Purchasing a home, especially in a presale scenario, can be one of the most significant investments you’ll ever make. Whether you’re buying a condo, townhouse, or detached home, signing a presale contract comes with its own set of risks and considerations. Since the property hasn’t been built yet, you don’t have the advantage of seeing the final product firsthand. That’s why it’s essential to ask the right questions before committing to a presale contract.
In this guide, we’ll cover key questions to ask the developer, the real estate agent, and even yourself, to ensure you’re fully informed before you sign on the dotted line.
1. What is the Total Purchase Price, and Are There Any Hidden Costs?
Presale contracts usually list the base price of the property, but that’s not always the total amount you’ll pay. Make sure you ask the following:
- Is the purchase price inclusive of all fees? In addition to the base price, you could be on the hook for things like GST (Goods and Services Tax), property taxes, maintenance fees, or development levies.
- Are there any upgrades or optional features that could affect the final price? If you’re considering customizations, make sure you know what those might cost.
- What about closing costs? You’ll likely incur costs when closing on the property, such as legal fees, title insurance, and appraisal fees. Be clear on what you’ll need to pay at the time of closing.
2. What is the Estimated Completion Date?
Construction delays are common, especially in high-demand areas. Ask the developer for a realistic estimated completion date, but keep in mind that it might change. Some questions to ask include:
- When is the expected completion date, and how often is it updated? Be prepared for possible delays and ask the developer how frequently they communicate updates about the timeline.
- What happens if the property isn’t completed on time? Ask whether there’s compensation or recourse if you’re delayed or inconvenienced due to missed deadlines.
3. Can You See the Builder’s Reputation and Past Projects?
The quality of construction, adherence to timelines, and customer satisfaction all depend on the builder. Make sure to research the developer before committing. Some questions to consider:
- Who is the builder, and what other projects have they completed? Ask for references and visit completed developments if possible. Look up reviews from previous buyers.
- What is the developer’s track record for delivering on time and on budget?
- Are warranties provided for the home? Typically, there should be warranties for things like structural integrity, appliances, and other components. Ensure you understand what’s covered and for how long.
4. What Happens If You Need to Cancel the Contract?
Life changes, and sometimes buyers need to cancel their presale contract before completion. It’s crucial to understand your options and any potential penalties before signing the contract. Ask:
- What are the cancellation terms? Find out if there’s a cooling-off period, and what the penalties are if you decide not to proceed with the purchase.
- Are there any contingencies that could allow me to cancel without penalty? For example, some contracts have contingencies related to financing approval or if the building does not meet certain standards.
5. How is the Property Being Financed?
Presale contracts often involve a payment structure that may be different from traditional home purchases. Ask the following questions to ensure you’re clear on how payments will work:
- What is the deposit structure? Most presale contracts require an initial deposit, often 5% to 10%, with subsequent payments due at various milestones in the construction process.
- How do payment schedules work? Understand the timing of payments and how they align with the progress of the build.
- Will I be able to get financing for the property upon completion? Speak with your lender about the presale, as some lenders have specific requirements or restrictions regarding presale properties. Make sure you’re pre-approved for a mortgage when the time comes to close.
6. What is Included in the Unit?
Since you’re buying before the property is complete, it’s vital to ask about the specifications and what’s included in the unit. This can save you from surprises later on. Consider asking:
- What’s included in the base price? Are appliances (washer, dryer, fridge, etc.) included, or are these extra?
- Are there any optional upgrades? Ask about upgrades for flooring, countertops, cabinetry, or additional features. Are these upgrades optional, and if so, how much will they cost?
7. Are There Any Future Developments in the Area?
The neighborhood where your new home is being built may undergo significant changes by the time you move in. It’s essential to understand what’s planned for the area, as new developments can affect property values, accessibility, and lifestyle. Ask:
- What other developments are planned nearby? Find out about future residential, commercial, or infrastructure projects.
- Will the area continue to be developed after completion? You want to be aware of any potential disruptions or changes that could impact your quality of life or the value of your property.
8. Is the Property Part of a Strata or Homeowners’ Association?
If you’re purchasing a unit in a building with shared spaces, you’ll likely be part of a strata (for condos or townhouses) or homeowners’ association (for planned communities). Ask about:
- What are the monthly strata or maintenance fees? These fees cover things like building upkeep, landscaping, and amenities. Make sure you know how much they’ll be and what they cover.
- What is the history of fee increases? Ask if the fees have been raised frequently in the past and whether any future hikes are anticipated.
- Are there any special assessments planned? In some cases, strata or homeowners’ associations may require additional payments for repairs or upgrades that weren’t budgeted for.
9. What Is the Resale Potential of the Property?
While you’re buying the property for your own use, it’s also wise to consider its long-term value. Resale potential can be influenced by factors such as location, demand, and the property’s condition. Ask:
- What is the historical demand for properties in this development or area? Do your research to see how similar properties have appreciated in value over the past few years.
- Is the property likely to hold or increase in value? Consider the location’s future growth and whether the property is in a desirable neighborhood.
10. What Are the Insurance Requirements?
You’ll need to understand how insurance works for presale properties, particularly regarding builder’s risk and coverage once you take possession. Questions to ask include:
- What type of insurance does the builder carry during construction? This protects you if something happens to the building during the construction process.
- What type of insurance will I need once I take possession? Ensure you know what type of home insurance you’ll need before you move in.
Final Thoughts
Buying a presale property can be an exciting and rewarding investment, but it’s important to do your due diligence before signing on the dotted line. By asking the right questions and understanding all aspects of the presale contract, you’ll be in a better position to make an informed decision that aligns with your financial goals and lifestyle preferences.
Remember, this is a big commitment, so take your time, ask lots of questions, and seek professional advice if needed. Happy house hunting!
Have any other questions about presale contracts? Drop them in the comments below! We’d love to hear your experiences.
