Buying a Presale Home: What You Need to Know
As someone who is buying a presale home for the first time, the process, steps, and information involved may be unfamiliar to you. However, a buyer's agent can assist you in comprehending the process and making the most advantageous decision. Nevertheless, before you begin looking for a realtor, it is crucial to grasp the basics of purchasing a presale home.
What is a presale home?
Presale properties refer to homes that are made available for purchase before they are constructed or finished by the developer. When you purchase a presale home, you are essentially placing a down payment to secure your rights to own the property in the future. Payment schedules are generally included, and you will pay in instalments as construction progresses. However, you will not be required to pay the entire cost of the home until it is fully built.
The benefits of purchasing a presale home
Buying a presale home has various advantages, such as not having to pay the full price until the home is finished. This gives buyers the opportunity to save money during the construction process and possibly decrease their mortgage amount. Moreover, presale homes may increase in value while being built, resulting in a higher value than the initial purchase price. These advantages make presale homes highly desirable among potential homeowners and investors.
Other benefits include:
There are several advantages to buying a new home, such as built-in warranties to ensure your peace of mind. Additionally, purchasing a presale home offers the chance to personalize the layout and color scheme according to your preferences. Living in a brand new home is another benefit. Moreover, if you are a first-time home buyer in BC, you may qualify for incentives that can help you save money on the cost of your new home.
To ease the cost of buying a new home, first-time home buyers in BC can take advantage of several benefits. These include the reduction or elimination of property transfer tax, the option to withdraw tax-exempt funds from an RRSP through the Home Buyer’s Plan, and the First-Time Home Buyers Credit, which offsets legal fees and closing costs. However, these incentives have specific requirements that must be met, and your realtor can assist you in determining your eligibility.
Deposits and deposit schedules
The initial step in buying a pre-sale home is to provide a deposit for the property. Typically, a small deposit (such as $1,000) is required when making the initial offer, followed by a deposit of 5-10% of the total price agreed upon after the 7-day cooling-off period. As the construction of the home moves forward, you will be required to pay a certain percentage at two agreed-upon times.
It's essential to understand that the deposit amount and payment schedule in a presale contract can vary based on multiple factors such as the developer, market conditions, and the expected completion time of the home. Furthermore, it's worth noting that your real estate agent can negotiate better deposit and payment terms on your behalf.
Risks
Buying any home comes with risks, but there are some unique risks associated with purchasing presale homes. Here are the most significant risks to keep in mind:
Presale homes often take longer than expected to finish, and even if there's a set completion date in the contract, unexpected factors outside of the developer's control can cause delays that are not considered a breach of contract.
Developers may have the right to make changes to floor plans or finishings without informing the buyer if it's required to meet building codes.
There's a possibility that the value of the home may not have increased by the time it's completed, though this is a risk associated with any investment over time.
A competent realtor can assist you in mitigating the risks involved in purchasing a presale home, just like any other real estate transaction. With their expertise in market data, analysis, and experience, they can guide you to make an informed investment decision.
Rescission or cooling-off period
The rescission or cooling-off period provides buyers with a 7-day window to withdraw from the contract for any reason, beginning from the moment the offer is accepted. This allows buyers to have a period of reflection and ensure they are confident in their purchase decision.
It is important to note that the 7-day period automatically ends, and if the buyer does not notify the developer of their intention to withdraw, the contract will proceed without any further approval. Therefore, it is crucial to take the time to reflect and communicate any changes of heart to your realtor within the cooling-off period.
Developers
The developer is the entity constructing and offering the home for presale. They're motivated to do so because it reduces their financing expenses, allows them to gauge the market value of the homes they're constructing, and protects them against any downturn in the real estate market. As a buyer, it's highly advantageous to have an experienced and knowledgeable professional who's acting in your best interests - and that's precisely the role of your real estate agent or advisor.
Realtors or advisors
When you're making an important decision like buying a home, it's crucial to be well-informed and confident. This is where having an advisor comes in handy. For first-time home buyers interested in presale homes, it's ideal to have an advisor who is experienced in both areas. This ensures that your advisor is aware of the incentives available to first-time buyers and can empathize with your feelings as you embark on your first home purchase. Additionally, you can trust that your advisor is knowledgeable about the presale market and is capable of negotiating with developers.
What can an advisor help negotiate?
Negotiating the final price is just one aspect of buying a presale home. An experienced advisor can also assist in negotiating the terms of your deposit and payment schedule as well as the layout and amenities of your new home.
Working with an advisor as a home buyer is free
Your advisor, as the representative for you, has your best interests in mind, and you, as the buyer, do not have to pay for their services. Instead, the developer covers the commission for the advisor once the final sale is completed. Therefore, you can benefit from their expertise and knowledge without incurring any costs.
Find a JULY advisor
If you are considering buying a presale home and need the assistance of a realtor to help you achieve your goals, consider checking out JULY advisors. Don't hesitate to contact any of their advisors if you have any questions.