PRE-SALE CONDOMINIUMS — THE RISKS AND REWARDS
Why Do Developers Pre-sell Condos?
Virtually all developers are required by their lending institutions to meet certain “pre-sale” goals before they provide financing for the project. In other words, the developer must come to market with a building concept early on in the construction process to prove its viability to its lenders. There is some uncertainty with pre-sales, but much of the actual legal risk is mitigated for the purchaser by the government-required Disclosure Statement that is provided by the developer.
What is a Disclosure Statement?
A Disclosure Statement outlines the legal entity offered for sale; it protects both the purchaser and the developer. This Disclosure Statement contains information on zoning requirements, building design, construction, suite sizes, strata bylaws, operating budgets, and other important construction, building, and legal information. It is an important document that should be reviewed by a purchaser’s lawyer either prior to entering a Contract of Purchase and Sale, or within the seven-day rescission period allowed by law wherein a purchaser can cancel the contract and receive a full refund on their deposit.
A developer cannot sell a subdivided property that contains more than four units without a Disclosure Statement, so be sure to obtain one for any pre-sale condominium building that you are considering.
WEIGH YOUR OPTIONS
Disadvantages of Buying a Pre-sale Condominium:
There are potential risks that purchasers should consider when buying any pre-sale property:
- Is the developer reputable? Does it have a reputation for quality construction and delivering on what it promises?
- Does the developer provide quality after-sale service?
- If the market collapses or your personal situation changes, as a buyer you are still legally obligated by contract to proceed with the sale.
- Your deposit is invested into one property and is not available to use for other investments.
Buying a pre-sale condominium comes with some risks; however, the rewards are undeniable. The best advice is to know yourself, research your developer, and understand your market.
Advantages of Buying a Pre-sale Condominium:
Aside from your personal motivating factors, there are many advantages including:
- Increasing value from the time of purchase to the time of completion. A buyer considering a pre-sale condominium should have faith that prices will continue to rise, at least during the construction period of the building. In a hot market, this financial reward often makes the risk worthwhile. According to Statistics Canada, new homes are up 1.1% in May from April 2016.
- Buying without having to close the sale immediately gives a current homeowner time to increase the equity value in their current home and renters more time to save money prior to the closing of the sale.
- Buying early often provides more options for floor plans, views, and styles.
- Purchasing a pre-sale condo often provides some price savings as the developer needs to meet certain financing goals to continue with construction.
- In most cases, bidding wars are eliminated by buying a pre-sale condominium.
- New units and new buildings come with full new home warranties.
- A full Disclosure Statement provides the purchaser and/or their lawyer with the necessary information to make an informed and educated purchase.
At Lakepoint One, risk is mitigated by the reputations of Verity Construction, Victoria’s leading condominium architecture firm, de Hoog & Kierulf Architects, and a trusted community developer with a strong track record, Westhills Land Corp.
To learn more about Lakepoint One Condominiums, register now.
DISCLAIMER: All data and information provided on this site is for informational purposes only. Westhills Land Corp. makes no representations as to accuracy, completeness, currentness, suitability, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis. This post is for informational purposes only and not an offering for sale. An offering may only be made by Disclosure Statement. These plans and renderings are not intended to fully or completely represent the final product. Plans and renderings provided are preliminary layouts only for general review of type and size by client group. All sizes are approximate and subject to revision as design development proceeds. Details including but not limited to colours, interior and exterior details, landscaping, existence and location of retaining walls, views, and type and location of development on surrounding properties are all subject to change. Renderings are an artistic representation of the proposed home.