The process of buying pre-construction homes can be confusing. Here’s an introduction, and answers to your frequently asked questions.
Q. How does the pre-sale process work?
A. This is an opportunity for a buyer to secure a home in the pre-construction phase. You can visit a presentation centre to familiarize yourself with the new development, by walking through a display suite, reviewing the floor plans and amenities, and getting an overview of the community. To buy a pre-sale home, you submit a contract and deposit, which holds your home until the building is complete, at which time you will get full ownership.
There are many benefits to pre-sale purchasing, like allowing time to budget, selecting colour scheme and options, and moving into a truly new home.
Q. How do I get notified about new projects?
A. Register on the project’s website and get your realtor to sign up for updates, too. Often the developer will host a realtor event prior to the public launch, which allows your realtor to gather information on the development, pricing and timing of sales. In a highly active market like our current one, it is important to respond to emails and phone calls from the sales representatives – if you wait, you will likely have far less selection, if any at all.
Q. What can I afford?
A. To understand what you can afford, speak with a financial planner or mortgage broker to get yourself pre-approved. We strongly recommend arranging your financing at the time you write a contract on pre-construction home. By locking in at today’s rate, you will protect yourself from climbing rates that may occur over the course of the building’s completion.
Q. What is the best way to manage the deposit?
A. Most pre-construction homes require a total deposit of 20 per cent of the purchase price, paid out in stages. Typically, the 20-per-cent installment structure is 10 per cent for the first deposit, then five per cent due within six to 12 months, and the final five per cent is required within 12 to 18 months. Developers are often subject to requirements from their banks, which is why this deposit amount and payment schedule is needed. Make sure you review the deposit structure and timing of payments with your sales representative and/or realtor, to ensure you understand your obligations and when deposit money is due.
Q. After I sign a contract, when is it a legally binding contract?
A. Once a contract is signed by both parties, there is a seven-day rescission period in which you can cancel your contract without penalty. After this rescission period, your contract is legally binding and both parties are expected to execute their obligations as per the terms.