PRESALES AND NEW CONSTUCTION – A BRIEF OVERVIEW OF WHAT YOU SHOULD KNOW BEFORE YOU BUY
Most home buyers understand the importance of having a buyer’s agent when buying a home. Did you also know that it’s to your advantage to have a buyer’s agent when you are purchasing presale or new construction property? Remember, the developer’s sales team has zero fiduciary duty to look out for your best interests, they are working for the developer/seller. Meaning they are legally bound to represent the best interests of the builder, not the Buyer. That is one of the many reasons it’s so important to have a REALTOR who works for and represents you.
You benefit from an agent’s experience when using a buyer’s agent when building a new home. When entering into a new construction contract, protect yourself by using the experience and expertise of a professional real estate agent. Your buyer’s agent:
- knows how to read and explain a new construction contract
- prepares for and attends builder meetings and walk-throughs
- serves your needs even after the home closes
- offers suggestions and advice (on options, inspections, mortgages, and construction issues) throughout the buying process
- monitors trends and searches for great deals
- knows what properties are for sale within the local communities and neighborhoods.
- Doesn’t cost you anything! A buyer’s agent commissions are paid by the Seller.
A buyer’s agent works for YOU. It is our job to find you the best home at the best price, look out for your best interests, and help you navigate the complicated process of buying a new construction home.
PRESALES OF NEW CONDOS AND TOWNHOMES
PRE SALE CONTRACTS
Developers in British Columbia commonly pre-sell residential units such as strata titled apartments and townhouses. These ‘‘pre-sales’’ include any residential unit that is purchased prior to the completion of construction. Typically developers enter into contracts that provide for units to be built within two years at a fixed price, and require deposits to be paid by the prospective purchasers. The deposits are held in trust by a lawyer, notary public or real estate brokerage, unless deposit protection insurance is obtained, in which case the deposits may be released to the developer. If a proposed development does not proceed and the purchase contract is terminated, pre-sale purchasers are entitled to have their deposit money repaid. However, unless the pre-sale contract requires interest to be paid, the purchaser may not receive interest on that deposit. This is something that a purchaser will want to clarify at the time that they enter into a contract.
Obtain Professional Advice
As per above, we always recommend using a REALTOR. We can explain real estate terms and practices and provide information about available properties in the purchaser’s price range. Additionally, prospective purchasers may wish to consult a lawyer to better understand their rights and obligations in respect of an existing or proposed pre-sale contract. A lawyer will be able to provide advice with respect to the purchaser’s responsibilities under the contract, including any termination or extension rights.
Review the Disclosure Statement
A prospective purchaser should carefully review the developer’s Disclosure Statement. The Real Estate Development Marketing Act provides that a developer must not enter into a contract to sell a development unit unless a copy of the Disclosure Statement has been provided to the purchaser and the purchaser has been given a reasonable opportunity to read it. The Disclosure Statement explains what the developer is selling and describes the purchaser’s right under the Real Estate Development Marketing Act to cancel the pre-sale contract within seven days of signing it. It is important for prospective purchasers, who either already have a pre-sale contract or are considering entering into one, to appreciate the risks associated with them.
There are a lot of details involved in purchasing new construction properties. Before you sign on the dotted line, call PORTER GROUP anytime to discuss the ins and outs of purchasing a presale condo or townhome in Langley, Surrey, Cloverdale or Abbotsford.
Interested in taking a look at new developments? Call us to make an appointment to tour you through showrooms in Langley.
You can also visit vancouvernewcondos.com to get a sneak peak and register for VIP access to new and upcoming developments. We at PORTER GROUP are proud to represent vancouvernewcondos.com in Langley.
BUYING A NEW SINGLE DETACHED HOME?
If you are looking to buy a new home in British Columbia, there are some areas you and your REALTOR should check before making a purchase.
Is the builder licensed?
In B.C., builders must be licensed by BC Housing and arrange for third-party home warranty insurance. Otherwise, they must obtain an applicable exemption in order to get a building permit or start building on a new home.
As a prospective buyer of a new home, you should check if your builder is licensed. You can search the Public Registry of Residential Builders via any of the following:
- Company name/Geographic area/Licensee name/Licence number/Licence status/Licence type
Is there third-party home warranty insurance?
Use the New Homes Registry to find out if a new home or home under construction is being built by a licensed residential builder and if it has home warranty insurance.
Minimum coverage and allowable exclusions for third-party home warranty insurance are set by legislation.
As a minimum, homes built by licensed residential builders must have 2-5-10 Year Home Warranty Insurance. That 2-5-10 coverage includes a minimum of:
- 2 years on labour and material (some limits apply)
- 5 years on the building envelope, including water penetration
- 10 years on the structure of the home
This is the strongest construction defect insurance in Canada. On some new homes, the warranty insurance coverage exceeds that minimum requirement.
Only insurance companies approved by the Financial Institutions Commission can provide home warranty insurance. Make sure you ask if warranty is included in the new home and get that information confirmed in writing. Look for the 2-5-10 Year Home Warranty Insurance logo when checking out new homes.
Visit the BCHousing.org Home Warranty Insurance on New Homes page for more information, including commencement dates, exclusions and limits on coverage.
Is the home owner-built?
If an owner builder constructed the new home, it’s exempt from the legal requirements of being built by a licensed residential builder and being covered by a policy of home warranty insurance. However, if an owner builder sells a home within the first 10 years of occupancy, they remain liable to any purchasers for defects during that 10-year period under the statutory protection provisions of the Homeowner Protection Act.
Please visit the BChousing website at https://www.bchousing.org/licensing-consumer-services/new-homes/buying-new-home for further information.
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