Vancouver Sun - Published: Thursday, March 06, 2008
Working with a REALTOR® ensures you have a well-trained professional with the knowledge and tools to help you make the best decision and to properly document the deal.
Consumers have long recognized the inherent value of owning real estate in British Columbia. The demand for new product has never been greater and developers have tried to keep up with that demand. It is the normal practice for a developer to go to market and "pre-sell" units in advance of construction.
The provincial government recognizes that purchasing from a plan is a speculative investment until the project is completed. The Real Estate Development and Marketing Act spells out the requirements of offering for sale real estate that is not yet constructed and requires developers to disclose to buyers the details of the project, including timelines to completion, ownership background, and a mechanism for changes to be made if the developer feels they are necessary.
On the other side, the buyer is risking that what they have committed to purchasing today will be worth the same price (or more) when the project completes. If the market value of the finished project is less than what they contracted for, they are still obligated to complete at the original price. Developers recognize this risk to the consumer and usually offer the properties at a discount.
Typically, a developer will announce a date when units are available for purchase under pre-sale. Buyers will often line up to secure a unit. The contracts are prepared by the developer and often there is little time to read the fine print. The disclosure statement is given to the buyer at the time of signing the deal and allows the buyer an automatic rescission of the deal within seven days.
This is the critical time to be fully informed about the project. Some questions that the buyer may want to ask (with the assistance of their REALTOR®) are:
- After the deal is signed, can the buyer back out of the deal and if so, what is the timeframe to back out?
- What happens in case of delay in completion? Can the buyer back out? Can the developer back out?
- If the developer needs to cut costs, can they change the finishes of the suite without agreement of the buyer?
- Will the buyer be asked to pay more for the unit at a later date?
- Can the buyer assign the contract to another party? Is there any cost involved?
- If the market has dropped by the completion date, can the buyer back out and get their deposit back?
If any of the answers cause concern, the buyer should make sure they have a clear agreement in writing that spells out what they have agreed to. The buyer's REALTOR® will be able to assist with the written agreement. Remember, the written agreement will govern what happens in the future. In any situation and for any type of real estate, working with a REALTOR® ensures you have a well-trained professional with the knowledge and tools to help you make the best decision and to properly document the deal.
Andrew Peck is the 2007-2008 President of the British Columbia Real Estate Association and has been a REALTOR® for 24 years. In 1995, Peck became a co-owner of Royal Pacific Realty Group and currently serves as its managing broker.
© The Vancouver Sun 2008