In Vancouver’s sometimes sizzling real estate market a pre-sale may be the right opportunity for a first time homebuyer or an investor. A presale secures a property offered by a developer before it is built or completed. Prices may be rising so the purchase of a home that is not move-in ready can be lucrative and can happen before or during construction. While it can be a dream in the making for most home buyers, the process also comes with risks. If you are purchasing a home from floor plans or just completed construction, reach out and get that contract reviewed before you commit says Vancouver real estate litigation lawyer, Arsen Krekovic with Hoogbruin & Company.
When is a presale home purchase a great buy?
Having a choice of available homes is always a bonus when house-hunting.
- The deposit your presale contract requires can lead to a great investment as you wait for construction to be completed. Your standard deposit of 10-20% may lead to a significant return on your investment. If the real estate value surges 10%. It yields a 100% increase for you.
- Payment on mortgages is delayed in the meantime even as your equity increases asks purchasers to make a deposit on the sales price of the property that has been determined by the developer and the market. This necessitates entering into a contract.
- Equity is gained for the buyer who can benefit from a rise in the real estate market between the deposit and purchase and the final finished home. The equity that is built in can be significant while with a pre-sale the buyer is paying a small percentage of the future value and price of the property.
- Presale homes generally come with Warranty Protection which can be 2, 5 or 10-year warranties and so allow for minimal cost as a new owner upon moving in.
One of the most appealing aspects of a presale agreement is the seven-day rescission period. This is the legal requirement of the Real Estate Marketing Act. It allowed for a seven-day period from an accepted contract to allow for a purchaser to do their due diligence of reading the disclosure statement and ensuring this is the best purchase for their individual needs before committing to the purchase. After the seven-day period, the contract becomes firm and binding.
Risks a real estate litigator considers in your pre-sale home purchase
With so many advantages to a presale, it is wise to view your purchase from the vantage point of a real estate lawyer whose experience has seen the pitfalls.
Prices may not go up in the real estate market from the time you purchased until the time you take possession of a new property. Faced with such a risk, it may be advisable to buy an already built property and begin paying your mortgage.
If you have flexibility in your personal situation and your finances, pre-sale may be ideal. Construction delays may or may not impact you if you are looking to move into the new property or if you are buying with an eye to investment.
Getting out of a pre-sale real estate contract
In a standard purchase where you change your mind about a real estate property that is already built it is possible for the purchaser or the seller to use look to remedies of ‘specific performance’. You will need to consult with a real estate litigation lawyer to sue the other party to get the deal resolved.
Signing a presale contract, however, only provides you with the contractual right of buying the property. Your purchase is not fully yours before the property is constructed. Therefore, under such a contract, you can only sue for damages in case of a deal falling through, the value of which will rely on any increase in the market prices during that period.
Pre-sale contracts tend to be much longer and more complex than the standard real estate contracts BC realtors use. They are often one-sided and completely favor the developer and are drafted as such by the developer’s lawyers.
Be informed and protect your purchase, your rights and your future home and investment. Reach out to consult with Arson Krekovic, real estate law specialist at Hoogbruin & Company to determine if Vancouver presale is right for you, and if the risk is worth the prospective reward