To pre-sale or not to pre-sale: the pros and cons of buying a pre-sale property

When it comes to real estate, the term “pre-sale” refers to the practice of buying a unit in a condo, apartment building or other development that hasn’t yet been completed, is currently under construction, or which is still in the planning stages.

Pre-sales have been a steady and reliable part of the real estate market in B.C. for decades. But many buyers still don’t quite understand all the ins and outs – or the unique pros and cons – that come with buying a pre-sale property.

The pros of pre-sale

On the plus side, the advantages of purchasing a pre-sale property include:

·      Getting a brand new unit no one else has ever lived in, which will likely need fewer repairs or renovations, and which can usually be rented out at a higher rate.

·      A fixed purchase price with no risk of having to win a bidding war to get the property of your choice.

·      Flexibility to choose exactly the unit you want and customize the finishings, flooring, cabinetry, appliances and floor plan to your personal budget and preferences.

·      More time to save up for a down payment (which could also translate into smaller monthly mortgage payments).

·      Higher property transfer tax exemption threshold compared to buying a resale unit.

·      Lower upfront costs with the option to spread your deposit out over several months.

·      Potential for the property to start appreciating in value during the construction period, before you’ve even made your first mortgage payment.

·      Eligibility for a full 2-5-10 new home warranty guaranteed by BC Housing, to cover any defects or other issues at no extra cost.

The cons of pre-sale

While the benefits can be impressive, there can also be several disadvantages that come with buying a pre-sale property. This includes concerns like:

·      Not being able to physically inspect the completed property before you buy.

·      Having to wait longer until you can move in (or rent it out).

·      Risk of unexpected construction delays that could push the completion date back even farther.

·      Higher deposit rates than with most resale purchases.

·      The possibility that the developer could make small changes to the features, design, square footage or construction timelines for the property.

·      A risk that mortgage rates could be higher by the time the unit is built.

·      Requirement to pay GST on top of the agreed-upon purchase price.

Which is right for you?

While pre-sale projects have both pluses and minuses, ultimately, the only question that really matters is deciding whether or not buying a pre-sale property is right for you. If you’re thinking about buying a pre-sale unit as either a home or an investment, contact us to walk you through all the pros and cons, and help you figure out which option works best for you.