Jump to content

      













Photo

Pros and Cons to buying into a presale development in Victoria, B.C.


  • Please log in to reply
18 replies to this topic

#1 MarkoJ

MarkoJ
  • Member
  • 4,791 posts
  • LocationVictoria

Posted 06 March 2012 - 11:49 AM

Text write-up to follow....feel free to add your opinion.

PAMPe0AyMzI

Marko Juras, REALTOR® & Associate Broker | Gold MLS® 2011-2018 | Fair Realty

www.MarkoJuras.com - MLS® from $899 and $1,000 cash back for buyers | www.834sales.com & www.promontoryforsale.com - Building(s) specialist 

Looking at Condo Pre-Sales in Victoria? Save Thousands!

 

 


#2 Mark P

Mark P
  • Member
  • 10 posts

Posted 06 March 2012 - 01:18 PM

Marko what about pre-sales in regards to parking stalls and land value? Obviously if one was buying an older condo, parking would be included in the overall price. So when the annual assessment goes out to each resident, is the parking stall included? or is it solely the condo unit?

Who deems the "value" of the parking stall? I know that for The 834, parking stalls were 30K a piece. How does one factor that into the equation?

#3 MarkoJ

MarkoJ
  • Member
  • 4,791 posts
  • LocationVictoria

Posted 06 March 2012 - 07:56 PM

Marko what about pre-sales in regards to parking stalls and land value? Obviously if one was buying an older condo, parking would be included in the overall price. So when the annual assessment goes out to each resident, is the parking stall included? or is it solely the condo unit?

Who deems the "value" of the parking stall? I know that for The 834, parking stalls were 30K a piece. How does one factor that into the equation?


Parking at The834 was $35,000 a piece - I didn't buy one - the max I was willing to go was $25,000; however, they sold out at $35,000.

Parking at the Bayview Promontory is included with extra spots at $12,000; however, I passed on an extra spot. 234 parking spots and only 177 units; therefore, I figured with a small unit what is the point? There is unlikely to be a shortage.

So, essentially the value of parking in the building is reflected on several factors:

a) Location of the building. In the downtown core parking is generally worth more as parkade space is at a premium. If you go further out buildings typically have much bigger footprints to work with for the parkade.

b) Supply/Demand status in the building. If a building has 120 units and only 60 parking spots parking will be more expensive than if the building has 60 units and 120 parking spots.

As far as your BC Assessment question - looking at the assessment at the834 they don't seem to be factoring in parking spots but I don't know for sure.

Marko Juras, REALTOR® & Associate Broker | Gold MLS® 2011-2018 | Fair Realty

www.MarkoJuras.com - MLS® from $899 and $1,000 cash back for buyers | www.834sales.com & www.promontoryforsale.com - Building(s) specialist 

Looking at Condo Pre-Sales in Victoria? Save Thousands!

 

 


#4 Bernard

Bernard
  • Member
  • 4,241 posts
  • LocationVictoria BC

Posted 07 March 2012 - 01:11 PM

Normally parking should be accounted for in the assessment and the value of the units with and without parking should vary by the value of the parking spaces. I have sat on appeals that addressed the issue of having parking or not.

#5 Mike K.

Mike K.
  • Administrator
  • 50,328 posts

Posted 09 March 2012 - 09:06 AM

Something I'm unsure of is if the value of a condo drops significantly between the marketing (down payment) phase and the date of possession (presumably the date the developer receives the amount owing), is there any recourse for the buyer? I know the buyer can opt to walk away and lose the deposit, but other than that the buyer is committed to the original unit price, yes?

Know it all.
Citified.ca is Victoria's most comprehensive research resource for new-build homes and commercial spaces.


#6 Greg

Greg
  • Member
  • 1,700 posts

Posted 09 March 2012 - 11:55 AM

Something I'm unsure of is if the value of a condo drops significantly between the marketing (down payment) phase and the date of possession (presumably the date the developer receives the amount owing), is there any recourse for the buyer? I know the buyer can opt to walk away and lose the deposit, but other than that the buyer is committed to the original unit price, yes?


In actual practice you can probably walk away and lose the deposit, but I think most contracts are written in a way where you could be sued for specific performance. That would often not be in the developer's best interest, but I think it is still a legal option.

#7 MarkoJ

MarkoJ
  • Member
  • 4,791 posts
  • LocationVictoria

Posted 09 March 2012 - 12:07 PM

In actual practice you can probably walk away and lose the deposit, but I think most contracts are written in a way where you could be sued for specific performance. That would often not be in the developer's best interest, but I think it is still a legal option.


^ What he said. Depending on the terms of the contract, if you enter into a contract for $300,000 with a $30,000 deposit and the unit is worth $250,000 on completion and you walk away the developer could potentially come after you for the remaining $20,000.

I thought this happened at Reflections in Langford?

I also know there was a lawyer specializing in getting buyers out of contracts at the Falls.

Marko Juras, REALTOR® & Associate Broker | Gold MLS® 2011-2018 | Fair Realty

www.MarkoJuras.com - MLS® from $899 and $1,000 cash back for buyers | www.834sales.com & www.promontoryforsale.com - Building(s) specialist 

Looking at Condo Pre-Sales in Victoria? Save Thousands!

 

 


#8 Mike K.

Mike K.
  • Administrator
  • 50,328 posts

Posted 09 March 2012 - 12:49 PM

Oh, wow, see I thought that there was more to it than simply foregoing your deposit and moving on.

Know it all.
Citified.ca is Victoria's most comprehensive research resource for new-build homes and commercial spaces.


#9 Ms. B. Havin

Ms. B. Havin
  • Member
  • 5,052 posts

Posted 09 March 2012 - 07:35 PM

Maybe off-topic, but did anyone else get an email from Bosa Properties with the offer to buy into their Lido development (in Vancouver, SE False Creek) with a guaranteed rental income scheme? They're offering 20 2-BDR units during the month of March only, which you can pre-buy and then have rented out (and managed) by Bosa for 2 years, with a guaranteed monthly income of between $1.9K-2.3K per unit (depending on square footage size).

The cheapest 2 BDR is $459K, the most expensive (iirc) $779 (or around there). All are 2 BDR units, price dependent on floor level and square footage. The lowest price unit guarantees $1.9K per month for 2 years, the highest $2.3K per month, with Bosa taking care of all of the property management.

I've never seen an offer like that. Wonder if it's something totally new or not?
When you buy a game, you buy the rules. Play happens in the space between the rules.

#10 LJ

LJ
  • Member
  • 9,111 posts

Posted 09 March 2012 - 08:07 PM

^ What he said. Depending on the terms of the contract, if you enter into a contract for $300,000 with a $30,000 deposit and the unit is worth $250,000 on completion and you walk away the developer could potentially come after you for the remaining $20,000.

I thought this happened at Reflections in Langford?

I also know there was a lawyer specializing in getting buyers out of contracts at the Falls.


What remaining $20,000? He could come after you for the remaining $270,000 depending on the contract language, and if he couldn't sell the unit.

Conversely when the prices jumping up every month I know some developers were doing everything they could to get rid of people that pre bought. They would put in cheaper materiels, worse finishing, cheaper appliances etc. and then never respond to your complaints except to say " Here's your money back, stop bothering me".
Life's a journey......so roll down the window and enjoy the breeze.

#11 MarkoJ

MarkoJ
  • Member
  • 4,791 posts
  • LocationVictoria

Posted 09 March 2012 - 09:06 PM

What remaining $20,000? He could come after you for the remaining $270,000 depending on the contract language, and if he couldn't sell the unit.

Conversely when the prices jumping up every month I know some developers were doing everything they could to get rid of people that pre bought. They would put in cheaper materiels, worse finishing, cheaper appliances etc. and then never respond to your complaints except to say " Here's your money back, stop bothering me".


Well, I suppose in theory he or she could come after you for $270,000; however, I don't know how well that would hold up in court.

The disclosure statements are very broad. Developers can put in cheaper materials in a flat market and you wouldn't have much recourse.

Marko Juras, REALTOR® & Associate Broker | Gold MLS® 2011-2018 | Fair Realty

www.MarkoJuras.com - MLS® from $899 and $1,000 cash back for buyers | www.834sales.com & www.promontoryforsale.com - Building(s) specialist 

Looking at Condo Pre-Sales in Victoria? Save Thousands!

 

 


#12 Greg

Greg
  • Member
  • 1,700 posts

Posted 10 March 2012 - 04:26 AM

Well, I suppose in theory he or she could come after you for $270,000; however, I don't know how well that would hold up in court.

The disclosure statements are very broad. Developers can put in cheaper materials in a flat market and you wouldn't have much recourse.


The biggest weapon available to the pre-buyer in most cases is actually the threat of the negative publicity attached to legal action, not the actual odds of winning the legal action. Which is why I would only pre-buy from a known developer with a good reputation and an ongoing development business in the community. That's the type of developer who will actually care about potential threats to their reputation, and would go to some effort to avoid being sued over poor quality finishings and so forth.

#13 VicHockeyFan

VicHockeyFan
  • Suspended User
  • 52,121 posts

Posted 10 March 2012 - 08:04 AM

Maybe off-topic, but did anyone else get an email from Bosa Properties with the offer to buy into their Lido development (in Vancouver, SE False Creek) with a guaranteed rental income scheme? They're offering 20 2-BDR units during the month of March only, which you can pre-buy and then have rented out (and managed) by Bosa for 2 years, with a guaranteed monthly income of between $1.9K-2.3K per unit (depending on square footage size).

The cheapest 2 BDR is $459K, the most expensive (iirc) $779 (or around there). All are 2 BDR units, price dependent on floor level and square footage. The lowest price unit guarantees $1.9K per month for 2 years, the highest $2.3K per month, with Bosa taking care of all of the property management.

I've never seen an offer like that. Wonder if it's something totally new or not?


It's not all that revolutionary I don't think. There's not much risk for Bosa, they'll rent them at some price, and if they have to "top up" the rents a bit to cover the guaranteed payment well, that's a marketing cost. If they "lose" $500/mo x 24 months, then that's a $12,000 marketing cost to move a $700k condo. No big deal.
<p><span style="font-size:12px;"><em><span style="color:rgb(40,40,40);font-family:helvetica, arial, sans-serif;">"I don’t need a middle person in my pizza slice transaction" <strong>- zoomer, April 17, 2018</strong></span></em></span>

#14 rjag

rjag
  • Member
  • 5,227 posts
  • LocationSi vis pacem para bellum

Posted 10 March 2012 - 08:41 AM

It's not all that revolutionary I don't think. There's not much risk for Bosa, they'll rent them at some price, and if they have to "top up" the rents a bit to cover the guaranteed payment well, that's a marketing cost. If they "lose" $500/mo x 24 months, then that's a $12,000 marketing cost to move a $700k condo. No big deal.


But wait a minute, Marko and a few others in the bubble thread were trying to convince me that there is very little profit in these developments!!! Seems they indicate margins of less than 3.5% or abut $20k on the above noted example....:rolleyes:

But to reply to purchasing a pre-sale condo....its not 5-6 years ago when everyone was giddy and happy and believed that real estate would increase year over year by 10% and they believed in Santa and the tooth fairy. Times have changed and there arent as many lemmings anymore that are seduced by pre-sale seduction.

Sure there are times where this may make sense for some people. i.e. advance planning, future location may be on the edge of a planned infrastructure upgrade such as a skytrain station or new business park etc....but really outside of that, the developer holds all the cards in the contract and you are assuming and accepting part of the risk as far as the banks and courts will view this. There are not very many presale contracts that will allow you to negotiate changes to alleviate yourself from that risk...like a prior post said, they can come after you for everything not just the balance.

And really, what is the advantage of a pre-sale? Basically that you are guaranteed by the developer to not pay more than what the contract stipulates....but what if the market slows in 2-3 years time and the developer has to slash prices on the unsold units? You'll get a refund right? (Crickets chirping) Its a mugs game to buy a presale in this market unless the Developer is foolish enough to allow your Lawyer to negotiate changes to the contract...you're more likely to win the lottery.

Also the developer holds all the say in the final product, no guarantee is implied that the final product will be exactly as shown nor materials to be the same quality as described.

And in this market with numerous condo's already built why not by one of those? Or is the allure of buying some place with a wc thats never been crapped in so intoxicating....dont worry all the construction guys broke them in for ya:)

I wonder if a poll was taken at the Bayview or the Falls for example of the owners that pre-bought, if you asked them if they would do it again....what do you think the answer would be?

#15 MarkoJ

MarkoJ
  • Member
  • 4,791 posts
  • LocationVictoria

Posted 10 March 2012 - 07:34 PM

Finally getting around to typing this up.....

What is a presale?

Presales generally refer to developments being offered for sale prior to completion of construction (Presales can be offered prior to start of construction and/or during the construction period). Examples in Victoria include the Bayview Promontory, Mondrian, Era, and Sovereign.


What are the advantages to buying a presale?
  • The main advantage would be the potential increase in value prior to the completion of construction. Essentially, you put down a deposit (5% to 20% depending on the development) and hope to watch the value increase before you complete on the condo. During this waiting period you typically do not have to take on a mortgage, strata fees, or property taxes. Example, in the summer of 2009 I personally purchased a 533 sq./ft. south facing unit at the834 (Chard Development) for $198,900. On completion (end of November, 2011) the condo was worth approximately $240,000 to $250,000 with a similar BC assessed value. My deposit was only 5% or less than $10,000; therefore, you can see that the return on investment was very attractive at the834.
  • Brand new home - there is an appeal to a lot of buyers to move into something that has never been lived in before.
  • Latest in construction, design and technology. For example, the Bayview Promontory has a well-designed kitchen with a built in TV (yes, the TV is included), and the Sovereign has a car elevator and pretty awesome rooftop area.
  • More choice of units, floor plans, floors, etc. Early on during pre-sales is also when typically the units with the best pricing/value are bought.
  • The construction period can allow many first time buyers to save more money for the down payment prior to completion, and it can give retired buyers enough time to prepare for the downsize from a larger home.
What are the disadvantages to buying a presale?
  • The main disadvantage would be the potential decrease in value prior to the completion of construction. For example, you enter into a contract to buy a presale for $300,000 and on completion it is only worth $270,000. Prices don't always go up with pre-sales so buy carefully!
  • Delays in construction: most presale contracts have delay clauses which allow the developer to be up to a year late (varies with contracts) on the estimated completion date. So, you might buy a pre-sale with an anticipated completion date of 2014 and it might take until 2015! Time delays can occur due to whether, labour shortages, supplier problems, inspection problems, etc.
  • Your deposit is out of your pocket. Although it is protected by the Real Estate Development Marketing Act you have opportunity costs (you could potentially invest your deposit instead of having it locked up for up to 3 years while you wait for completion).
  • Changes in floor plans, finishing, etc. The disclosure statements are generally very broad the developer typically reserves the right to change appliances, vary the floor plan size by a small amount, etc. For example, in the disclosure it will typically specify that every unit or certain units come with a storage locker; however, the size of the storage locker may not be specified. In this type of scenario you are at the mercy of the developer - and hopefully they have a good reputation :)

Marko Juras, REALTOR® & Associate Broker | Gold MLS® 2011-2018 | Fair Realty

www.MarkoJuras.com - MLS® from $899 and $1,000 cash back for buyers | www.834sales.com & www.promontoryforsale.com - Building(s) specialist 

Looking at Condo Pre-Sales in Victoria? Save Thousands!

 

 


#16 MarkoJ

MarkoJ
  • Member
  • 4,791 posts
  • LocationVictoria

Posted 10 March 2012 - 07:44 PM

Maybe off-topic, but did anyone else get an email from Bosa Properties with the offer to buy into their Lido development (in Vancouver, SE False Creek) with a guaranteed rental income scheme? They're offering 20 2-BDR units during the month of March only, which you can pre-buy and then have rented out (and managed) by Bosa for 2 years, with a guaranteed monthly income of between $1.9K-2.3K per unit (depending on square footage size).

The cheapest 2 BDR is $459K, the most expensive (iirc) $779 (or around there). All are 2 BDR units, price dependent on floor level and square footage. The lowest price unit guarantees $1.9K per month for 2 years, the highest $2.3K per month, with Bosa taking care of all of the property management.

I've never seen an offer like that. Wonder if it's something totally new or not?


This is a very similar concept to what they are doing at the Bayview Promontory for the first 95 units - "Equity Builder Program."

Essentially, both promotions are just purchaser incentives.

Marko Juras, REALTOR® & Associate Broker | Gold MLS® 2011-2018 | Fair Realty

www.MarkoJuras.com - MLS® from $899 and $1,000 cash back for buyers | www.834sales.com & www.promontoryforsale.com - Building(s) specialist 

Looking at Condo Pre-Sales in Victoria? Save Thousands!

 

 


#17 MarkoJ

MarkoJ
  • Member
  • 4,791 posts
  • LocationVictoria

Posted 10 March 2012 - 08:31 PM

But wait a minute, Marko and a few others in the bubble thread were trying to convince me that there is very little profit in these developments!!! Seems they indicate margins of less than 3.5% or abut $20k on the above noted example....:rolleyes:

But to reply to purchasing a pre-sale condo....its not 5-6 years ago when everyone was giddy and happy and believed that real estate would increase year over year by 10% and they believed in Santa and the tooth fairy. Times have changed and there arent as many lemmings anymore that are seduced by pre-sale seduction.

Sure there are times where this may make sense for some people. i.e. advance planning, future location may be on the edge of a planned infrastructure upgrade such as a skytrain station or new business park etc....but really outside of that, the developer holds all the cards in the contract and you are assuming and accepting part of the risk as far as the banks and courts will view this. There are not very many presale contracts that will allow you to negotiate changes to alleviate yourself from that risk...like a prior post said, they can come after you for everything not just the balance.

And really, what is the advantage of a pre-sale? Basically that you are guaranteed by the developer to not pay more than what the contract stipulates....but what if the market slows in 2-3 years time and the developer has to slash prices on the unsold units? You'll get a refund right? (Crickets chirping) Its a mugs game to buy a presale in this market unless the Developer is foolish enough to allow your Lawyer to negotiate changes to the contract...you're more likely to win the lottery.

Also the developer holds all the say in the final product, no guarantee is implied that the final product will be exactly as shown nor materials to be the same quality as described.

And in this market with numerous condo's already built why not by one of those? Or is the allure of buying some place with a wc thats never been crapped in so intoxicating....dont worry all the construction guys broke them in for ya:)

I wonder if a poll was taken at the Bayview or the Falls for example of the owners that pre-bought, if you asked them if they would do it again....what do you think the answer would be?


Rjag, I don’t think profits are 3.5% for developers but they aren’t 25% to 33% either.

Yes, people got burned buying high-end presale units in Victoria when the market was at the peak and many people and REALTORS® refer to this event as a reason not to buy pre-sales; however, no one analyzes the numbers. Yes, if you paid 600k for a 1,000 sq.ft. unit thinking the market would appreciate 15% per year you probably got burned. My personal belief is that a lot of people overpaid to start with.

There can be an advantage to buying presales if you do extensive research. I won’t get into my excel spreadsheets, analysis, etc…but rather I will use a quick example.

Recent COMPLETED condo sales:

305–848 Mason Street, 418 sq.ft., no parking spot, 2006 built, balcony faces block wall, interesting location. SALE PRICE: $202,500 (March 7th, 2012).

201–1121 Fort Street, 490 sq.ft., no parking spot, wood framed, 2010 built, facing Fort (north-east), small kitchen. SALE PRICE: $241,900.(March 2nd, 2012).

Below is an example of what one of my clients recently bought as a PRESALE:

Unit 510–65 Saghalie (Promontory), 469 sq.ft., parking spot included, partial views of inner harbour from balcony, awesome kitchen with included built in HD TV, Miele and Electrolux appliances, heat pump, concrete high rise building, common outdoor barbeque area, 8’10’’ ceilings, etc. SALE PRICE: $210,931 (Incentives and Net HST included).

What does $198,900 get you at the ERA?

http://eravictoria.com/virtual-tours & click on “Studio A,” there is nothing remotely close that is on the market as completed that can match the same size, quality, and location for $198,900.

I run spreadsheets for studios, one bedroom, and smaller two bedrooms. The spread between completed units and what presales are going for is high right now which is good for presale buyers. My theory is A) there is a lot of presale competition B) credit has tightened up and lenders want to see a large percentage of presale solds before issuing financing for construction; therefore, developers have to post attractive presale prices to reach these percentages C) people aren’t jumping into presales like they use to because the real estate market is flat.

So overall, if you buy the right unit there are very good opportunities. My presale unit at the834 increased about 20%+ during construction in a FLAT market. I always run all presale calculations based on a completely flat real estate market during the 2 to 3 year build out. I build in a small market correction as a strong possibility and market appreciation only as a bonus.

As far as a severe market correction...you'll be in a very bad position whether you buy presale or completed (probably worse if you bought completed). Your 2006 built unit is not going to go for more money than the presale if the developer is fire selling units in a 2014 building.

Marko Juras, REALTOR® & Associate Broker | Gold MLS® 2011-2018 | Fair Realty

www.MarkoJuras.com - MLS® from $899 and $1,000 cash back for buyers | www.834sales.com & www.promontoryforsale.com - Building(s) specialist 

Looking at Condo Pre-Sales in Victoria? Save Thousands!

 

 


#18 Greg

Greg
  • Member
  • 1,700 posts

Posted 11 March 2012 - 12:21 AM

And really, what is the advantage of a pre-sale? Basically that you are guaranteed by the developer to not pay more than what the contract stipulates....but what if the market slows in 2-3 years time and the developer has to slash prices on the unsold units? You'll get a refund right? (Crickets chirping) Its a mugs game to buy a presale in this market unless the Developer is foolish enough to allow your Lawyer to negotiate changes to the contract...you're more likely to win the lottery.


One of the main flaws of this whole thread is ignoring the fact that a home/condo purchase isn't just an investment, it is a place to live. And in that regard location is very important. One of the main incentives to buying a condo presale is that you WANT the condo. These are not completely interchangeable commodities.

Take the Sovereign for instance. There's not really going to be another modern building of that variety built in old town. If you want to live there, and are particular about things like floor plans, then a presale is the way to get what you want.

And as far as an investment goes, then buying a presale today is no different than buying a completed condo today. The prices may go up or down, but the risk exposure is essentially the same.

#19 Sparky

Sparky

    GET OFF MY LAWN

  • Moderator
  • 10,557 posts

Posted 11 March 2012 - 12:29 AM

"Risk Exposure" ......That should be the primary concern for any potential purchaser

 



0 user(s) are reading this topic

0 members, 0 guests, 0 anonymous users