Pre-sale homes are a fantastic way to enter a fast-paced market, especially as a first time homebuyer. As you consider purchasing a pre-sale home, here are some legal considerations to have in mind prior to signing the dotted line on a new home along with an outline of legal documentation required before, during, and after a purchase.
What is a pre-sale home and pre-sale contract?
A pre-sale home is one that’s made available to purchase prior to being move-in ready. You can choose to purchase either before construction starts or during the construction phase. There are times when construction has been completed and the home is move-in ready, yet has not been sold—this is referred to as “new construction.” This kind of contract can be entered into months or even years before the completion of the reconstruction phase of development.
If you have read and understand your pre-sale contract, you should not have any issues. However, in order for purchasers to protect themselves from misunderstandings, there are some key points to look for prior to signing.
Understanding the sale process
When beginning the sale process, reading through documents such as the property disclosure statement thoroughly is a must. According to British Columbia’s Financial Services, “disclosure statements describe material facts about a development that is filed by the developer. If any material facts are omitted, changed or misrepresented, the developer must also file an amendment to the disclosure statement.”
What this means is that the property disclosure statement gives specific details about the property and provides information that’s of interest to potential and confirmed buyers. Usually referred to as a PDS, sellers aren’t legally required to complete one, but the document continues to be a standard practice in B.C. If your realtor never mentions a PDS, ask them to request one. This document should include the key information about the property that a potential buyer would and need want to know.
Purchasers are entitled to a copy of the filed disclosure statement and a copy of any filed amendments to the disclosure statement before entering into an agreement for sale or lease. To provide peace of mind, BCFSA can investigate if a disclosure statement is suspected to be deficient.
Preparing to move in
The final step before completing a sale is to secure a lawyer or notary to finalize the contract. All pre-sale contracts have a mandatory seven day cancellation window, called a rescission period. If you haven’t already done so, this is the best time to get a lawyer involved so they are able to flag any concerns with enough time to change your mind.
If you have a flexible and solid foundation that can manage last-minute turnarounds before the home project is complete, pre-sales are ideal for you. If you’re an investor who has other properties and is well versed in the market already, pre-sales are similarly a strong choice.
Anyone looking to purchase a pre-sale home should do their research with the support of a realtor and lawyer. Similar to the necessity of understanding mortgage documentation and insurance details, a thorough understanding of how legal documents work for a presale purchase is equally as important to a pre-sale homebuyer.