What a pre-sale is
A pre-sale means selling a home before it is finished, sometimes before the build even starts. A buyer signs a contract and pays a deposit to reserve their unit. In a multiplex project, this could be one, two, or all of the homes.
The buyer agrees to a price now and moves in later, once the home is built and ready. For the person funding the project, a signed pre-sale is proof that real buyers want the homes.
Deposits are held in trust, not cash you can spend
Here is the part people get wrong. The deposit a buyer pays is not money you can use to pay for the build. In BC, pre-sale deposits are held in trust, usually by a lawyer or notary, until the sale closes.
This protects the buyer if the project does not finish. It also means you cannot count on deposits to cover your day-to-day building costs. Treat deposit money as locked away until the home is complete and the deal closes.
What pre-sales actually do for funding
If deposits cannot be spent, why do pre-sales help you fund a project? The answer is that they lower a lender's risk. A lender worries about one main thing: will the finished homes sell? Signed pre-sales answer that worry with proof of real demand.
When a lender sees that homes are already sold, they may lend you more of the total cost, and sometimes at a better interest rate. Strong pre-sales can turn a lender from cautious to willing.
- Pre-sales prove buyers want the homes at your price.
- Lower risk for the lender can mean a higher loan amount.
- It can also mean a better rate (this changes with the market).
- Some lenders set a pre-sale target you must hit before they release construction money.
How this fits with construction financing
Pre-sales and a construction loan usually work together. Many lenders will not release the full loan until you reach a set level of pre-sales, for example a share of the units sold. This shows them the project can repay the loan when it finishes.
As a rough guide as of 2026, conventional bank construction loans often want the borrower to put in 25% to 40% of the project cost as their own equity. Some BC credit unions lend up to about 80% of project cost with interest-only payments during the build. Strong pre-sales can help you reach the better end of these terms. All numbers change with the market and with each lender.
The trade-off of selling early
Selling early has a cost. When you pre-sell, you lock in the price today. If home prices rise while you build, the buyer gets the gain, not you. You gave up that upside in exchange for a safer path to funding.
Waiting to sell until the homes are finished keeps the upside if prices rise, but it is riskier. You carry the loan longer, and you take the chance that prices fall or homes sit unsold. There is no single right answer. It depends on how much risk you can carry and how much your lender requires. None of this is financial advice, so review your own numbers with a professional.