Presale condos are commonplace in the Vancouver housing market. As the city attempts to bolster housing inventory in order to combat rising prices, they are greenlighting multi-unit condo developments at unprecedented rates. With the increase in condos available, it should be no surprise that presale condos are increasingly available as well. If you’re interested in purchasing a presale condo, these tips for buying presale could save you significantly.
Know your Risk
Sizeable investments such as real estate investments always carry some risk, and presale condos represent unique risks that you may or may not understand. Knowing the downside of buying these properties can help you avoid certain pitfalls that can cost you a lot of money. First time home buyers should especially take note as presale condos are not typical when compared to completed properties currently on the market. In fact, presale condos represent a contract wherein the purchaser agrees to pay for a condo at an agreed upon future date. Future market conditions or financial resources are not relevant, so it’s important to know the risks.
First, presale condos are subject to taxes including GST and HST. As is the case with all new property purchases in British Columbia, you’ll be required to pay these taxes when the presale contract is completed. In addition, property transfer tax will need to be paid, so you’ll need to include these taxes in the final sale price of your condo. Most buyers are not surprised to learn they’ll owe taxes, but the fact that these taxes are essentially deferred until the sale completes means they can sometimes be overlooked.
Of greater cause for concern is that your presale condo contract does not reflect market changes. So, if the housing market falls, you’re still required to pay the agreed upon price for the condo. This means that the market value of the condo when you finally take ownership may be less than you agreed to pay and you cannot terminate the contract. That’s right, you cannot back out of a presale condo contract.
Another factor to consider when purchasing presale condos is that mortgages are not always guaranteed. Many buyers can have a mortgage approved for a presale condo, but it can be tricky. You’ll need to be clear with your lender of your intention to buy a presale condo to ensure your mortgage will be approved.
The Great Unknown
Finally, since your presale condo is not a physical property you can tour before you purchase it, you need to be very careful to negotiate all expectations in your contract. If you’re expecting granite countertops and a whirlpool tub, make sure that’s in your contract. It’s even advisable to have a lawyer review your contract before you sign because developers rely on the fine print to protect themselves in case they can’t deliver on all their sales promises.