The ever-changing real estate market can be unpredictable and forces you, the buyer, to change along with it, making you have to rethink your strategy on not just when to buy a home, but how to buy a home as well. If we could time-jump back four years ago to 2015, it would have been an easy decision: buy a home that doesn’t even exist yet. Wait, what? What does that mean? Well, pre-sale homes were all the rage back in 2015. Particularly with condos, they were an easy sell as potential buyers could view concept art and floor plans, then put down a deposit and secure the suite a year before they would be able to move in as the condo would still be undergoing construction. An investment like this often paid off for the buyer as the pre-sale price would be dirt cheap, and if they didn’t want the home after it was completed, most, if not all, buyers would sell them and double their investment.

But again, that was 4 years ago. Is it still wise to invest in these pre-sale properties, or is it better to go back to the old ways of buying a property that already exists in 2019? Let’s explore your options by looking at a few key areas.

The Initial Price of the Home

In terms of pricing, purchasing an already existing house will save you more money than to invest in a pre-sale property. With the housing market the way that it is, and the current forecast for price appreciation, putting in $700K towards a home that isn’t built yet won’t guarantee profits in a couple of years like it did in 2015. Not only will you have to wait for the home to be built (which could take anywhere from 2-3 years), but you can get a similar older property (around 10 years old) for $600K.

However, if you do have money to spare and care about the age of the building, pre-sale may be the option for you.

The Deposit

While re-sale homes can have a negotiable deposit between the buyer and the seller (usually around 5-10%), pre-sale homes require the buyer to pay 20% upfront before the building is even completed. The 20% is staggered over the course of many months, with 10% within the first couple weeks of claiming, and then the other 10% months later, but it is definitely something to take into account and plan for if planned for a pre-sale property.

Ongoing Costs

The obvious choice here would be a pre-sale home if ongoing costs are the biggest factor for you, the buyer. Pre-sale homes not only come with a warranty which guarantees the quality, but they are generally built with smarter, more sustainable materials that keep living costs low. Older homes may need things to be replaced, have a higher cost of living depending on the materials used to build the property, and other maintenance costs that can add up to be more than what the house is worth. Not to mention what could be found during the pre-move-in inspection…

Price Negotiation

Pre-sale homes are far less forgiving when it comes to negotiating the price and trying to talk the seller down to something that might take such a toll on your wallet. Pre-sale homes are often contracted and built by large companies so they’re often pretty firm on their price, unless of course you happen to be super charismatic and able to sway them into a deal.

Existing home prices are much easier to get the price that you want to pay, especially if there are some things in the home that you see could use replacing or upgrading. A buyer’s agent will discuss everything with you and make the best deal that they can with the seller.

Rentals

Not quite ready to have your own home yet, but are considering renting for the time being? Luckily for you, both pre-sale homes and existing homes are equal options in this area, but it all depends on what your specific needs are.

If you’re looking for something right away or someplace to live within the next couple months, then putting your chips towards the pre-sale houses which, as mentioned above, can take a few years to complete, that may not be the best option for you. Existing homes can be moved into right away, or at least within a couple of weeks to a month.

If you buy a pre-sale home, but are looking to just rent it out, then you’re in luck. Not only will the building be highly sought after and you can make decent money off the property, but you’ll be able to do it within weeks of purchasing.

Conclusion?

There really isn’t a concrete conclusion here on which one is better. Each of the options comes with its own advantages and disadvantages and the buyer will have to figure out for themselves which option works best for their own needs.

As far as the market goes and what the experts say: they would more-so lean towards the existing homes, since pre-sale investments are not worth it in today’s housing market and would be considered the riskier choice.

Need an expert’s opinion to help you figure out which one is best for you? Contact Walter Ekins and set up a consultation to work out all the bells and whistles. He will be able to point you in the right direction by listening to your needs and landing you and your family your dream home.