Essential Presale Terms

New to BC or presales?

Navigating pre-sale properties without knowing key real estate terms can be tough.

Here’s a list of 31 essential terms to know when dealing with new pre-sales or real estate in Canada.

We hope this guide helps you make a successful investment in the Canadian real estate market.

1. Pre-Approval

– The process where a bank or financial institution approves a loan limit before purchasing a property in Canada. It helps buyers understand their price range. It’s common to receive pre-approval before the first deposit.

2. Deposit

– An initial payment made by the buyer as a security deposit when signing a purchase contract for a Vancouver pre-sale property. It usually represents a percentage of the total purchase price (e.g., 10-20%).

3. Purchase Agreement

– The official contract between a buyer and the developer for purchasing a property, including terms of purchase such as price, conditions, and schedule. Typically done along with the first deposit.

4. Floor Plan

– A layout that shows the internal structure of a property, including the location, size, and arrangement of rooms.

5. Disclosure Statement

– An essential document provided by the developer before the property purchase, detailing specific information, contract terms, and development timelines.

6. Additional Deposit

– An extra deposit required under certain conditions. For example, an additional deposit may be due when a building permit is issued.

7. Building Permit

– An official permit from the city government that must be obtained before starting construction. Developers usually apply for it within 3-6 months after starting pre-sales. Approval can take 3-12 months depending on complexity and city processing times. Many pre-sale contracts include a “conditional approval” clause, where if the permit is denied, the contract is voided, and deposits are refunded.

8. Completion Date

– The date when construction is complete and the buyer can take possession of the property. By this date, the buyer must pay the remaining balance and transfer ownership.

9. Home Warranty

– A warranty program for newly constructed homes, usually covering repair of construction defects and valid for specific periods. Typically starts upon receiving the occupancy permit.

Common warranty periods:

• 1-year for materials and labor
• 2-year for major systems
• 5-year for building envelope
• 10-year for structural defects

 10. Closing Costs

– Additional costs incurred when purchasing a home, including legal fees, registration fees, and taxes.

11. Conveyancing

– The legal process of officially transferring property ownership to the buyer, usually handled by a lawyer or notary.

 12. Occupancy Date

– The date when the buyer can physically move into their new home. The buyer should plan their move accordingly.

 13. Strata Fees

– Monthly management fees for the maintenance and operation of shared facilities in properties like condos or townhouses. It covers common area upkeep, cleaning, and repairs.

 14. Inspection

– A professional assessment of the property’s condition, including checks on structural integrity, plumbing, and electrical systems.

 15. Appraisal

– An assessment of the property’s market value. Required by lenders to finalize loan approval, usually conducted after the purchase agreement.

 16. Interest Rate

– The rate applied to a home loan. Fixed and variable rates are available, and it significantly impacts the cost of borrowing.

 17. Mortgage Approval

– The process where a bank or financial institution approves a loan for purchasing a home, ensuring the buyer has the necessary funds.

 18. Financing Condition

– A condition in the purchase agreement that makes it valid based on loan approval. If the loan is not approved, the buyer can cancel the contract.

19. Title Insurance

– Insurance protecting the homeowner from legal issues related to property ownership, such as unpaid taxes. Acquired after signing the purchase agreement but before ownership transfer.

 20. Property Transfer Tax

– A tax payable when transferring property ownership. In British Columbia, it is a percentage of the purchase price. However, Property Transfer Tax can be exempt or reduced if certain conditions are met (e.g., for first-time homebuyers). See the following link for details.
https://pinest.ca/new-presale-first-home-buyer-realestate-tax-benefit/

 21. GST (Goods and Services Tax)

– A tax on new home purchases in Canada, currently at 5% of the purchase price.

 22. Holdback

– An amount retained to address potential deficiencies in construction, usually 5-10% of the total purchase price, held for 30-90 days post-completion. Buyers can notify the developer of any issues during this period, and the holdback can be used to address these.

 23. Deficiency List

– A list of defects or incomplete items found after property completion. The developer addresses these based on the list.

 24. Completion Certificate

– An official document confirming the building’s completion, required to legally use the property.

 25. Mortgage Broker

– A professional who compares loan products from various lenders to find the best mortgage for the buyer. They work with different financial institutions.

 26. Fixed-Rate Mortgage

– A mortgage where the interest rate remains unchanged for the loan term, ensuring consistent monthly payments.

 27. Variable-Rate Mortgage

– A mortgage with an interest rate that varies with market conditions. Low rates can be beneficial, but higher rates increase interest costs.

 28. Principal

– The original amount of the loan, excluding interest, representing the actual loan amount.

 29. Amortization Period

– The total time required to fully repay a home loan, usually set at 20 or 25 years.

 30. Equity

– The difference between the property’s current market value and the remaining loan balance. It represents the homeowner’s actual ownership in the property.

 31. Occupancy Permit

– A permit issued after confirming that a building meets legal requirements, allowing occupants to move in.

We hope this information helps Vancouver real estate and pre-sale property buyers better understand the pre-sale process and make informed decisions. 🙂

Please consult a professional for detailed use of each term and when reviewing contracts.

Thank you.