The Pros and Cons of Buying a Presale

The Pros and Cons of Buying a Presale

Here's the 411 folks, buying a presale property can be an exciting opportunity, but it's important to carefully weigh the advantages and disadvantages before making a decision. In this blog, we will discuss the pros and cons of purchasing a presale property and provide you with valuable insights to help you make an informed choice.

One of the major advantages of buying a presale property is that you do not need to secure a mortgage until closing. This means that you have time to save money and prepare your finances before committing to a long-term loan. Additionally, buying a presale property offers the opportunity for customization. You can work closely with the developer to select finishes, fixtures, and even layout modifications, allowing you to personalize your home to suit your taste and lifestyle. Big banks like RBC and TD are now incentivizing presale purchases by providing mortgage pre approvals for up to 60 months, if you buy a presale and want to secure a mortgage early on. This relieves the stress of having to get financing later and if interest rates go up or down by the time the project completes, you won't have to re-qualify, you'll just be grandfathered into the rates if they are lower or you'll get to keep the original rate you got before the project completed.

However, there are some downsides to consider as well. One of the most notable disadvantages is the long completion period associated with presales. Construction projects often face delays due to unforeseen circumstances, such as weather conditions, labor shortages, or even changes in the development plans. This means that you may have to wait longer than anticipated to move into your new home. It's important to be prepared for potential delays and adjust your living arrangements accordingly. Lastly, you do have to pay GST on the purchase of newly built homes, so every presale is subject to this payment. However, the BC Government announced a few weeks ago that they'll be increasing the property transfer tax for newly built homes from $750,000 to $1,100,000 which means that more presale buyers will only have to pay GST on purchase for larger condo and townhome units, rather than having to pay both the property transfer tax and GST.

Another concern with presale properties is the reputation of the builders. While there are many outstanding developers in the market, there are unfortunately some who have been associated with poor construction practices or inadequate customer service. It is crucial to thoroughly research the developers and their past projects to ensure that you are working with a reputable builder.

In conclusion, buying a presale property has its advantages and disadvantages. The flexibility of not needing a mortgage until closing and the ability to customize your home are definite perks. However, the long completion period and the potential for projects to be delayed should not be overlooked. Additionally, it is essential to thoroughly research the reputation of the builders involved in the project.

Ultimately, the decision to buy a presale property should be based on your personal circumstances, preferences, and risk tolerance. Consulting with a real estate professional who specializes in presales can provide you with valuable guidance and ensure that you make an informed choice.