Presale Condo Deposit in Real Estate: FAQs You Need to Know

Purchasing a presale condominium in British Columbia can be an exciting yet complex process, especially when it comes to putting down the required deposit. As a realtor in Vancouver for over 20 years, I’ve helped many clients navigate the ins and outs of securing their dream presale home. In this comprehensive guide, I’ll answer the most frequently asked questions about presale condo deposits in BC and provide key information you need to know.

Key Takeaway

The presale condo deposit typically ranges from 5-30% of the purchase price, paid in installments over 12-24 months. While deposits are usually non-refundable, British Columbia’s 7-day rescission period allows buyers to cancel the contract and receive a full refund. Carefully review the purchase agreement to understand deposit terms.

Understanding the pre construction condo payment schedule is essential, as developers set specific timelines for each installment. Missing a payment could result in penalties or even contract termination, so buyers should plan their finances accordingly. Consulting a real estate professional can help clarify deposit obligations and ensure a smooth purchasing process.

What is a Presale Condominium?

A presale condominium is a new development property purchased directly from the developer before construction is completed. As a buyer, you pay a deposit upfront to secure the unit and make additional payments during the construction phase. The remaining balance is paid when the project completes, usually coinciding with the occupancy date.

Presales allow you to purchase a brand new home at today’s price. Reviewing fall home buying tips to understand seasonal market opportunities, can also enhance your purchasing success. Some presales offer discounts in the fall.

When entering into a presale agreement, it’s essential to understand what to expect in presale contracts , as they often include specific terms regarding payment schedules, timelines, and potential delays.

How Much is the Typical Presale Deposit?

The amount of deposit required for a presale condo varies by project but generally ranges from 5-30% of the purchase price. Developers require a substantial deposit to ensure buyer commitment and help finance construction.

According to industry standards, the typical presale deposit structure is:

• Initial deposit: 1-5% at offer acceptance
• Second deposit: 5-10% within 30 days
• Remaining installments: Paid over 12-24 months

For a $500,000 condo, you may pay $15,000 initially, $25,000 in 30 days, then $10,000 every 3 months over 2 years, totaling 20% down. Some developers offer 5-10% deposit options, but you’ll need to act quickly since these sell out fast. Keep in mind that payment structures vary by developer, so it’s essential to review the terms before committing.

Understanding the difference between an apartment and a condo can also help you make an informed decision, as condos are typically owned units while apartments are rented. Additionally, some builders offer incentives like cashback or free upgrades to attract buyers, which can further ease the financial burden. It’s also important to consider closing costs, which can include land transfer taxes, legal fees, and development charges, adding to your overall expenses.

If you’re debating between a condo and a townhouse, understanding the differences in ownership—such as freehold vs condo townhouse —can help determine which option best suits your financial and lifestyle needs. Researching the developer’s reputation and reviewing the purchase agreement carefully can also protect you from unexpected costs or delays.

Deposit Percentage	Payment Schedule
5-10%	Lower deposit, paid in fewer installments
15-20%	Moderate deposit, paid over 12-18 months
25-30%	Higher deposit, paid over 18-24 months

Why are Presale Deposits So Much?

Developers require substantial presale deposits for a few key reasons:

• Secure buyer commitment – The deposit locks you into the purchase contract and prevents buyers from walking away easily. This provides the developer more sales certainty.
• Fund project costs – Deposits from presale purchases are used to partially finance construction costs, reducing the developer’s need to borrow as much.
• Limit speculation – A high deposit deters investors looking to “flip” presale units and ensures buyers are serious about purchasing.

While presale deposits may seem excessive compared to resale homes, they are an important part of financing major new condo projects.

Are Presale Deposits Refundable?

In most cases, presale deposits are non-refundable if you simply change your mind about the purchase. However, British Columbia provides protections allowing buyers to cancel the contract and receive a full refund within the 7-day rescission period after signing the purchase agreement.

You can also receive a refund if the developer is unable to complete the project. Outside of these specific circumstances, your deposit is at risk if you walk away. Carefully review the deposit terms in the purchase contract before committing.

What Happens if the Project is Delayed or Cancelled?

It’s rare, but major delays or cancellations do occasionally happen. If the developer fails to finish the project within a reasonable time, you may have the option to terminate the contract and receive your deposit back. Check your purchase agreement.

For cancelled projects, buyers are entitled to a full refund of any deposits and payments made. The money is held in trust by the developer’s lawyer, protecting your investment if they fail to deliver the condo.

Securing Your Presale Condo Deposit Funds

Coming up with the deposit on a presale condo can be challenging. Here are some tips:

• Tap into your savings – Using tax-sheltered accounts like RRSPs can provide tax benefits.
• Borrow from family – Offer repayment terms agreeable to both parties.
• Obtain a loan – Presale deposit loans using the condo as collateral are an option.
• Partner with co-buyers – Splitting the deposit can make presales affordable for more buyers.

Pro Tip: Discuss deposit financing options with your mortgage broker or advisor early in the presale process. They can help you understand the different loan options available and ensure you have enough funds set aside for your deposit. Exploring financing solutions early can also give you a competitive edge in securing your desired property.

First time home buyer tips often emphasize the importance of planning ahead to avoid unexpected financial hurdles. Additionally, being proactive about your deposit requirements for home purchase can significantly streamline the buying process. Understanding these requirements early allows you to budget effectively and avoid any last-minute surprises.

By collaborating with your mortgage broker, you can also explore potential government programs or incentives that might help alleviate the financial burden of your deposit.

Should I Work with a Realtor on Presales?

Yes, absolutely! Here are some key benefits a trusted realtor provides:

• Expert guidance – Realtors regularly help clients purchase presales and can explain the process.
• Negotiation skills – Leverage their relationships and experience to negotiate the best price and terms.
• Deposit management – Realtors can assist with securing deposit financing and managing payment schedules.
• Independent representation – Unlike onsite sales agents, realtors solely represent your interests.

As a realtor myself, I’ve negotiated thousands of dollars off presale prices and preferable deposit structures for buyer clients. Let me put my expertise to work for you!

My Presale Deposit Nightmare Story

As a realtor, I’ve seen my share of presale deals go bad. Here’s one memorable cautionary tale…

I was representing a young couple, James and Samantha, who purchased a hot new downtown presale touting amazing amenities. They stretched their budget to buy in early with the minimum 5% deposit promotion.

Initially all seemed well, until the project was hit by massive construction delays. The completion date got pushed back…again and again.

James and Samanta were essentially left in limbo, with no way to back out and recover their hard-earned deposit money.

After 2 years trapped in delays, the project was ultimately cancelled. Thankfully, the couple finally received their deposit back after a lengthy battle. But their homebuying dreams were shattered by the ordeal.

The lesson? Don’t get so caught up in flashy promotions that you overlook critical details like realistic timelines. And make sure your realtor thoroughly vets the developer’s reputation and financials.

Conclusion

Securing a presale condominium with a deposit is a big commitment. To make the process go smoothly:

• Carefully research the developer’s reputation and track record
• Review the purchase contract thoroughly before signing
• Consult a trusted realtor to represent your interests
• Seek legal advice if you have concerns
• Arrange deposit financing well in advance

With the right guidance and preparation, purchasing a presale condo can be an rewarding endeavor resulting in the brand new home of your dreams!

Read More: Guide to buying a condo .

FAQs:

Q: What is a presale condominium deposit?

A: A presale condominium deposit is an amount of money that must be paid to secure the purchase of a property before it is built. It enables buyers to get access to the future market value of the property and protects them when purchasing a presale condo.

Q: What is the difference between purchase and sale agreement and disclosure statement?

A: The purchase and sale agreement outlines the legal terms that will govern the transaction, while the disclosure statement provides information about the property, such as its location, size, amenities, etc.

Q: How much money is typically required as a deposit for a presale condominium?

A: The deposit amount depends on various factors, including market conditions, availability of financing, and other factors. Generally speaking, it can range from 5-20% of the total purchase price.

Q: When should I hire a real estate broker or representative for purchasing a presale condo?

A: You should hire a real estate broker or representative prior to making an offer on a presale condo in order to ensure that you are making decisions in your best interest. They can help you understand all of your options and provide guidance throughout the process. They can also assist you in reviewing the contract details, negotiating favorable terms, and identifying any potential red flags before you commit.

Having a professional by your side ensures that you stay informed and make confident decisions throughout the transaction. Additionally, they can help you create a condo purchase checklist to keep track of important considerations such as deposit structure, closing costs, and developer reputation.

Q: Are commissions paid when buying a pre-sale condominium?

A: Yes, commissions are often paid when buying a pre-sale condominium. However, this can vary depending on the brokerage firm and how they structure their fees.

Q: What are some potential issues I should be aware of when purchasing a presale property?

A: Some potential issues you should be aware of when purchasing a presale property include any changes or delays in construction due to financing or other issues; unexpected costs related to additional requirements imposed by building codes; and any requirements around filing documents with local governments prior to closing .

Q: Is there any difference between resales and pre-sales properties?

A: Yes, there are several key differences between resales and pre-sales properties. For example, with pre-sales properties you may have more time before closing; access to incentives such as reduced deposits if certain milestones are met; ability to customize certain features; but also higher risk due to construction delays or increased costs.

Q: What does it mean if my deposit is subject to return upon completion of construction?

A: It means that if construction is not completed within an agreed upon timeline then your deposit may be returned in full at that time. This ensures that buyers have some protection against unforeseen circumstances which may delay completion of construction.

Q: What happens if I cannot complete my obligation under contract after signing for purchasing pre-sale condos?

A: If you cannot complete your obligation under contract after signing for purchasing pre-sale condos then according to most contracts you would lose your deposit unless otherwise stated in writing by both parties. This could result in forfeiture of all funds paid towards purchase.

Q :What is an example of how my deposit might be protected when purchasing a presale condo ?

A : Most contracts will state that your deposit will be held in trust by either lawyer or broker until completion or termination of contract . In addition , some developers may offer additional protection such as insurance policies against potential losses due to default .