deposit: Usually 20% for a brand new launch, and 10-15% for later selling cycle. 5% is usually just right before completion. You might see a lower TOTAL deposit of less than 20%, but that might come with a risk of the project not going ahead due to developer financing.
Step 4: Secure Financing Pre-Approval
While you don’t need a mortgage immediately, getting a mortgage pre-approval ensures you’ll qualify for the loan when the unit is ready for possession. Remember:
- Extended Rate Holds: Some lenders offer rate holds for presales.
- Special Construction Rate: Some lenders work with the developer to offer a special rate for the buyers.
- Down Payment Savings: Continue building your savings during the construction period.
Step 5: Attend the Sales Launch or Preview Center
Developers often host preview events where buyers can view floor plans, models, and pricing.
- Be Prepared: Bring ID, a checkbook for the deposit, and your real estate agent (if you have one).
- Choose a Unit: Decide based on location, size, layout, and view preferences.
- Negotiate: Some developers may offer incentives (e.g., reduced deposits, upgrades, or discounts) during early sales phases.
For many VIP early sales opportunities, you will need a VIP REALTOR with the developer to get in early to get the best unit and pricing. We are and you should register with us to be on our early bird list.
Step 6: Sign the Purchase Agreement
Once you’ve chosen your unit:
- Cooling-Off Period: In many provinces, you have a short period (e.g., 7 days in British Columbia) to cancel the agreement without any penalty.
- Review the Contract: Understand all terms, including deposit schedules, completion dates, and what’s included (e.g., parking, storage).
Consider hiring a real estate lawyer to review the agreement for hidden clauses or unusual conditions. Or use a specialized presale REALTOR such as Michael Sung.
Step 7: Wait for Construction
During the construction phase:
- Monitor Progress: Stay updated on construction milestones through developer newsletters or portals.
- Plan for Financing: Confirm your mortgage closer to completion.
Construction can take 1-3 years, depending on the project's size and scope.
Step 8: Final Walkthrough and Closing
Before you officially take possession:
- Pre-Delivery Inspection: Ensure the unit matches agreed-upon specifications.
- Closing Costs: Budget for additional costs such as:
- Property Transfer Tax (if applicable).
- Legal fees.
- GST (5% in Canada).
- Strata documents and initial fees.
- Insurance
Step 9: Move In or Rent Out
Once the final paperwork is completed:
- Move In: Enjoy your brand-new home!
- Rent Out: If it’s an investment property, begin finding tenants.
Additional Tips
- Work with a Realtor: A knowledgeable realtor specializing in presales can guide you through the process and may know about exclusive deals. A good realtor can save you tons of headache and money.
- Understand Assignments: If you need to sell your unit before it’s complete, check if the developer allows assignment sales.
- Be Patient: Delays are common in presales, so plan accordingly.
Conclusion
Buying a presale condo is a great opportunity to secure a modern home or investment. By understanding the process, researching thoroughly, and staying financially prepared, you can confidently navigate the presale market and enjoy the rewards of your new property.
