PRE-SALES

Inspired by my good friend — and witty, accurate writer — Kade.

Once a golden ticket in Vancouver, queues round the block to have the fortune of ‘buying’ one.
‘Buying’ because back then they were often flipped (assigned) just before Completion —to the original Purchasers gain.

In more recent years - that hasn’t been the Pre-sale norm.

First, what is a Pre-Sale?

A home available to purchase now, that isn’t yet built. Occupation available later - normally 2+years away.

(Not to be confused with a New Build, available to purchase now and available to occupy now)

MORTGAGE FINANCING RISKS?

The biggest risks of buying a Pre-sale don’t show up on the day you sign that Pre-sale contract — they show up months or years later, right before completion.

Pre-sales can feel like the perfect solution: more time to save, more time to plan, and a brand-new home waiting for you at the end of it.
And they can be the right purchase for some folks - but not all.

What is your risk tolerance?
What is your liquidity?
What is your income stability?
What is your Plan B?

Interest Rates Change

Ask anyone who bought a Pre-sale in 2020/2021 and then completed in 2023.

Qualification Rules and Guidelines Change

Again, ask anyone in the above scenario where qualifying rate (stress rate) jumped from 5.25% to close to 8%
They did a Pre-Approval at the time of signing the Pre-sale Purchase contract.
They did everything in the interim they were supposed to do — income the same, downpayment records spick and span etc.

Through no fault of their own - some buyers no longer qualified. They needed a co-signor. They needed more downpayment. Or, they needed both.

Life Happens: Job Changes, Income Fluctuations, Layoffs

Lenders care about your income at the time of mortgage funding, not at the time you sign the Pre-sale contract.
Even “good” changes can work against you - seek advice ahead of income changes.
Your Pre-Approval might be solid — but the lender reassesses everything right before completion, typically.

The Property May Not Appraise at the Purchase Price

Pre-sales are often bought years before they’re finished. Markets shift. If home values dip or the market cools, the appraisal at completion may come in lower than your contract price.
That creates a gap.
Lenders lend on the lower of the purchase price or appraised value, which means:
If your home appraises $40,000 under contract price, you may need to bring that $40,000 difference… in cash.

Advantages?

Pre-sales can be an incredible opportunity.
More time to save, brand new everything, lower maintenance costs in theory, customization often available in finishes.
Advantages aplenty, as long as you go in with your eyes wide open.
The risks are manageable, but they are very real.

The Bottom Line:

Pre-sales Come With Real Advantages and Real Risks

The key is not to avoid Pre-sales — it is to know thy self, and plan accordingly.

Confused? Normal!
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