Back
Everything to Know about Presale Condo Risks
Presale and pre-construction condos seduce consumers with the promise of highly designed, sleek spaces but savvy home buyers need to assess the risks before they commit.
“Pre-sale is one of the most speculative real-estate investments you could make because you’re basically buying a floor-plan on a screen or piece of paper – you and your agent need to do your research,” says Christopher Bibby, sales representative, RE/MAX Hallmark Bibby Group Realty, who recently leveraged his 15 years of condo market experience to buy two pre-sale condos that his own kids will use when they reach university age in a decade.
When it comes to presale condos, home buyers have to do their homework. This includes hiring and paying attention to a reputable agent, lawyer, accountant and mortgage broker or lender with pre-sale condo experience to protect their interests.
New development condos are attractive home-ownership options for many reasons - but it’s important to consider the other side of the coin. Here are the possible risks and things to watch out for when looking at buying a pre-sale home:
Shifting Property Values
- Appreciation: “Will it be worth more or less than you paid for it upon completion or a few years after you take possession?” says Mike Stewart, realtor, Vancouver New Condos, who has been selling pre-sale and resale condos in Vancouver, the Okanagan, Fraser Valley, Greater Victoria, Nanaimo, and the rest of B.C. since 2005. “We can’t predict or control the market and no one has a crystal ball.”
- Value, Financing & Affordability: Lenders may disagree with the buyer’s and agent’s valuation, but even if they’re aligned, no one will give you a mortgage until the building is completed. Worst case scenario, you could lose your deposit/down payment and the unit if you can’t get financing or lose your job 10 days before closing. “Buy what you can afford right now not what you think you’ll be able to afford when construction is completed in two or three years,” says Stewart.
Construction Concerns
- Construction Delays: Everything from financing challenges and home prices to weather, material shortages and errors can delay construction without the builder incurring penalties. Buyers that plan to live in the new units may be forced to make alternative living arrangements and investors’ returns will be postponed. “Anything can go wrong,” says Stewart. “For example, a builder bought windows that didn’t meet Canadian standards and the replacements cost an additional $20 million.”
- Complete Cancellations: Developers rarely cancel a project or abandon construction, but it does happen. In most cases, deposits will be returned to the condo owners, but it may take time and require legal representation. “It’s stressful and buyers may find they’ve been priced out of the market – once they get their deposits back, they probably won’t buy as much as they would have a few years earlier,” says Bibby.
- Quality (construction, finishes) and Floor Plans: Reputable developers do their best to deliver on their commitments because it’s good for business, but mistakes do happen. “Know that whatever you see in the sales centre and model units will look better than the finished product once they’re rolling out dozens or hundreds of units,” says Bibby, who has seen suites without features such as closets, windows and even minus a few square feet to accommodate building codes and mechanical such as HVAC.
Know your Presale Condo Numbers
- Contracts: Developers depend on skilled, experienced legal teams to ensure the contracts protect the developers’ best interests. Go over every word in that contract with your agent and lawyer to find out exactly what your developer is allowed to do and change without incurring consequences or penalties.
- Unexpected Fees: Read that contract! Developers have been known to charge up to $10,000 in additional fees to connect services (water, electric, sewage, natural gas, wifi). Buyers may even discover their hot water heater is leased not owned. “A woman had to cancel her own wedding to cover the unexpected closing costs, so buyer be aware,” says Bibby. While $1,500 to $2,000 may be standard in certain locations, some developers will cap fees at up $5,000. Know what you’ll be asked to pay at closing and negotiate before you sign.
The fact that pre-sale condos don’t actually exist yet and real estate markets, particularly in certain regions, are highly unpredictable, must be considered and accepted. As a result, more conservative, risk-averse people in the home buying market might be comfortable with a resale - not a presale - condo.
By: REW
GuidedBy is a community builder and part of the Glacier Media news network. This article originally appeared on a Glacier Media publication.
Location
Topics
Related Stories
-
Real Estate Vancouver
6 Apps that make home buying a smooth and convenient experience
So you’re ready to buy a new home. But as everyone knows, it’s not a simple process. There are a lot of moving pieces,...
-
Real Estate
Discover your dream home with a Kamloops Realtor
Sponsored Content Although we all wish buying or selling a house was as easy as signing a dotted line, there are many...
-
Real Estate
Millennials may rescue slow recreational real estate sales
A “ generational shift” in the recreational real estate market could help reverse a sharp decline in sales this year...
-
Home Inspection Vancouver
FAQs: What You Need to Know about Subject Removal
Subject removal is an important process during the real estate transaction that you need to be well versed in to ensure that...
-
Real Estate Richmond
How Realtor® Nari Thiara saved a home seller over $30,000
Sponsored Content In her 8 years with One Percent Realty, Nari Thiara estimates she’s managed to save her clients...
-
Real Estate Vancouver
Beware of real estate investment schemes promising tax write-offs, warns CRA
Canadians should beware of a spate of real estate investment schemes that falsely promise a significant tax write-off,...
-
Real Estate
Kamloops realtor helps make dream homes a reality
Sponsored Content For Connor Shelton, it’s all about making dream homes come true for his clients. That’s why the Kamloops...
-
Real Estate Vancouver
The Surprising Things Millennials Want when Buying a Home
It’s more challenging to become a homeowner in 2019 than it was for previous generations, but here’s some encouraging news:...
-
Real Estate Burnaby
Short-term rental taxes: What owners need to know
Since October 2018 when the legislation came into effect, short-term accommodation providers in B.C. have had to collect and...
-
Real Estate Richmond
Homebuyers sacrificing travel, leisure, retirement funds to build down payments
Funding a home purchase can be a monumental challenge in pricey Canadian cities such as Metro Vancouver – and for some, it...
-
Real Estate New Westminster
Multi-generational living, space-sharing and other Millennial home-buying hacks
Today’s Millennials want to get into homeownership, but high prices mean they are having to be creative about how to do so –...
-
Mortgage Brokers Vancouver
What’s Better for You? Fixed-Rate Mortgages vs Variable-Rate Mortgages
For first-time home-buyers, choosing the right mortgage can feel daunting. Here’s a classic example: Let’s say Jen and Jon...
-
Real Estate
Kamloops realtor helps make dream homes a reality
Sponsored Content For Connor Shelton, it’s all about making dream homes come true for his clients. That’s why the Kamloops...
-
Real Estate New Westminster
So you want to sell for land assembly
Sponsored Content Here are 5 things to consider so you get the best deal for yourself and your community. 1. Start with the...
-
Home Decor Vancouver
Refreshing Your Home for Spring/Summer
There are many ways you can refresh your house for the spring/summer season. These projects can provide your house with the...
-
Food & Drink Abbotsford
4 Dishes to Make with Summer Peaches
Summer is the perfect time of year to experiment with different ways to use peaches. These juicy, refreshing fruits can be...
-
Home & Garden Abbotsford
How to Create a Zero-waste Household
Reducing your household waste can help the planet in many ways. You may even be able to eliminate your waste completely if...
-
Beauty & Wellness Abbotsford
7 beauty trends for summer 2021
You may be looking forward to re-entering society this summer or at least looking better during a video meeting. Beauty trends...
-
Gifts Abbotsford
Four fabulous experience gift ideas for mom this Mother’s Day
If you’re tired of giving the same old types of Mother’s Day gifts, treat your mom with an experience instead. There are many...
-
Home Furniture & Decor Abbotsford
Working from home? 4 tips for your home office setup
Working from home can be a better experience for you with the right office setup. Setting up your in-home office correctly can...
-
Coffee Sales Vancouver
Everyone's whipping up dalgona coffee, the viral drink catching tons of buzz
Over the last couple of weeks, you might have noticed people posting photos of an unusual-looking coffee drink. What appears to...
-
Pets & Animals Vancouver
This virtual platform connects pet owners with veterinarians
If you are worried about the health of your pet during the COVID-19 pandemic, you are not alone. Whether you are too...
-
Delivery Vancouver
Stuck At Home? These BC Breweries Will Deliver Beer to Your Door
Thankfully, a number of B.C. craft breweries offer online sales, with delicious craft beer available to be delivered right to...
-
Design & Renovations Vancouver
How To Decorate Your Rental So It Feels Like Home
The right bath and hand towels can add energy to a room. Photo: Barb Lunter Older rental suites can sometimes be plagued...
-
Design & Renovations Vancouver
Spring Decor Tips to Refresh Your Space
Fresh flowers, topical coffee table books and garden ornaments used cleverly indoors are a few ways...
-
Healthy Living Vancouver
How To Be Ultra-Productive While Working Remotely
Canadians across the country set up laptops and cellphones to work from home on Monday to avoid COVID-19. While it’s a new...
-
Healthcare Vancouver
B.C. research suggests no mental health benefits to eating your placenta
A new study published May 2 has suggested there are no mental health benefits to eating your placenta. The new research...
-
Catering Vancouver
40 years of perfecting the party
Four decades is a long time, and it is especially long in the competitive hospitality industry, which is cutthroat and not for...
-
Local Attractions Vancouver
8 awesome things to do in Whistler besides ski and snowboard
While skiing and snowboarding are a great deal of fun, Whistler offers a plethora of fun activities that you must try. From...
-
Wedding Experts Vancouver
Canada's Event Planning Star, Soha Lavin
You could say that event planning is in Soha Lavin’s blood. Indeed, the founder of Vancouver-based CountDown...
-
Food & Drink Vancouver
Chef Trevor Bird shares cooking tips and recipes for busy parents
We get it, parents are busy. In Vancouver at least, it’s typical that both parents work, which can make dinner time more than...