Presale Condo Deposit:
FAQs and Everything You Need to Know
Written By: Mariko Baerg, REALTOR of Bridgewell Real Estate Group
If you want a realtor to represent YOUR best interest & not the developer’s, call me today!
Vancouver and the Lower Mainland have a number of emerging options for presale condo opportunities. The presale market is very different than the resale market, and because of this we’ve put together some of the basics when it comes to presale condo deposits. If you’re interested in purchasing a presale then you need to be aware of how the presale condo deposit works – so read on for details!
If you’re thinking of purchasing a presale property, it’s important that you have a realtor working in your best interest and not the developer’s.
*We don’t work for the developer – we work for YOU!*
For more information on why to hire a buyer’s agent when purchasing a presale, check out our blog here: 8 Reasons To Hire a Presale Realtor
What does it mean to purchase a presale condo? What is a presale condo?
When you purchase presale home you are paying for a home that is not built yet, it is a future home. Therefore a presale is a property that a developer offers for sale before construction of the building has started.
Presale condos work in the following way:
- You only need to pay the deposit up front, then you wait for the building to complete
- Your mortgage payments don’t start until the building is complete, and you pay the remainder of your down payment at the time of completion as well.
- The deposit is held in a trust account.
- The deposit ranges in amounts depending on the developer and the project. It is very common to see a 15-25% deposit schedule paid over a period of time throughout the building project.
Presale vs Resale Deposit Schedules
Presale condo deposit vs. resale condo deposit is a very different process.
A presale condo deposit is typically due over a period of time, for example over the course of 18 months; whereas a resale condo deposit is typically due within 24 hours of subject removal. (7 days after acceptance)
An example of how a presale condo deposit schedule would work is as follows:
$1000 upon writing an offer
Remaining 10% of purchase price upon 7 day rescission period
Additional 5% due at 12 month mark
Additional 5% due at 18 month mark
This results in a total of 20% due over the course of 18 months for a presale condo deposit.
Therefore, when dealing with a presale condo deposit there is usually an initial deposit upon writing, another deposit due after the 7 day rescission, period, and then one or two more deposits after a period of time.
If I put money down when I write the offer but decide that I don’t want the property during the rescission period do I get my initial deposit back?
In the above example you can see that it is common for the buyer of a presale condo to have to put an initial deposit down upon writing the offer. However, it is important to note that in British Columbia, you have the right to cancel the contract to purchase the property for 7 days after the developer has accepted the offer.
This right is called your 7 day rescission period, and is a part of provincial law in BC.
This 7 day rescission period allows you to walk away from the purchase for any reason, regardless of whether it’s related to financing, interest, deposit funds, or more. No matter what the reason is, you have the right to cancel the contract on spot within those 7 days and have your initial deposit that you put down at the time of writing returned to you.
However, if you pass the 7 day rescission period and decide to back out after that time, you will not receive your deposit back.
What happens to my presale condo deposit? Can the developer spend it?
The deposit is held in a trust account, which is typically held by either the developer’s lawyer or the developer’s realtor’s brokerage.
The developer does not gain access to your deposit until the construction is complete, and in the event that the developer declares bankruptcy or has a major issues that restrains them from completing the project that your deposit will be returned to you.
How do mortgages work with presale properties?
For a presale you do not start paying the mortgage until the building is complete. The presale condo deposit is simply there to secure the property until it is built.
For example, let’s say that you pay a 20% deposit to the developer to secure the property. Once the property is completed in 5 years you get a mortgage for the remaining 80% of the property and the 20% that you have already paid forms a part of the purchase price.
As a buyer, am I charged a commission if I work with a realtor to purchase a presale?
NO! As a buyer you are not charged a commission when working with a realtor to purchase your presale or resale home. The vendor pays your realtor the commission, which allows for you to hire representation to keep you safe, protected, and negotiate on your behalf entirely FREE!