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Following my previous column discussing the benefits of purchasing presale condos, this article focuses on how to go about buying a presale unit. This includes mitigating potential risks; and understanding a buyer’s rights and responsibilities under the British Columbia Real Estate Development Marketing Act (REDMA), including disclosure, down payments and rescission.
I reached out to GVHBA member Nav Kandola of AXIS Real Estate Solutions Inc. for an overview of the act.
What You Need to Know
Disclosure: The developer is required to disclose the anticipated start and completion dates of the project. This is more for convenience to the buyer than actuality. With unknown variables that could delay a project, the sales agreement typically allows the developer three 30-day extensions. If a project is delayed, the buyer will receive a letter well in advance making them aware of the delay and the new anticipated completion date.
Amendments: The developer is obligated to keep you up to date on amendments to estimated dates and material facts. This is important because building a new development is a long and complex process, often with many changes.
Rescission: Buyers have a seven-day right of rescission from the day the disclosure statement is received from the developer. This gives you time to read over the documentation, and provides a cooling-off period. It is always best to get legal advice during this stage. You can choose to rescind your contract and receive your initial deposit back.
Down payments: Typically,buyers are required to place a 10 per cent deposit which becomes part of the mortgage down payment. Some developers may take more or less of a deposit dependant on the situation of the project. Construction financiers will require a minimum, and the duration of the completion date will be determining factors. The initial deposit can be low as $1,000 to $5,000 when writing the contract.
How to Mitigate Potential Risks
It’s important to buy from a reputable builder when purchasing a presale unit. You need to be confident in the quality of the home you are buying, and also be confident that it will be built to quality standards in a timely manner. It is a good idea to check out previously built developments and talk to owners too.
It is also important for the buyer to understand that a presale is not the purchase, but a contractual agreement to purchase when the product is ready for sale. Find out how much of a mortgage you can afford. Be realistic. You will need to ensure you have the full down payment and be in a position to take on the financial obligations of a mortgage when the project reaches completion.
There is no cost difference between buying from a developer or through a real estate agent. No fees are being saved. Working with an agent who is connected to the industry may help in securing your desired unit in what is a very competitive market with developers selling record numbers of units in record days.
Buyers should closely review what they intend to purchase. Consult a lawyer familiar with REDMA on the presale agreement and review the following items: size of a unit; finishing details and appliances; parking and storage lockers; date of delivery; any penalties or additional costs for changes in the property and delay or delivery clauses. Also, make sure you are clear on what is included, and what items are optional or shown only for display purposes.
A presale purchase is an ideal way to secure a new home or investment in the location with the services you want. When looking to buy a presale condo, buy only from reputable builders, and always consult with your real estate agent, mortgage broker and lawyer. The GVHBA offers consumer-buying resources for all stages of the home-buying process. Go to www.gvhba.org for a complete list of members.