Presale generally refers to real estate developments that are available for sale before the
construction or completion of the developments.
Completed developments that still have units unsold are also considered presale.
What are the benefits and risks of buying a presale?
Benefits
• It’s brand new! You’ll be the first owner of the home and you probably
won’t need to renovate before moving in.
• You get the 2-5-10 years warranty which would help you save money on
repairs over the years.
• Since a presale property takes 2-3 years to complete, it gives you time to
save up to pay for your mortgage.
• Presale properties usually go up in value upon completion.
Risks
• There might be delays to the completion of the property. It’s not uncommon
for presales to delay for 1 to 2 years.
• If you no longer want or can afford the presale during construction or upon
completion, you cannot back out from it. However, you’re able to transfer or resell the presale
under assignments in most cases.
How much do I need to pay upfront? Do I need to pay down payment?
While every presale contract is different, typically you have to pay a fixed amount upon signing the
purchase agreement. You have 7 days to reconsider if you want to proceed with the purchase. Once you
decide to go ahead with the purchase, you will need to put down 5-10% of the purchase price as a
deposit, with subsequent payments of 5% of the purchase price over the next 12 to 18 months. The
deposit usually adds up to 15-25% of the purchase price. This is considered the down payment of your
new home.
When your home is built, then you will start paying for the remaining 75-85% of the purchase price.
When do I start to pay my mortgage?
Your mortgage payments don’t start until the development is complete. However, it’s recommended to
start arranging for your mortgage when you make the presale purchase so you have a good
understanding of the costs of owning the property and potentially get a better mortgage rate.
Do I need to pay tax on presale?
All new or presale homes in BC are subject to a 5% GST. If your new or presale home is priced below
$450,000 before tax, there is an eligible partial rebate on the GST. However, if it’s priced above
$450,000 before tax, you’ll have to pay the full 5% GST.
There’s also the 1-3% Property Transfer Tax on all sales of properties in BC. This tax is exempt
from first time home buyers if the property is priced below $500,000.
For more information, consult a tax professional or visit the BC government website.
