I really do not like to buy anything that I can’t see and touch. So when it comes to condos, I’d rather wait and buy it when it is built. Obviously, there are plenty of people who find it acceptable to put 10 to 20% down payment 2 to 3 years in advance of moving in., but there are some drawbacks to buying pre-sale condos.
For one thing, it is hard to visualize how your place will finally look. Often you have a show room with some fully furnished rooms. You get a feel for the color scheme and material but you really do not get a feel for the space. Even if they have a sample suite in your floor plan, be aware that they may leave out the ceiling in the showroom to give you a false sense of spaciousness.
Also with such a long period of time before the construction is complete, there is plenty of time for things to change. Both for you and the builder.
Sometimes financial situation change and you cannot come up with the second deposit payment that is required closer to the completion date. If you have additional properties, it is possible to get the additional amount through a home equity loan. If not, you risk loosing your deposit!
However, sometimes the situation changes so much that you don’t qualify for a regular mortgage at all. It could be the government’s new rules or it could be a change in your employment situation. Now you have to decide whether to settle for a higher rate through alternative lenders or sell the place.
If you want to sell the place, then you better be familiar with the terms of your agreement of sales. The contracts are written by the developer’s lawyers. There are many terms that are not beneficial to you. Here is an obvious situation where having your own realtor will protect you from nasty surprises.
The builder can run into their own problems over this long period of time. Do you know what happens when the construction is behind schedule? What if they are short of funds and decides to take a few short cuts in terms of the design? These items should be covered by the agreement of sales but don’t expect the sales associates at the sale centre to point them out to you because chances are they are written favoring the developer. Keep in mind the sales associates are not licensed realtors. They are employees hired by the developer or marketing company to sell you their project. They have no duty of care to you. And they are not covered under the Real Estate Council of BC.
One reason why someone would be willing to put the money out so far in advance is that they do not want to miss out on any appreciation that will happen during this time period. A strategy could be to buy another place and rent it out. Sell it when your pre-sale condo is ready. This might not work for everybody. You will need to consider the price of the condo, the expected appreciation, the length of time before completion and the associated transaction costs. Have a realtor work out the details to see if it applies to you.
So in summary, I would suggests buying built condos to avoid any surprises, but if you have set your heart on buying a pre-sale condo, please bring along a realtor to protect your interest.
Alternative lending.ca are specialists in alternative lending solutions such as second mortgages, home equity loans and inter alia mortgages. We operate out of Vancouver, BC, but can assist people in all of BC and selected locations in Alberta, Manitoba and Saskatchewan.
