FAQ When Buying a Pre-sale Home

Here’s a detailed FAQ that can help you navigate the complexities of buying a pre-sale home, which refers to purchasing a property before it is built or completed. These are common questions potential buyers might have:

1. What is a pre-sale home?

A pre-sale home is a unit purchased in a residential development before the completion of construction. Buyers typically make this purchase based on architectural plans, models, and renderings provided by the developer.

2. Why buy a pre-sale home?

Pre-sale homes often offer the advantages of a lower initial purchase price, the ability to customize finishes and features, and the appeal of moving into a brand-new property. There may also be potential capital gains if the market value of the property increases by the time it is completed.

3. What are the risks of buying a pre-sale home?

Risks can include construction delays, changes in market conditions which might affect property value negatively, potential differences between the finished product and the initial plans, and the financial stability of the developer.

4. How are pre-sale homes financed?

Buyers typically pay a deposit ranging from 10% to 20% in staged payments, which is held in trust until completion. The balance of the payment is due upon completion. It’s crucial to get pre-approval for a mortgage to ensure funding is secured for the final payment.

5. What is the "cooling-off period"?

In British Columbia, there is a statutory 7-day cooling-off period (also known as the "rescission period") after signing a pre-sale contract. During this time, buyers can cancel the contract without penalty, providing a short period to reconsider their decision.

6. Can I sell my pre-sale contract?

Yes, often buyers can sell their interest in the property before it is completed, a process known as "assignment." However, this usually requires the developer’s consent and may involve additional fees or restrictions.

7. What should I check before buying a pre-sale home?

• Developer’s reputation and track record
• Detailed review of the disclosure statement and contract terms
• Understanding of the deposit structure and payment schedule
• Legal stipulations regarding completion, delays, and warranties

8. Are there additional costs when buying a pre-sale home?

Yes, buyers should account for GST on new homes, property transfer taxes if applicable, and legal fees. At completion, there may also be additional costs like utility connections, strata fees, and property taxes.

9. What warranties come with pre-sale homes?

New homes in BC come with a mandatory 2-5-10 home warranty insurance, which includes:

• 2 years on labor and materials
• 5 years on the building envelope, including water penetration
• 10 years on the structure of the home

10. What happens if the developer fails to complete the project?

If a developer fails to complete a project, the deposit paid by the buyer is protected and must be refunded, as it is held in a trust. However, other financial or legal repercussions depend on the specific circumstances and contractual agreements.These FAQs cover many of the basics but always consider professional legal and financial advice specific to your situation when buying a pre-sale home. This ensures that your rights are protected and your investment is secure.