Presale Transaction Cross Reference List from British Columbia Real Estate Association (BCREA)
The news release download is available here.S
A consumer information download from BCREA is available here.
The backgrounder is available here.
For Immediate Release
New Tool Helps Homebuyers Navigate Presales
Vancouver, BC – July 24, 2008.
The British Columbia Real Estate Association (BCREA), the Canadian Home Builders’ Association of BC (CHBA BC) and the Urban Development Institute (UDI) are pleased to introduce a new tool to assist homebuyers in the purchase of homes under development, also known as presales.
“Over the years, thousands of British Columbians have entered into contracts to buy new homes before the construction of their homes had begun or during the construction period,” said BCREA President Scott Veitch. “The Presale Cross Reference List helps ensure homebuyers are aware of the unique considerations involved in purchasing these properties.”
The Presale Cross Reference List is intended as a starting point for homebuyers to determine whether enquiries, advice or clarification is needed when navigating the purchase of a home in a multifamily development under construction. Buyers unfamiliar with such projects may require extensive consultation with knowledgeable professionals who have experience with presale investments.
“Presales are an excellent vehicle for purchasers to buy a new home and often result in cost savings for the purchaser. However, as with any investment, consumers need to understand what the opportunities and risks are to make an informed decision,” said Maureen Enser, UDI Executive Director.
“CHBA BC is pleased to partner with BCREA and UDI and be a part of this great tool that will assist REALTORS® in disseminating reliable information about presales to consumers who purchase products that our members build,” added M.J. Whitemarsh, CHBA BC Chief Executive Officer. “This joint effort is the culmination of extensive work by industry to enhance consumer confidence and further raise the bar of professionalism within residential construction.”
1 backgrounder available.
For more information, please contact:
Dana Bidnall, communications coordinator, BCREA, 604.742.2784 M.J. Whitemarsh, chief executive officer, CHBA BC, 604.432.7112 Maureen B. Enser, executive director, UDI, 604.669.9585
The Facts About Presales
Over the years, thousands of British Columbians have entered into contracts to buy new homes before the construction of their
homes had begun or during the construction period. This type of real estate transaction is commonly referred to as a presale
transaction. It most often involves the buyer of a new home and the developer entering into a purchase agreement to complete
the transaction at a future date when the home is completed and ready for occupancy.
This is usually a win-win transaction for both the homebuyer and the developer. Buyers are able to select the homes they want
to buy and developers know, with some certainty, their ability to successfully market and finance the projects they are
offering to the market.
Rewards Usually Outweigh Risks
Buying a home is likely the largest personal financial transaction a consumer will make, and there are many complex decisions
involved. Building a new home is also a complex process that stretches over a relatively long period of time and has inherent
risks for the developer. These risks are typically associated with a free market for materials and skilled trades, and changing
interest rates.
Even though there are certain risks associated with presales, there have been very few instances where the purchase agreement
was not honoured by the developer. When a developer is unable to complete the transaction, the purchase agreement will
usually specify how the intended transaction is unwound. A deposit made by a buyer must be held in trust by a lawyer, notary
or REALTOR® and the full deposit is returned to the buyer if the home builder/developer is unable to meet their commitment
to deliver the home. The only exception to this is described in NOTE 5 on page three of this information brochure.
Do Your Homework
Before deciding to buy a new home in a presale transaction, a buyer should do their homework and feel totally comfortable
with the builder/developer and with the terms of the purchase agreement. Start by researching the business history and
reputation of the home builder. Ask for references from past homebuyers who have bought from the developer. Seek the advice
of your REALTOR®, lawyer, mortgage broker, banker or other professionals and determine whether they know the history of
the developer.
Read the purchase agreement and the disclosure statement in their entirety. Hire your own lawyer who has experience in
residential real estate transactions. Ask them to review the purchase agreement. Make sure you ask them about wording in
the purchase agreement that you do not understand. Clarify all of the relevant dates, including dates on which the developer
has opportunities to terminate the purchase agreement.
Finally, there is a seven-day rescission period during which a buyer may rescind their purchase offer.
The full download includes a cross reference list for Presales of Residential Development Properties. The list is of important information for buyers of homes under development. Buyers unfamiliar with such projects
may require extensive consultation with knowledgeable REALTORS®, accountants, lawyers or notaries familiar with presale investments.
The list is intended as a starting point for buyers to determine whether enquiries, advice or clarification is needed.
Also included in the download are several notes on Policy Statements that govern the basis upon which a developer can market a project before it is built.
The news release is download is available here.
A consumer information download from BCREA is available here.
The backgrounder is available here.
Important Consumer Information about Presale Protection
Provided by the Urban Development Institute
For a printable version click here.
In British Columbia pre-sales have allowed tens of thousands of families to successfully purchase a home. A pre-sale is a contract for the purchase and sale of a unit made prior to construction or completion of a project. Developers and purchasers enter into contracts that provide for units to be built within a period of time and sold for an agreed fixed price. A certain number of pre-sales are generally required by the financial institutions before they lend money for projects. Purchasers usually pay deposits to the developer’s realtor or lawyer in trust as part of the pre-sale agreement. These deposits are fully protected under the law and are paid back in full to pre-sale purchasers if a project does not proceed.
The purchase of a new home will be the largest and most important purchase you make in your lifetime. Therefore it makes sense to protect this investment by doing proper due diligence. UDI suggests the following key points when purchasing a pre-sale unit:
- Know who you are buying from: Find out the history of the company you are purchasing your unit from. What industry experience do they have? What are their previous projects? Are they a well capitalized company? Do they have any project failures in the past? Ask these questions of your professional advisors (your lawyer or a licensed real estate broker), and do an internet search, starting with the company’s website.
- Use the 7 day rescission period: When you purchase a pre-sale unit, under the law you have up to seven days to rescind the offer. Use this week to read the Disclosure Statement and Contract and to seek professional advice from a lawyer on the contents and implications of your purchase contract, so you fully understand it. If there is something you do not understand, do not be afraid to ask questions – especially of the developer and your professional advisors. This is the reason behind the seven day rescission period. A Lawyer Referral Service is offered by the BC Branch of the Canadian Bar Association. They can be reached by phone at (604) 687-3221 in the Lower Mainland, or toll free throughout the Province at 1 (800) 663-1919.
- Know your rights and obligations under the Contract: The review noted above should certainly include a thorough analysis of the terms that allow for the cancellation of the project – or delays. This includes whether interest will be paid on the amount of the deposit. There may be other rules in the contract; such as the purchasers obligations and the developer’s rights relating to the termination of the contract, and if (and how) pre-sale purchasers can assign (sell) their purchase contracts or units to new buyers. These issues need to be understood as well.
- Know your rights under the Law: Developers must follow numerous rules with regard to their disclosure statements under provincial law. This information is readily available at the BC Financial Institutions Commission website. There is also a Frequently Asked Questions webpage on the site. Several important questions that consumers should ask are answered, including –
- “What information must a developer provide to a purchaser?
- After a purchaser has signed a purchase agreement, can the purchaser cancel that agreement?
- How can a purchaser [give] notice [to] the developer that the purchaser is cancelling the purchase agreement?
- Can a purchaser obtain a copy of the Disclosure Statement and any Amendment from our office?
- Can a developer change the Disclosure Statement without a purchaser’s approval?
- What remedies does a purchaser have if the Disclosure Statement contains an omission or misrepresentation, or is amended after the purchase agreement was signed?
- Can [the BC Financial Institutions Commission] enforce a purchaser’s rights?
- What can be done if a purchaser believes a developer’s Disclosure Statement is deficient and the developer is still marketing?
- How can a purchaser make a complaint about a realtor?
- Can a developer use [a] deposit to construct and market the development units?”
Further information on your legal rights can be provided by your lawyer or contact the BC Financial Institutions Commission. Their contact information is as follows:
Inquiries: (604) 953-5200
Toll Free: 1(866) 206-3030 -outside local calling area within B.C.
Fax: (604) 953-5301
General Email: FICOM@ficombc.ca
For a printable version of this Pre-sale Protection click here.
DISCLAIMER: The materials on this page, and any downloads here-in, have been prepared for information purposes only. They are not intended to be nor do they constitute legal advice.
