“When the market was hot, pre-sale condominiums were all the rage,” explains Vancouver Townhouse realtor Ariane Benjamin. “The slowdown has left many buyers in limbo, attempting to back out of contracts that are nearly iron clad as buildings near completion.”
Market depreciation has meant that some pre-buyers cannot secure the financing to pay for purchases they made when home prices were higher. With pre-sale condos, a buyer puts down a deposit on a unit that will be constructed at a later date. Once it’s complete, the buyer must pay off the entire balance agreed upon to the developer.
The problem is that banks will only provide a mortgage that covers the home’s current value. The balance owed to developers on purchases made just a few years ago may now exceed the value of the property by as much as 10-15%. And with many condos recently valued at $1 million plus, that could mean as much as $150,000 that a buyer suddenly has to produce personally.
A few buyers have approached lawyers to see if there’s some way to legally back out, but the outlook is not good.
A buyer who fails to complete a legal contract is not only in danger of losing their deposit, they could be held accountable by the developer if the unit fails to sell—or if it sells for less than the amount agreed upon in the contract.
“Usually the only way out is if the developer has made an error,” explains Ariane. “For example, if they fail to secure building permits, send disclosure statements—or if financing falls through.”
Prospective buyers who are locked into a contract should stay in contact with developers. It’s vital to understand completion dates, obligations, and other details around the property.
“Many developers have their own realtors and lawyers, so hiring your own may be a good idea. It’s beneficial to have a team that represents your interests and who can provide you with legal options on how to move forward.
VANCOUVER HOUSING: LOOKING TO BUY OR SELL A TOWNHOUSE IN 2019?
As an experienced townhouse realtor in Vancouver, Ariane Benjamin has been tracking townhouse sales and neighbourhood trends for over 15 years. Her one-on-one approach to buying and selling emphasizes a customer-first attitude and allows her to deliver results and value. Call (604) 779-1500 to set up a complimentary consultation today.