What is A Pre-Construction Sale

A Pre-construction sale (Pre-sale) is the contractual purchase of a property prior to the start of construction. A typical construction timeframe for this type of purchase is usually between one to four years.

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Assets available when purchasing this type of property that can help buyers are renderings of the exterior, interior and other key components such as kitchens, bathrooms and living spaces. Floorplans, specification sheets and sample materials or imagery for cabinets, countertops, hardware, fixtures and lighting are also usually provided.

 

To further help purchasers in their decision-making process, the developer or builder will often construct a mock show suite available for viewing within a presentation center or community parade. This could resemble one of the available units for a condo building, a show-home for a single family home, townhome or duplex/semi-detached unit.

 

A Pre-sale opportunity occurs if a builder is required to sell a certain percentage of their units before their financial institution will give the green light for the development of the project to start. Typically, the Pre-sale product types are condos and townhomes due to the larger volume of units and longer construction timelines for the development.

 

During the initial release of a development project, many builders will incentivise Pre-construction sales (Pre-sales) to reach their financing threshold sooner. Included upgrades, lower or extended deposit structures and incentives like rental guarantees or included property management can often be offered to early buyers.

 

In many cases, the timeline between the sale and the delivery of the property allows for purchasers to save for their downpayments or gain equity within the property value. This is possible by securing the purchase price multiple months to even multiple years before the closing or possession of the property. In the case of investors, the increased equity allows for them to finance the property at the time of closing using their equity as a form of down payment or sell the property on assignment prior to the completion of the development project for a profit or return on their original investment/down payment.

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