Developers in BC commonly sell residential units, such as strata-titled apartments and townhomes prior to the construction of the building. In other words, purchasing a pre-sale is not the same as buying an existing physical property, but rather a contract for the right to receive and an obligation in paying for a finished unit at some point in the future.
Q. I AM REQUIRED TO PAY A DEPOSIT. WHAT IS STANDARD?
Most presale homes require a total deposit of 15-20% of the purchase price, paid out in stages. Developers are often subject to requirements from their banks which is why this deposit amount is needed or why they can’t be more flexible at times. Some developers offer limited opportunities to buy with 5% or 10% deposit, particularly if it is getting close to completion.
Q. WHAT IS A RESCISSION PERIOD?
A rescission period protects a new condo or townhouse buyer, reserving him or her the right to cancel the purchase in writing within a seven-day timeframe of officially agreeing to the sale. Legislated by the provincial government, it provides a window to perform due diligence and finalize the contract.
Q. WHAT IS BRITISH COLUMBIA’S 2-5-10 STRUCTURE?
The 2-5-10 name comes from the warranty’s mandated minimum time frame breakdown for different protected components: 2 years: the warranty period for labour and materials-related defects or issues ; 5 years: the warranty coverage for the building envelope, including water penetration; 10 years: the warranty period for the general structure of the building.
The two-year labour and materials coverage protects against any issues in labour and materials for 15 months on the common strata property and 24 months for defects. This includes components such as delivery and distribution systems; exterior cladding, caulking, windows or doors that may lead to detachment or material damage to the new home; violations of the Building Code that constitute a health or safety risk; and defects which render the home unfit to live in. When the warranty speaks of the building envelope, it is referring to the outside or skin of the building, whereas the structure of the building refers to the ‘bones ‘ of a building or functional structural components.
Q. I’VE PURCHASED A HOME. WHEN SHOULD I ARRANGE FOR MY MORTGAGE?
I strongly recommend arranging your financing at the time you write a contract on your presale home. This allows you the opportunity to hold a mortgage rate based on today’s rate – even if you won’t start paying your mortgage for some time. By locking in at today’s rate, you will protect yourself from climbing rates over the 2-3 years you may be waiting for your home to be built.
Q. IS THERE A PROPERTY TRANSFER TAX ON A PRE-SALE?
The newly built home exemption reduces or completely eliminates the amount of property transfer tax you pay when you purchase a newly built home up to $750K.
Check out Downtown and Yaletown PRE-SALES here
