Question 1

What is a presale or pre-construction property?

Accepted Answer

A presale or pre-construction property is a home or condo that you purchase before it's built. You're buying based on floor plans, renderings, and specifications, with the actual construction to be completed in the future, typically 2-5 years after purchase.

Question 2

How is buying a presale different from buying a resale property?

Accepted Answer

When buying a presale, you don't get a mortgage immediately. Instead, you pay deposits over time until the building is complete. With resale properties, you get a mortgage right away and take possession shortly after purchase. Presales also involve more uncertainty about the final product and longer waiting periods.

Question 3

Can I get a mortgage today for a presale unit?

Accepted Answer

No, you cannot get a mortgage for a presale unit until the property is nearing completion. Lenders won't provide financing for a property that doesn't exist yet. You'll apply for a mortgage 30-90 days before the completion date.

Question 4

How much deposit do I need for a presale property?

Accepted Answer

Typically, presale properties in Canada require total deposits of 15-25% of the purchase price, paid in installments. For example, 5% on signing, 5% after 6 months, and 5% after 12 months. Luxury properties or certain developers might require higher deposits.

Question 5

Are my deposits protected?

Accepted Answer

In most Canadian provinces, deposits for presale properties must be held in trust accounts by the developer's lawyer or notary. These funds are typically protected by deposit insurance up to certain limits, depending on the province. In BC, for example, deposits are insured up to $100,000 through the Home Owner Protection Office.

Question 6

What happens if I don't qualify for a mortgage at completion?

Accepted Answer

If you don't qualify for a mortgage at completion, you're still legally obligated to complete the purchase. Failing to do so could result in losing your deposits and potentially facing legal action from the developer for any losses they incur from having to resell the property at a lower price.

Question 7

What is the mortgage stress test in Canada?

Accepted Answer

The mortgage stress test requires borrowers to qualify at a higher interest rate than their actual contract rate. Currently, you must qualify at either 5.25% or your contract rate plus 2%, whichever is higher. This ensures you can still afford your payments if interest rates increase.

Question 8

Can interest rates change between when I buy a presale and completion?

Accepted Answer

Yes, interest rates can change significantly during the 2-5 year construction period. This is one of the biggest risks of presale purchases, as higher rates at completion could affect your ability to qualify for the mortgage amount you need.

Question 9

Do I need a real estate agent to buy a presale?

Accepted Answer

While not required, having a real estate agent experienced with presales can be valuable. They can help negotiate better terms, understand the contract, and provide insights about the developer and project. Their commission is typically paid by the developer.

Question 10

Do I need a mortgage broker for a presale purchase?

Accepted Answer

A mortgage broker can be very helpful for presale purchases, even though you won't get a mortgage immediately. They can assess your current qualification status, help you plan for future qualification, and provide strategies to maintain or improve your position during the waiting period.

Question 11

Can I sell my presale contract before completion?

Accepted Answer

This depends on the terms of your purchase agreement and local regulations. Some contracts allow assignment (selling to another buyer before completion), while others prohibit it or require developer approval and payment of assignment fees. Check your contract and local regulations carefully.

Question 12

What is an assignment?

Accepted Answer

An assignment is the sale of your presale contract to another buyer before the building is complete. The new buyer takes over your position in the contract and is responsible for paying the remaining balance at completion. Assignment fees and developer approval are typically required.

Question 13

What happens if the developer cancels the project?

Accepted Answer

If a developer cancels a project, they are typically required to return all deposits with interest. However, this can still cause significant inconvenience and opportunity costs, especially in rising markets where comparable properties may now be more expensive.

Question 14

Can the final square footage be different from what was promised?

Accepted Answer

Yes, most presale contracts allow for small variations (typically 3-5%) in the final square footage. If the difference exceeds the specified threshold, you may be entitled to compensation or the right to cancel the purchase and receive your deposits back.

Question 15

What is the GST/HST rebate for new homes in Canada?

Accepted Answer

New homes in Canada are subject to GST/HST. However, if the property will be your primary residence, you may qualify for a rebate of a portion of these taxes. The rebate amount varies by province and purchase price, with maximum rebates typically available for homes under certain price thresholds.

Question 16

Do I need to pay property taxes during construction?

Accepted Answer

No, you don't pay property taxes during construction. Property tax obligations begin after completion when you take ownership of the property. The developer is responsible for property taxes on the land during the construction phase.

Question 17

What is the property transfer tax in Canada?

Accepted Answer

Property transfer tax varies by province. In BC, for example, it's 1% on the first $200,000, 2% on the portion from $200,001 to $2 million, and 3% on the portion above $2 million. First-time homebuyers may qualify for exemptions or reductions in some provinces.

Question 18

Can I make changes to the floor plan or finishes?

Accepted Answer

Limited customization may be available during the early stages of a presale project, depending on the developer. Major structural changes are rarely permitted, but finish selections (flooring, countertops, etc.) are often available from predetermined options, sometimes with upgrade costs.

Question 19

What is a disclosure statement?

Accepted Answer

A disclosure statement is a legal document that developers must provide to presale buyers. It contains important information about the development, including legal description, ownership details, features, amenities, bylaws, rules, and potential risks. Review this document carefully with your lawyer.

Question 20

What is an occupancy date vs. a completion date?

Accepted Answer

The occupancy date is when you can move into the property, while the completion date is when legal ownership transfers to you. In some cases, especially with condos, you might be allowed to occupy the unit before the entire building is complete and legal title can be transferred.

Question 21

What is an interim occupancy period?

Accepted Answer

An interim occupancy period occurs when you can move into your unit but don't yet have legal ownership. During this time, you pay the developer an occupancy fee (similar to rent) instead of mortgage payments. This period can last from a few weeks to several months until the building receives final approvals.

Question 22

What is a deficiency walkthrough?

Accepted Answer

A deficiency walkthrough is an inspection you conduct with the developer before taking possession. You'll note any defects, missing items, or issues that need to be fixed. These items should be documented and the developer should address them within a reasonable timeframe as specified in your contract.

Question 23

What warranties come with a new presale property?

Accepted Answer

New homes in Canada typically come with statutory warranty coverage that varies by province. In BC, for example, the 2-5-10 warranty provides 2 years on labor and materials, 5 years on the building envelope, and 10 years on structure. Additional developer warranties may also apply.

Question 24

Can the completion date be delayed?

Accepted Answer

Yes, completion dates for presale properties are often delayed. Most contracts allow developers to extend the completion date multiple times with proper notice. Review your contract to understand the potential delay provisions and what remedies, if any, are available to you if delays become excessive.

Question 25

What is the cooling-off period for presale purchases?

Accepted Answer

Most Canadian provinces provide a cooling-off period (rescission period) for presale purchases, typically 7-10 days after receiving the disclosure statement or signing the contract. During this time, you can cancel the purchase for any reason and receive your deposit back without penalty.

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