Pre-sales A Closer Look
Pre-Sale Condominiums and Townhouses are not for everybody. But for many Buyers particularly Investors. Pre-Sale Condos and Townhomes are a Great Option because of the advantages this particular type of property offers.
What are some of the advantages for Investors?
Low hassle investment with potential for Capital appreciation Pre-Sales allow Investors Capital appreciation in a rising market prior to completion without the hassle of tenants, the cost of property taxes and maintenance fees. Pre-Sales can also be Sold prior to completion by the owner for profit and is called an Assignment of Contact.
When the property completes the Investor gets a property with a Full 2/5/10 year warranty. Which means Low Cost, Low Hassle Ownership during the life of the warranty.
Leverage: An Investor may be able to purchase a Pre-Sale by putting down a deposit of 10% to 25% usually over 18 months depending on the Developer. Should the property increase in value before completion, an Investor could see a significant return on the deposit money invested. Also in a rising market an Owner/Investor may be able to buy a Pre-Sale with a reasonable deposit rather than have the funds sit in a Bank, their money could see a substantial gain in equity which can have a positive effect on a mortgage.
Low Cost of Ownership: New Pre-Sales built buy a good Developer in most cases will not require a lot of costly and Time consuming Repairs of maintenance on the part of an Owner/Investor as compared to an older building for may years. Change to many.
Popular with Tenants: Newer buildings tend to be popular with tenants for the same reasons Investors, newness, no need for troublesome and costly maintenance as well as modern conveniencesthat a newer building tend to come with such as Gyms, Saunas, Hot Tubs, Concierge, Swimming Pools etc. Put space between conveniences and that..
Newer Suites Often Get Higher Rent: Brand New is popular and very often prospective Tenants are willing to pay a Premium to rent or lease a newer unit over an older one. Many new developments are built along Bus and Sky Train transportation in many cases as people like to leave their cars at home.
Who Buys a Pre-Sales and Why?
***1st time Buyers may look at Pre-Sales as a great way into the Market by planning ahead 2-4 years, they can get themselves into a Brand New Condo in an area they will want to live in. This gives them the opportunity to freeze the purchase price at todays market values with potential to gain some equity in a Hot Condo market and time to save more money to reduce a mortgage or just be prepared without having to race around looking for an older property where competition and demand are strong with potential multiple offer offers driving up prices.
***Assignment Sales: 1st Time Buyers, People wanting to stop renting or are looking to upgrade to a newer or bigger condo or Seniors looking to downsize that don’t want to wait 4-5 years can look to the Assignment inventory with Properties completing sooner.
***There are also Buyers that want New Condos that have just completed and they might find what they are looking for but they will be buying at the current market values and will be subject to the demands on the current market for competition. One Bonus there is no GST on the resale condo as the 1st registrant paid GST on completion.
***Jr Seniors and Seniors age 60 years old and up who have savings in the bank earning a low rate, own a detached home and are not quite ready to downsize can use the Pre-Sale opportunities to ease the anxiety of moving, get a better return on idle cash, potential equity gains on the New Condo or Townhome while at the same time your Home equity can continue to grow in value for an extra 2-4 years a Double Win.
7 Advantages to Owner Occupiers
1) Selection for Owner/Occupiers,the Pre-construction purchase of a Condo or Townhome allows for in many cases a level of variety of floor plans, views and color and appliance upgrade options not available when looking at the Re Sale market.
2) Simplicity, >An Owner Occupier can put a small deposit down on a Pre-Sale and continue living in their Home until the Pre-Sale is ready for occupation. Any issues with the newly completed property should be covered by the 1 Year Developers Warranty
3) Financial LeverageOwner Occupiers buying a Pre-Sale in a rising market can also benefit financially. The Buyer may have bought the Pre-Sale at a time when Real Estate prices were lower than when the property completes. This may allow the Buyer who previously was a high ratio borrower become a low ratio borrower thus saving thousands of dollars in Mortgage insurance premiums.
4) Leverage for Non-Canadian Residents, Normally Non-Canadian Residents have to put down a 35% non-payment (please confirm with a Mortgage Broker) when buying an existing property in Vancouver all at the time of purchase. When one buys a Pre-Sale in Vancouver the Deposit usually 25% irrespective of country of residence.
5) Warranty Protection,Owner Occupiers can rest easy knowing they are covered by the BC Government administered 2/5/10 year warranty program.
6) Newness,Many Buyers enjoy being the 1st Owner of a new Condo. Pre-Sales offer Guaranteed newness when purchasing along with all the mechanical, appliances and other systems are at the beginning of their life and should preform as expected and not need repairs or replacement for 15-25 years.
7) Low Ownership costs, Newer properties tend to be more energy efficient than older homes which keeps utility costs low for completed Pre-Sales condos. Further more during the 2/5/10 Warranty period there is a very small chance a Buyer of a completed Pre Sale condo will have to pay high maintenance fees or large assessments to repair the building.
Rights and Obligations with Pre-Sale Condos and Townhouses
When buying Pre-Construction condos in Vancouver it’s easy to over look the potential negative aspects of this type of purchase or investment especially for 1st time home buyers.
Purchasing a Pre-Sale Condo is not an actual physical purchase of a tangible property, it’s actually a contract for the right to receive an obligation to pay for a finished condo at a set point in the future, irrespective of market conditions or the Buyers financial situation.
What are the Risks and the Disadvantages of Pre-Sale Condos and Townhomes in Vancouver
If you are thinking of buying a Pre-Sale condo in Vancouver it i important to be aware of the potential risks and negatives for some people which include the following GST and PTT is payable on Pre-sales. Yes GST is payable on all new properties in BC and is due when the Pre Sale property completes along with the Property Transfer Tax due, remember there are rebates on both GST and PTT that you might be qualified for. Talk to your Realtor and Lawyer to see if you are eligible.
Buyers can’t Back Out if the Market Falls. If Real Estate prices in Vancouver and the Value of the Pre-Sale condo at the time of completion is below what was originally paid for it, the Buyer is still required to complete! The Buyer can not back out! if the Buyer does back out on the purchase of the Pre-Sale very bad things can happen that involves Lawyers, courts, judges and lots of money spent. Make sure if you’re buying a Pre-Sale you are 100% you can complete on it.
No Guarantee of a Mortgage In most cases it is possible to get a Mortgage on a Pre-Sale property. But there is No Guarantee. Consult your lender, Bank or Mortgage Broker before purchasing a Pre-Sale.
Buyers may not get Exactly What they Pay for! In the contracts to buy Pre-Sales, which are drafted by the Developers and are not the Standard Contract of Purchase and Sale, Developers protect themselves in a case this happens.
Make sure you Buy from a Reputable Developer and read the contract for the Pre-Sale in detail! Have your Lawyer review the contract! There is also a 7 Day Rescission Period which allows you time to review all Documents with your Lawyer and you can Cancel the Contract for any reason within this Time period.
f you are considering purchasing a Pre-Sale Condo or Townhouse or possibly an Assignment Sale in a Development or an area you missed out on. CALL Richard Bishop Today @ 778-888-7424.
“This Invitation for New Clients and is not meant as a Solicitation for Clients already Working with a Realtor, as required by our “Realtor Code of Ethics” I will only work with clients as an Exclusive Buyer’s Agent.”
As of June 15, 2018 the Rules of Disclosure in British Columbia have changed… We as Realtors are now required to provide you with a number of Options for Agency before we discuss any information or provide any advice regarding Real Estate starting with “ Disclosure of Risks to Unrepresented Parties”Unrepresented in a Real Estate Transaction? Know the Risks. SEE the New Rules in the New Disclosure Document Section.
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