Pre Sales

What is a Pre Sale?

In a nutshell a pre-sale is an agreement with a developer to purchase a property ( which could be either a townhouse, condo or single family home)  which will then

be completed at a predetermined date in the future.  You can choose to purchase either before construction starts; during construction; or when newly completed

if there is still availability.

How much do I have to pay?

You do not need a mortgage yet, but you will need to place a deposit. The deposit varies from developer to developer and so does the deposit structure. 

Typically 5-10% is required when writing the contract and incremental deposits will be required up to 20%.  

Simply explained, the day we sign the contract is called ‘writing’.  On this day the paperwork is signed and a draft of approximately $10k is given at that time.  

For example, There is a unit is listed at $500k. 

And has a deposit structure advertised as: 

“15% total structured as:  10k at writing, 5% (- 10k) on day 7, 5% 120 days after acceptance and 5% 9 months after 2nd Deposit”  

On day 7 if we are going ahead with the purchase the deposit needs to be ‘made up’ to equal 5%.  

So in this case 5% of $500k is $25k.  But we have already given $10k when we wrote the contract right?  

So $25k - $10k means we only need to give $15k on day 7 to fully commit to the sale. 

The next 5% ($25k) is then given 120 days after writing (day we signed the agreement), and then a further 9 months later

another 5% is given ($25k) and nothing is further required till the unit is completed.

Benefits to purchasing pre sale are:

A Seven-day rescission period. Legally required by the Real Estate Marketing Act, there is a seven-day period from an accepted contract to allow for a

purchaser to do their due diligence of reading the disclosure statement and ensuring this is the best purchase for their individual needs before

committing to the purchase. After the seven-day period, the contract becomes firm and binding.

Delay Of Mortgage until completion of the building.  This allows for more time to save for the down payment and closing costs.  

There’s still the ability to have a rate hold from a partnering lender with the development. If rates go up, the rate hold would apply.

If rates go down, the lesser amount would be the rate for the mortgage term.

Warranty Protection. Presale homes come with 2, 5 or 10-year warranties, which allow for minimal cost as a new owner upon moving in.

Building Up Equity. As housing prices rise over the course of the construction period, the contract on the home also rises in value.

Before completing your home there’s the potential to see profit. The return on investment is why presales are so popular with investors.

Property Transfer Tax:  Presale homes under $800,000 are exempt from property transfer tax, as long as the purchaser is a Canadian

citizen or permanent resident living in the home for a year. See if you qualify here.

First time buyers are also exempt from PTT when purchasing under $450,000 and with a slight rebate under $575,000.

Details on First Time Home Buyer Exemption can be found here.

Otherwise, property transfer tax of purchases under $2 million are 1% of the first $200,000 and 2% on the remainder.  

There is a 3% increase on the purchase price amount over $2 million.