In Canada, pre-construction homes are often called presales or pre-sales. They’re a way to invest in real estate before a building is constructed, sometimes years before they are finished.
If you’re looking for an affordable entry point into the Canadian real estate market, buying pre-construction may be an option.
Purchasing a pre-construction condo gives you the opportunity to pick the location and design that suits your needs. It’s a good way for developers to measure interest in new projects and ensure adequate demand for their units.
Purchasing a pre-sale is also an excellent way to avoid entering a bidding war in a competitive real estate market, and some investors purchase pre-construction homes to resell them when they are complete.
Read on to learn how to buy a pre-construction property in Canada.
What to Know Before Shopping for Pre-construction in Canada:
#1 The Type of Realtor
When looking for a realtor for assistance with pre-construction in Canada, please ensure that they have experience working in presale. Agents who have connections with developers or project marketing companies will also be helpful.
One way to connect with the right realtor for you is by using Nobul, a digital real estate marketplace. On Nobul, home sellers have the advantage of saving thousands in commission costs. The marketplace allows property sellers to choose the best realtors for their needs from top local agents competing for their business with different fee structures and personalized services.
In a conversation with BNN Bloomberg, the CEO and founder of Nobul, Regan McGee, explained how Nobul is a truly competitive platform.
He shared, “Our marketplace is a competitive marketplace. Agents that want to charge 5% can justify the 5% through their reviews and service proposition. That’s great. [But] if they’re doing something that’s more like a 3% job, that’s going to come out as well. So, it’s really about consumer choice.”
On Nobul, you can also find live, personalized support from real estate experts. They can help you with questions about services, reviews, and cash-back incentives.
#2 Initial Deposit
You’ll need to pay an initial deposit within ten days of signing the contract. This deposit is typically 5% of the total price of the home and is part of the total down payment.
#3 The Down Payment
- Developers typically demand a 20% down payment for a presale.
- You may have anywhere from 12 to 24 months to complete the payment during the construction.
- Your mortgage payments begin after the home is ready.
#4 Mortgage Pre-Approval
To set up the financing, you’ll need to get pre-approved for a mortgage loan. However, your financial institution will only guarantee the principal mortgage amount. You can usually lock in the mortgage rate three months before the closing date.
#5 Occupancy Period
You may be able to move in six months before receiving ownership of a condo unit during a period termed “occupancy period” if your municipality believes your building is ready for habitation. However, the developer may still need time to complete the build. During the occupancy period, you are essentially renting the unit from the developer.
#6 Closing Costs
You may have to pay several closing costs that aren’t part of the property price on the closing date or when the property is transferred to your name. The closing costs can vary, but they may be up to 10% of the purchase price.
#7 Secured Deposits
Where there is money, there is potential for real estate corruption. To avoid losing your deposit in a cancelled pre-construction project, ensure that your deposit is secured. In addition, have a lawyer review your paperwork for red flags before you sign.
Investing in pre-construction in Canada is an excellent way to gain property ownership. But, like any investment, you need to cover your bases and have competent professionals on your side early in the process.