Risks and Benefits of Pre-Selling Homes

There are many developments on the rise in Vancouver and it seems new ones are on the horizon every day. For a relatively small deposit and downpayment requirement with a few years to save up or set aside financing concerns until the completion, pre-selling properties seem like a great way to get into the market. Sure there are benefits, but potential risks are there and should be thoroughly considered before signing on the dotted line.

Advantages Risks
Greater customization: Choose your preferred design, layout, décor upgrades, and even parking configuration. Terms of contract may change: You might not get exactly what you wanted. Check the fine print with your Realtor and lawyer.
Warranties:
  • 1-year developer’s warranty to cover issues before building is complete but after you’ve put down a deposit.
  • 2-5-10-year warranty program covered by the BC Government.
No mortgage guarantee: Not all banks will fund pre-sales. Some lenders will only cover the value at completion, which could be less depending on market conditions. And if your financial picture changes, you may not qualify even if you were pre-approved. 
Low hassle: Minimal replacements or repair costs and work for 10–15 years. No way to back out: Once you’re all in with a signed contract, you’re in for the long haul—or you forfeit that deposit.
Low cost of ownership: New energy-efficient homes mean lower utility costs, lower maintenance fees, and minimal chance of paying special assessments for repairs. Must have patience: Properties can take up to several years to build. And unexpected delays may have you hunting for temporary living situations until move-in day.
In a rising market: The value of your unit can be higher upon completion than when purchased, giving you instant equity. In a soft/falling market: By the time you move in, you already owe more than your condo’s worth.

This table comes courtesy of: http://www.rew.ca/news/buy-home-pre-sale-tips and it's author Theresa Borsman

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