Should You Buy a Pre-Sale Condominium in Victoria, BC?
Pros, Cons, Risks & Rewards of Purchasing a Condo in BC Before it is Built
In order to secure financing, most BC developers of condominium buildings need to sell a certain percentage of the units in their building. In Greater Victoria the sales campaign for these new condo developments often start long before there is a shovel in the ground. Buyers commit themselves to purchasing a condominium, which may not be ready for occupancy for two to four years. This type of sale is typically called a pre-sale.
Buying a pre-sale condominium in Victoria is very different than buying a condominium in an existing building. Here are some of the pros and cons of buying a pre-sale condo or townhome.
PROS OF BUYING A CONDO BEFORE IT IS BUILT
- You get the most up-to-date layout, which today, generally means an open concept layout
- You get the most up-to-date materials and finishes such as countertops, tiles, flooring, etc.
- You often can choose from a few different colour palettes
- The colour palette used in most new buildings are neutral and contemporary, so you don’t need to repaint
- You can sometimes add extras to your condo, which would otherwise be difficult or prohibitively expensive to add to an existing condo
- You get the benefit of having new appliances and fixtures which, hopefully won’t need replacing for many years
- You get the benefit of a new building which, hopefully, won’t need major repairs or replacements for a number of years
- You get the benefit of the New Home Warranty
- Other than the deposits, you get a number of years to save your money to pay for your new condominium
- If the market rises,* from the time you commit to buying to the time you that take possession, you get the benefit of this price increase. This “profit“ is seen by many people as one of the biggest benefits of buying a pre-sale condo. At the time this article was written, the condo market has been rising considerably in Victoria, Oak Bay, Saanich, Sidney and on the West Shore of Greater Victoria.
- Normally, new buildings have fewer restrictions than older buildings with regard to pets and rentals
- You don’t have to clean up, or even think about the last owner’s dirt
CONS OF BUYING A PRE-SALE / NEW CONDO
- In a rising market, such as we have been experiencing in Greater Victoria for the last number of years, you will have very little opportunity to negotiate terms and price in the contract. You often have to sign the developer’s contract “as is”
- Most developer’s contracts are very much slanted in favour of the developer and contain clauses:
- Allowing the developer to substitute different finishes and materials (flooring, tiles, counters, doors etc., etc.) if the finishes which you agreed to are not available
- Providing a “fudge factor“ that allows the developer to deliver the condominium to you with a smaller square footage than what was advertised
- Have a projected closing date on which you can take possession, but also provisions that allow the closing date to be pushed out, sometimes as long as two years. So, it’s difficult for you to know when you will have to take possession and pay for your new condominium
- Allowing the developer to decide not to build if they don’t achieve a certain sales target
- Limiting the developer’s liability to the return of the buyer’s deposit if the developer defaults, but not limiting your liability if you default
- Limiting the ability of the buyer to assign the contract to a third-party. Sometimes there is an absolute prohibition on assignment, sometimes there is a fee payable to the developer in the event that the buyer wants to assign the contract
- If the developer has financial difficulty during the course of construction or becomes insolvent, the project may be shelved or seriously delayed. Although you will get your deposit back if it’s properly protected, you will have lost the use of your deposit and the benefit of a rising market
- Unless it’s provided by the developer’s bank, it’s unlikely that you will be able to get a mortgage commitment for a new condominium that is not going to be finished for three or four years. So, when you purchase a pre-sale, often you won’t know what mortgage rate you will be paying in two or three years. It could be a lot higher than when you signed the purchase contract
- After you take possession and find that something isn’t working properly, getting the developer back to fix things may be a problem. This obviously depends on the developer. Some are better than others
- The 2-5-10 year New Home Warranty is not really a 2-5-10 year warranty. There are some items that are warranted for less than two years
- If you need to resort to the New Home Warranty, you may find that it is a time consuming and frustrating process
- Because of the complexity of the developer’s contract, you should have a lawyer review the construction contract and the disclosure statement for a pre-sale. This review by a lawyer will add extra cost to your purchase. A review by a lawyer of a standard purchase contract for an existing condominium is not normally required
- There will be GST payable on the purchase of a new condominium, unless you qualify for an exemption
The bottom line is you need to weigh the risk and potential reward of buying a condo before it is built and are well advised to investigate that developer’s business practices and track record as thoroughly as possible. If you would like more information on new condo developments and pre-sale condos, townhomes and Single Family Homes in Victoria contact us we are here to help.
TOGETHER, Hal Decter, LL.B. and Audra Poole bring a unique level of knowledge, experience and service that is hard to find.
For eleven years, Hal Decter was a practicing real estate lawyer and partner with one of Canada’s top law firms. His client experience ranges from some of the country’s largest corporations to individuals and couples starting their first businesses or buying their first homes.
Audra Poole brings her research acumen and luxury marketing and sales talents to the team. She is a highly respected marketing and public relations executive with more than twenty years of local, regional and international experience.
Whether you are looking to buy or sell a home in Victoria, Oak Bay, Sidney or Saanich – we’ll be on your side and make the process as stress free and seamless as possible.