New Condos FAQ
Buying pre-sale condos in Vancouver BC has advantages for both First Time Home Buyers and experienced property investors. Presale properties are different from Resale properties. Here we will explain the purchasing process and the relative benefits of purchasing presale homes.
Presale Condos Explained
When you purchase a presale home, you are paying for a future home. A presale is when a developer offers condos to the market in some cases before construction of the building has started.
You only need to pay a deposit. You will still pay the full price, but you don’t need to take out a home loan on the property right away. The deposit will range from 5 to 10% of the purchase price, and further 10 to 15% increments throughout the building project. Your deposit is held in a trust account until the building is completed. If for any reason the developer does not finish the building, the full amount will be returned to you.
Purchasing Process of a Presale Condo
An offer on a presale condo cannot occur until the Vendor has the disclosure statement ready. The disclosure statement is a comprehensive document that allows a prospective buyer make an informed decision about a purchase and is required and vetted by the provincial government under REDMA to be prepared before sales can begin.
Once the Disclosure Statement is available, the Vendor can give exact prices and you can make a decision with that important information in mind.
According to the legislation covering the sales of new property in BC, the Real Estate Development & Marketing Act (REDMA), presale condo and new property buyers have a 7-day rescission period from an accepted offer during which the buyer can kill the deal for any reason.
So that means the buyer has 7 days to review the disclosure statement and project from the date of an accepted offer and has the right to kill the deal for any reason.
Normally, Vendors ask for a deposit with an accepted offer which is refunded (usually it’s a cheque, which isn’t cashed until the end of the project and which is given back to the buyer or destroyed if the buyer decides to cancel or kill the deal within the rescission period.)
Do I Pay Commission when I Buy a Presale Condo in Vancouver?
No. You do not need to pay any commission when you purchase a presale condo in Vancouver.
The Vendor pays us only if you go forward with a purchase and we disclose to you in writing how much we get paid.
How do mortgages work for presale condos?
Do I start paying before the construction is complete or is there a percentage that I should pay before its done to “secure” the apartment, and then I pay the regular mortgage when the building is complete?
When buying a presale, you usually pay a 20% presale deposit to the developer top secure the property. Once the property is completed you get a mortgage for the remaining 80% payable and the 20% you paid the developer is included and forms part of the purchase price.
The Benefits of Buying a Presale Condo
The answer depends on your objectives, which we investigate in more detail here, there are three key reasons that should be known to every potential purchaser:
You Own a brand new condo as soon as it is built.
You can sometimes have alterations made to your specifications ahead of time so you walk into your own color scheme, appliances, and fixtures.
You can secure a cost at the buy date, with the possibility to profit from a rising land market, without the monthly expense of a mortgage payment, property charges, and upkeep fees.
Presales offer numerous points of interest for speculators. Beneath we lay out six appealing components of the presale market.
A. Investment Benefits
You can buy a presale condo for a meager deposit of 5% to 10%. Should the properties value increase over time, you could see a huge return on a small investment. For instance: you choose to purchase a $300,000 condo with an arranged completion date as far off as 5 years. To secure the property, you make a 10% deposit of $30,000. Because of an increase in the market, your condominium is worth $360,000 2 years after the fact and you choose to put the property on the market (this is known as selling the assignment of contract). You leave with your $30,000 deposit as well as the increased value that is, 60,000 or a 200% profit on your initial investment.
Presently say you choose to keep that same property and the value stays steady until your fruition date. The property is still valued at $360,000 when you go to your representative to see about getting a home loan. Since you have more than 20% in value ($60,000 + $30,000 = $90,000 or 33.3% of your $270,000 mortgage) you can keep away from costly CMHC high proportion protection premiums that are required for properties bought without a 20% up front installment. You made a 33.3% down payment on your home loan with just putting 10% down at first.
For non-Canadian residents, presales offer a great investment. As a rule, non-Canadian residents need to put down a 35% default (please confirm this with a mortgage specialist) when purchasing a current property in Vancouver at the time you buy. At the point when one purchases a presale in Vancouver, the deposit is generally 20% of the country where you live. What’s more, this is additionally paid over 9 to 15 months much of the time.
B. Less Stress
Presale properties follow regular market trends, with prices rising and falling pretty much as property does. The distinction between holding a presale and a current property lies in the way that an investor can profit by the potential capital without the stress of occupants, the expense of property taxes, and the month to month maintenance costs.
C. Lower Upkeep Costs
New condominiums built by legitimate developers will not require exorbitant repairs or upkeep with respect to an owner/investor for an extensive period after finish. The same can’t generally be said for more seasoned structures.
D. Tenants Like New Condos
New Condo structures are exceptionally popular with tenants because of – new appliances, modern layouts and new condo fixtures; no need for repairs or large maintenance; and a lot more features are available with new structures, such as, pools, hot tubs and saunas as well as, exercise rooms and the main entrance attendant, and so forth.
E. Higher Rental Profit
Tenants are often willing to pay a premium to rent a newly built condo over an older unit for the reasons detailed above.
F. Protection Warranty
All presale construction receives BC’s 2-5-10 Year Home Warranty Insurance. This warranty does not begin until the building is complete and, in most cases, assures the investor low costs and low hassles for the duration of the warranty.