April 27, 2023 What To Expect After the Contract Is Signed: Deposits, Down Payments and Move-In
So, you’ve bought a pre-sale home — congratulations! But the natural question of, “Now what?” may arise. Closing the purchase of a pre-sale home can feel intimidating to even the most seasoned of homebuyers. There are a few areas that each buyer should know and understand to ease the nerves and ensure all the boxes are checked. Below is an easy outline of the steps you’ll need to take, so that you can ensure a smooth transition into your pre-sale home and focus on the excitement of new home ownership.
1. SUBMIT A DEPOSIT
Once your offer is accepted, you’ll be asked to submit a deposit that holds the home while you execute your final due diligence. Deposits are typically 5-10% of your unit price, although deposit and payment structures vary based on the development. This deposit is safeguarded by what’s called a recession period. For a period of seven days, your pre-sale home is secured for you. During this time, you reserve the right to cancel the purchase before those seven days are up. This period is where you double-check all important details such as financing before officially sealing the deal.
Most deposits are structured in a graduated deposit structure, which is an installment payment schedule. However, not all deposit payments follow the same schedule and amount breakdown. Different developers may use individualized structures according to what is best for the seller and the purchaser.
2. SPEAK WITH A LAWYER OR NOTARY
A real estate lawyer or notary will help you with the finer and final details of your purchase. They arrange the transfer of funds between yourself and the development and ensure that all legal matters are handled correctly. They also ensure that you fully understand your contractual obligations and the obligations of the developer.
3. SECURE YOUR FINANCES
It’s important to note that the pre-sale deposit does not necessarily negate the need for a down payment. Paying a deposit to the developer and paying a down payment to qualify for a mortgage loan can be two unrelated pieces, as a mortgage lender may request additional funds outside of the pre-sale deposit. Pre-sale purchasing can require different budgeting than resale homes. The good news is, when purchasing a pre-sale, mortgage payments do not begin until the building is complete and the new owner can take possession.
Because deposit payments vary in their structure and schedule, understanding the terms and timelines of your pre-sale purchase is critical. Ensure your realtor, agency or developer will notify you when key payments are due and that your calendar is set to remind you. For more in-depth information about deposit structures, look to your realtor to discuss your options and opportunities.
While you likely would have been pre-approved for financing ahead of time, now is the time to reconnect with your mortgage broker to ensure that this specific purchase is approved. Let them know if you’ve had any changes in income or purchasing power. Once your mortgage is approved, ensure that you’ve made note of the deposit and payment schedules and are prepared to fulfill your financial obligations.
4. EXECUTE THE WALKTHROUGH
A deficiency walkthrough is the crucial last step in a homebuyer's process before ownership of their pre-sale home. This is usually your first opportunity to see your nearly ready new home. Prior to completion, you should receive a “Notice of Completion Date” from the developer’s agent. This is usually 10 days prior to completion, but timing can vary. After the walkthrough, they will present you with a list of any noted deficiencies for you to acknowledge. Typically, the developer will then fix these issues before your move in date. It is always recommended that you bring your realtor along to review the list with you prior to signing.
5. TAKE POSSESSION AND MOVE INTO YOUR NEW HOME
After the deficiencies are addressed, your new home will be ready for you! A few days prior to the established possession date, reconnect with your lawyer or notary to finalize the transaction. They will register the property to your name and your mortgage will begin. With these final details, accept the keys to your new home. Enjoy seeing your pre-sale vision come to life and get ready to move in!
If you have any questions about the process from purchase to possession of your pre-sale home, speak with your real estate agent or a Sales Centre representative for your development, both of whom can provide tailored information for your specific purchase.
