Purchasing a pre-sale or ‘off-the-plan’ property in Vancouver gives you the opportunity to purchase property that has not been built yet. It can give you more time and flexibility to finance the purchase, may reduce some taxes, and allows you to make customisations to your property before it is even built! However purchasing pre-sale comes with its own set of risks to understand, and here’s what you need to know.
What Does Pre-sale Mean in Real Estate?
Pre-sales are a common component of the Vancouver Real Estate market. In its simplest form, you are pre-purchasing a property that is yet to be built (or in some cases in the early stages of construction).
For a lot of prospective buyers, a pre-sale condo is the most cost-effective way to enter the property market, as there are a number of advantages offered:
More time to accrue/obtain finance. When purchasing pre-sale, you only need to have your downpayment available. Depending on the contract there may be other smaller payments along the way, based on the schedule of construction. Generally, however, the entire payment is not due until the building is completed, which may provide a few extra years to save, and lower your mortgage amount to boot.
Depending on the state of the property market in Vancouver, your property may appreciate over the time that it is built.
Your downpayment and deposits are held in a lawyer’s trust account. This restricts the developer from accessing the funds until the building is complete.
New properties are subject to mandatory home warranties and insurance. This gives you a minimum of two years on the labour and materials, five years on the building envelope, and ten years on the structure of the building itself. By comparison, purchasing an existing property may not come with these warranties, which could increase the overall cost if you needed to rectify an issue.
You get a brand new home! Being involved from the start may give you the opportunity to customise the layout, finishes, colour scheme and more to make sure the property you move into is the one you want, from day 1.
What Are the Risks With Pre-Sale Property in Vancouver?
As with any investment or large financial purchase, there are inherent risks. When it comes to pre-sale property, however, there are a unique set of risks to understand.
Purchasing a pre-sale property as an investment is highly speculative. As these buildings can take years to complete, you are taking on the assumption that the property market will continue to appreciate, which may not be the case.
Even though the property market may change, you are usually purchasing your pre-sale condo at a premium to those currently available. This is because most pre-sale developments price their condo’s on the assumption that property prices will increase, not decrease. As a result, you may pay up to 30% more for pre-sale than you would for an already completed property.
Most pre-sale developments end up taking longer than expected. These delays can range from a few months up to 1-2 years. Regardless of whether the scheduling delays are caused by the developer or some external reason, there are usually clauses in the contract of sale which heavily favour the developer in these instances. This can make it difficult to plan a move-in date, and delay your own plans for your new property.
If a developer needs to make changes to the floor plan, materials or other design elements to comply with building codes they usually reserve the right to make these changes without notifying you. As such, the purchase you agree to in a showroom 3 years prior to the finished product can be different from the property you actually receive.
Your personal finances may change between signing the contract and the building’s completion. If you lose your job or something else impacts your income, you may not be able to access finance when the property is ready and lose your downpayment.
Delays in construction are common, and can be an inherent risk when purchasing a pre-sale condo
Can I Reduce My Tax by Purchasing Pre-Sale?
The property transfer tax (PTT) is one closing cost that often catches home buyers off-guard. It is based on the sale price of a property, at 1% of the first $200k, and a further 2% of the sale price from $200k-$2 million. As a first home-buyer, you may be entitled to a PTT concession, but only if the property is valued at less than $475,000, which isn’t very common in Metro Vancouver these days.
Purchasing a pre-sale property, however, can exempt the sale from the property transfer tax, provided the property is priced at $750,000 or less.
Whilst that is a win for the home-buyer, newly built properties are instead subject to 5% GST. This expense is usually in addition to the sale price of the property and should be accounted for when assessing your own finances.
If the property is to be used as your primary residence, there are opportunities to reduce your taxable capital gains in the future. However, this would be based on price appreciation, among other things.
How Do I Know I’m Purchasing the Right Pre-Sale Property?
Whilst there are never zero risks, there are a few things you can do to reduce the risks associated with a pre-sale property purchase:
Do your homework. Is the developer established and reputable? Do they have a good track record and happy clients? Is the property being built in an up and coming neighbourhood? Will there be access to services and other essentials? It’s important to look at the development as a whole and what it can offer you, not just the condo you wish to purchase.
Use a buyers agent! The best way to understand the property and neighbourhood is to use a licensed Realtor. They should be very aware of the area itself and new developments, including the positive and negative features of the development, and offer you industry-specific insights and advice.
In the same manner that you would assess the developer and development, choosing the right agent can make all the difference to your pre-sale property purchase in Vancouver.
It’s also important to keep in mind that a buyer’s agent does not cost you anything! Rather, a buyer’s agent is paid by the seller upon settlement of the property, so you have nothing to lose by letting the professionals help you.
If you’re interested in a pre-sale property, or another home purchase in Vancouver, the West Haven Group is here to help. Simply reach out to our professional team to schedule an obligation-free meeting.
Whilst all Realtor’s in Vancouver are licensed to operate, finding the right agent for your property purchase or sale isn’t a simple task. Whilst many people will interview a number of agents, most don’t know which questions to ask, or what to actually look for to make sure the entire experience is seamless and enjoyable. Using these these 7 tips you’ll be able to find a real estate agent in Vancouver in no time.
1. Your Agent Should Know and Love Vancouver!
We’re starting this list with one of the more obvious, but also most important, tips to find a great Real Estate agent- your agent should know and love Vancouver!
They should be very aware of the market itself, and be able to tell you:
The amenities available, e.g. schools, shops, gyms
The current state of the market in those areas, including which types of property are more popular, where new developments are taking place, average listing/sales prices etc…
Any agent can look up these figures and information, but having an agent who knows the area well can also keep you informed of market trends, as well as other potentially impactful developments such as:
New property developments such as condo’s or large commercial spaces
Zoning and by-law restrictions
Any other restrictions or caveats to be aware of in your property search, e.g. are the properties predominately free hold or lease-hold titled?
2. Your Realtor Should Have an Exceptional Track Record
Sadly, a lot of Realtor’s will tell you your property is worth more than it is in the hopes of signing you on as a client. When it comes to finding the right agent in Vancouver, however, there are a few simple things you can ask for to assess their experience and knowledge. Whether it’s requesting their sales statistics, or ensuring they have a tried and tested property plan (more below), choosing the right agent is as much about instinct as it is about ensuring they have the time and capacity you need to feel comfortable with your property transaction.
So, when searching for a property agent in Vancouver- don’t hesitate to ask for references! This could be in the form of testimonials on the agents website, right through to talking with their previous clients (if it’s available to you).
3. Communication is King
Buying or selling Real Estate can be intimidating, and there are many steps that take place throughout the transactional process. An effective agent will make you aware of these stages, as well as guide you through them. Whether it’s:
Mortgage applications and brokerage
Contracts and conditions of sale, or
you want an agent that communicates this information to you, and keeps you involved every step of the way.
Your agent is also responsible for liaising between industry professionals (brokers, lawyers, building inspectors etc…) so it’s important to ask, and understand, how and how often you should expect to hear from your agent. Do they answer the phone when you call? Are they quick to reply to emails? Can you contact them easily and quickly if you need to?
4. Does Your Realtor Utilise Technology?
Aside from being key to communication, technology has enabled an entirely new way to market properties and access wider audiences. Online advertising has become integral to a Realtor’s success, and tech-savvy Realtor’s will use it and other tools to their advantage.
Almost all searches for a Real Estate agent in Vancouver start with the internet. This gives you a great starting point for an Agent’s reputation and attention to detail.
Do they have a website, and does it provide you with the information you need?
Are their current listings available online, and do they present well?
Does your prospective agent use social media, and do they market themselves/their company with it?
Does your prospective agent make it easy to for buyers/sellers to find their contact information, and get in touch?
Can you electronically sign documents to save yourself time and energy?
Does your agent use professional photography and/or videography?
Do they use any other tools, such as augmented reality walkthroughs, to fully engage with property buyers?
There are no limits to the ways and amount of technology that can be used, so it’s important to find an agent who is up to date with the tools available and uses them effectively.
5. Can Your Agent Work Around Your Schedule?
Even with all the tools available to Realtors, if they don’t have the capacity to accommodate your needs you are unlikely to receive the time and results that you expect. So first things first, it’s important to know how available your agent is and to gauge their involvement in, and knowledge of, the Vancouver property market.
Do they work full time? Are they flexible with contact hours and meetings? Do they have systems in place to ensure that you receive documents and information in a timely and correct manner?
Ultimately you need to make sure that their schedule isn’t overloaded, and that it can fit in with yours.
6. Does Your Agent Have a Property Plan?
Every property is different, but a top-performing Realt or in Vancouver will have tried and tested marketing strategies and property plans. This should easily communicate how they plan to find or sell your property, and why their services are different or competitive compared to other agents. They should also be able to answer:
Which tools and technology do they use?
Do they have access to an internal network of listings and other property services?
Can they offer realistic advice when it comes to pricing, and do they have the negotiating skills to meet your expectations?
A good agent should also be able to give you a timeline for your property purchase or sale, as well as offer advice and personal contacts when it comes to brokerage, legal, and more.
7. Make Sure You See Eye to Eye With Your Agent
Once you’ve made it through the paperwork and evidence, the best piece of advice we can offer is to go with your instinct. Most prospective buyers/sellers will acknowledge and eventually choose the Agent that they had the best connection with, and this is exceptionally important in Real Estate.
You’re going to be spending a lot of time talking and working with your Agent, and you want to know that they have your best interests at heart. Do they listen to you and understand your wishes and expectations? Are they solution-oriented, and willing to work hard to meet your expectations? Have they helped to make those expectations realistic based on the current market? Are you aware of all the potential costs and pitfalls of the industry? Do your personalities compliment each other, and do you actually get along?
All of these puzzle pieces should come together to give you a real and accurate view of the Vancouver property market, and are just as important in helping you find and choose the right Real Estate agent.
Of course, if you’re interested in buying or selling a property, we’re here to help. As industry leaders the West Haven Group is always available to answer your property questions, and are more than open to a conversation with you. For more information, or to speak with one of our Realtors, reach out and connect with us!
Ready to purchase a home in one of Canada’s fastest-moving property markets? There are a lot of steps when it comes to purchasing a home in Vancouver, and they’re not always straightforward or easy to understand. So we’ve compressed them into bite-sized chunks! Our 5 step home buyers checklist can be used as a quick reference guide for your property purchases, and of course- we’re always here to help if you need anything further.
Vancouver Home Buyers Checklist #1: Engage a Realtor
There is a LOT of misconception when it comes to engaging a Realtor, or buyers agent when you’re on the property hunt. Many people are familiar with the commission structure of property sales, but for the most part, are unaware of how an agent can help you to purchase a property. The best part? It doesn’t cost you anything!
Rather, when you utilize the services of a Realtor, the commission is paid by the seller’s agency after completion. By engaging an experienced, high-performing Realtor/buyer’s agent you are also given access to:
Behind-the-scenes and off-market property listings
Immediate and arranged property viewings
The Realtor’s, and brokerages, internal communications networks, where new listings are usually posted first, often weeks or months before they become available to the public.
Vancouver Home Buyers Checklist #2: Mortgage Pre-Approval
When it comes to the home buyers checklist, determining the amount that you can actually borrow is an imperative step in finding your new home in Vancouver. Your Realtor can help to put you in touch with a suitable broker, as well as helping you to collect and compile the necessary information.
There are a number of reasons why obtaining a mortgage pre-approval early on is important as:
It helps to set realistic expectations by taking into account your real financial situation.
With it, you can now establish a budget and narrow your search options.
It puts you into a stronger position to make an offer, as vendors know that you are a legitimate and capable buyer.
Mortgage pre-approval can help you to reduce the emotional and financial stress of the purchasing process, by giving you clear, definitive answers about your access to finance.
The process will also determine your monthly repayments, and help you to establish a budget. That way you can calculate what you can actually afford to spend each month, to be able to meet your mortgage obligations whilst maintaining the lifestyle you desire.
Finding out what you can spend will save you time, energy and money when purchasing a home in Vancouver
Vancouver Home Buyers Checklist #3: What Can You Afford?
When it comes to purchasing a property in Vancouver, it can be difficult to marry your wishlist with affordability. Whilst we will always work our hardest to ensure you are happy with your new home, we find that in most cases there is usually at least one compromise, and it’s important to be prepared for it.
However, once you are aware of the funding available, you can begin to establish your wishlist, and then decide what you are willing to spend to acquire those features. If the events of 2020 have been any indicator, it’s also important to establish a budget that accounts for contingencies, as well as any other future events that you can take into account. Start by asking yourself questions like:
Are you starting, or growing your family soon?
Do you really need a water view, or do you need more space to live in?
Are you purchasing the property as an investment, and will it generate an income?
Do you have the required downpayment?
Will you require mortgage lenders insurance?
Do you need to move into something immediately, or can you be patient?
How much do you need for normal living expenses per month? Does this allow for utilities, bills, food, education, and socializing?
What is the maximum repayment amount you can afford, taking into account your lifestyle and contingencies?
Are you prepared for the closing costs on your property? These can add an additional 2-4% of the total purchase price, and need to be considered. Again- your Realtor can help you to determine and establish these costs.
Vancouver Home Buyers Checklist #4: Let’s Find Your New Home!
After completing the first 3 steps of our home buyers checklist, you should have a wishlist compiled, and now be aware of what you can afford to spend to acquire them. With a definitive mortgage figure, you can also begin to narrow your property search, which usually begins with websites like REW.ca.
If you have chosen to engage a buyer’s agent, the chances are they have already lined up a number of viewings and opportunities to meet your needs. As we mentioned earlier- a high performing Realtor will often have access to properties before they become public listings. They also tend to have an ear to the ground within their own networks, which can lead to off-market opportunities, and making sure you have the first access to view properties.
After viewing each property, ask yourself these five important questions:
What did I like/dislike about the property?
What would I have to change about the home in order for it to work for me?
If the price were right, could I see myself living in this property?
If so, what is that price?
Did the home ‘feel right’ to me?
Overall, trust your instinct!
Vancouver Home Buyers Checklist #5: Offer and Negotiations
When you’ve found a home that suits your needs (or your dreams) it’s time to make an offer. If you are using a buyers agent, they will be able to guide you to the right amount to offer, that is within your budget. However it is important to remember that there may be several offers on the table, and the list price is rarely the final sale price.
Moreover, submitting an offer doesn’t necessarily mean it will be accepted, or that you must ‘go firm’ on the sale.
Rather, most offers come with ‘subject to’ clauses or conditions, allowing you the opportunity to fully inspect the property and its condition. It also allows you the opportunity to complete your due diligence on the property, and, once your offer has been accepted, we need to work to satisfy the conditions (or subjects). These most commonly relate to:
Once you have made an offer on a property, it’s time to complete your due diligence
When the conditions of sale have been met, it is time to hand over a deposit. This is usually around 5% of the sale price and will be managed by your Realtor’s brokerage, your lawyer/notary, or both. This is also the time that closing costs need to be settled, including any property transfer tax, GST (on new properties), and legal costs.
Purchasing a new home can be a stressful and emotionally taxing experience. There are a number of moving parts that make the property industry what it is, and having someone experienced and on your side can make the process much easier and simpler. If you would like any advice or information about purchasing a new property, reach out and connect with our experienced team.
Although the use of ‘tenants’ can easily be confused with property rental, both joint tenancy and tenancy in common actually refer to a type of shared property ownership. For homeowners, choosing the form of ownership will dictate what happens to the property in the event of one owner passing, and can also affect the amount of tax to be paid at that time.
In part 2 of our property ownership property ownership series, we dive into the differences between joint tenants and tenants in common, to highlight the distinct differences between the two, how they affect your ownership of real estate, and how to decide which one is right for you.
Owning a property as ‘joint tenants’ is most commonly seen in a marriage or relationship, where both parties own equal portions of a property. This form of ownership carries with it the ‘right of survivorship,’ whereby the ownership automatically transfers to the surviving party, in the event that one of the owners passes away.
In B.C., joint tenancy also affords both owners full use and rights over the property. Upon the death of one person ownership of the property transfers to the remaining party, avoiding any probate fees and taxes that would usually be incurred. Similarly, if it happens that there are more than two parties to a joint tenancy agreement, the remaining ‘tenants’ receive the deceased’s interest in equal proportions in the event of one’s passing.
Although the right of survivorship avoids probate fees and capital gains tax, that tax will still have to be paid by the estate at the passing of the last survivor.
Tenants in Common
Unlike joint tenancy, tenancy in common does not come with the right of survivorship. It is more common whereby two or more parties purchase property as an investment, and fractional ownership is more prevalent. Key points of difference in tenancy in common agreements include:
Tenants can choose to own equal portions of a property, or ownership can be divided into any number of ways. For example, one owner may own 75% of the property, and another the remaining 25%. This may be useful in cases where owners make different contributions to the purchase.
Each tenant in common has the right, and freedom, to allocate their share of a property to another person via their will, a property transfer and even a sale. This is because ownership is fractionalised, and can therefore be ‘portioned’ and sold, without selling the entire property.
In the event of death of one or more parties, the transfer of ownership of their property portion will be subject to probate fees. Put simply, this fee is to obtain a grant of probate, which is used by the Land Title office to approve the transfer of ownership of the property, guarantee the validity of the deceased’s will, and conclusively manage any other stipulations/challenges against the estate.
In British Columbia, probate fees generally amount to 1.3-1.4% of the estates value. Whilst this may sound small, with the property price increases of the past decade it can actually be quite a substantial figure.
Typically if you are purchasing property with your spouse or de-facto partner, joint tenancy is the preferred choice. On the other hand, there are a number of reasons that people prefer tenancy in common ownership:
Purchasing property as an investment with people who are not intended to be beneficiaries.
Purchasing property as an investment where the size of each persons investment (and therefore their proportional ownership over the property) varies.
The ability to keep the investment separate and transferable in a will, which is most commonly used to provide for children from a previous marriage.
Joint Tenants vs. Tenants in Common- Which One Is Right for Me?
Without having an in-depth conversation it is difficult to determine which form of joint ownership is best suited to your circumstances.
There are, however, a number of considerations which may affect your decision.
Owning property as joint tenants will avoid probate fees upon one owners death, however owning property as tenants in common may give you access to a higher first home buyers grant (if/when available). This is because ownership in a tenants in common agreement gives you rights over a proportional amount of the property, and can therefore entitle each owner to the grant.
If taking advantage of this grant (or simply in the event of a change of circumstances) property titles can be transferred into joint tenancy at a later date. However this may incur a property transfer tax and other fees, which should be taken into consideration.
Purchasing property with another party does not automatically grant joint tenancy. Rather it must be stated in express terms that a joint tenancy agreement is in place, or it is assumed that the parties to the agreement are tenants in common. This is stipulated in the The Property Law Act in B.C.
Joint tenancy agreements can be ‘severed’ under a number of circumstances, and revert back to a tenants in common agreement, without the notification, consent, or awareness of those in the agreement.
Under a joint tenancy agreement, you cannot sell or mortgage the property without the express permission of all people involved. As such, a tenants in common agreement may be better suited to your needs, as you have the right to use and control your portion of the estate.
If you are unsure of the best form of ownership for your new property, we’re here to help! Our dedicated team are on the ground in Vancouver, with the latest property insights and up-to-date knowledge surrounding the legalities of property ownership.