Presale Buying Myths
Buying a presale condo or new construction home can be a great investment and help you avoid a stressful bidding war in the traditional resale market. However, there are a number of risks to be aware of and misconceptions about this type of purchase. My name is Ira Willey, I’ve helped many clients purchase presales here in Victoria and I want to share some good and bad experiences that may help you make an informed presale purchase. Stay tuned until the end of the video because reason #10 is always a huge surprise to buyers! Here are 10 common myths when buying a presale:
1: It’s Cheaper than Resale
It’s cheaper than buying an existing home. In the past, presales used to be priced cheaper than existing resale real estate. Now a days, they are usually priced higher. Developers are anticipating where the market will be in the future and pricing accordingly. Pull up recent comparable sales in the area and get an average price per square foot of resale units, if you find a presale to buy in line with that number, I would consider that a good deal.
2: It Will be Built on Time
It will be built on time. Most presales in Victoria in my experience are built late. Expect at least a few months to up to a year delay depending on the project. Ask the developer or your Realtor how long similar buildings were delayed. The biggest unknown in building is the excavation, for example if a lot of blasting is involved, that alone can take a few extra months.
3: It Will be like the Floor Plan
It will be exactly like the floor plan. In the contract and disclosure statement there is a clause that the finished square footage can be X percent different than what is on your floor plan. Changes happen during construction, so be aware that the floor-plan may not be exactly what the finished product is. Interior measurements are notoriously inconsistent for example some builders measure from the outside walls, not the inside usable space. So your 500 square foot condo, maye only actually be 450 square feet of usable space.
4. You can save money without a realtor.
Some buyers walk directly into the showroom and buy without using a Realtor. From my experience, it’s very rare that the developer passes on that discount for any commission saved to the buyer. The entire process is much more streamlined and smoother on both ends if a buyer is represented, as this also reduces the developer’s legal risks and potential disclosure pitfalls. In fact, a good buying agent on your side can save you money and help you choose a better unit in the building since if they have experience and they know what to watch for. For example, my buyer was interested in a unit but it was above the parking garage gate, I advised switch units and have since heard that garage gate is extremely noisy.
Number 5. The strata fee will be low.
The strata in the disclosure statement is an estimate. Once the strata is formed and professionals,landscapers and maintenance are hired, expect this to rise within a few years.
Number 6. It will be new and therefore more comfortable and secure than an older building.
New buildings are built smaller and smaller. If you want square footage, then consider an older building. Also, there are always going to be some growing pains and work done on a new building which can be disruptive in those first few months. New buildings are also targeted by thieves since the security protocols in the underground parking are not set up yet and many trades are still coming and going. Don’t put anything valuable in the storage locker until you know it is secure!
Number 7. It will be be 100% complete on move in.
Usually the landscaping is not done, the common areas such as the gym are rarely complete, and sometimes there are even unfinished deficiencies in the suites. Manage expectations and be aware that the dog wash may take a few extra month to be up and running!
Number 8. The finishings and appliances will be the same as the show room.
Developers reserve the right to change appliances and finishings. Often times if a build is 2 years out, they can’t source the exact same materials that you saw in the show room.
Number 9. All developers are equally accountable and reputable.
This is simply not the case, look at the track record and avoid one off or fly by night companies with no past or future projects. Do your homework on who the builder is, who is backing this project and if they have had a bad track record.
Number 10. You can’t negotiate the price.
In a hot sellers market, you probably won’t get any deals. However, in a more balanced market you can absolutely negotiate the price of a presale. If not price, developers are also much more likely to include some upgrades for free since that allows them to keep all the posted sales prices equal. I’ve helped my buyers get free heat pumps, EV chargers and kitchen upgrades, just make sure its written into the contract. It never hurts to ask for something extra and try to save a few bucks.