Buying a pre-construction home often feels like a safe bet. You sign a contract at today’s price and wait for the property to be built, hoping that by the time you move in, the home will have gone up in value. Unfortunately, the opposite can happen.

Across Canada, many buyers are discovering that their new homes are worth less at closing than what they originally agreed to pay. This leaves them with a difficult choice: either walk away and lose their deposit or take on more debt than they can afford.

The Pre-Construction Problem: When Value Drops

Imagine you purchased a pre-construction property for $550,000. Two years later, when the home is ready, the real estate market has cooled. The home is now appraised at $350,000.

This creates several challenges:

• Mortgage shortfall: The bank will only lend based on the appraised value, not the original purchase price.
• Out-of-pocket costs: You are expected to make up the difference between the mortgage and the contract price.
• Risk of losing your deposit: Walking away from the deal usually means losing your deposit, which can be tens of thousands of dollars.
• Potential legal claims: Builders may sue buyers who refuse to close, demanding compensation for the lost value.

For many families, this financial gap is simply impossible to cover.

Your Options If You Can’t Afford to Close

If you cannot complete the purchase or are facing debt because of a pre-construction shortfall, you do have options. These include:

1. Consumer Proposal

A Consumer Proposal is a legally binding agreement you file through a Licensed Insolvency Trustee. It allows you to:

• Stop legal action from creditors or builders.
• Consolidate your debts into one affordable monthly payment.
• Pay back only part of what you owe, with the rest forgiven once the proposal is completed.
• Protect your income and assets while resolving the debt.

Consumer Proposals are often the best choice when the shortfall and other unsecured debts total $250,000 or less (not including a mortgage on your principal residence).

2. Division I Proposal

If your shortfall is larger than $250,000, you may need to file a Division I Proposal. This process is similar to a Consumer Proposal but is designed for higher levels of debt. It still provides protection from creditors and offers a chance to negotiate repayment terms, although the process is more complex.

3. Bankruptcy

In some cases, Bankruptcy may be the only option. While it can feel intimidating, Bankruptcy provides immediate protection from lawsuits, collection actions, and wage deductions. It can discharge most unsecured debts, giving you a chance to rebuild your finances.

Choosing the Right Solution

The best solution depends on your personal situation:

If you have a mortgage shortfall and other unsecured debts under $250,000, a Consumer Proposal is often the most practical choice.

If the shortfall is larger, a Division I Proposal may be required.

If your finances are too strained for a proposal to work, Bankruptcy may be the right path.

What matters most is that you understand your rights and take action before creditors or builders do.

How MORATAYA Corp Can Help

If you are facing a pre-construction shortfall, you are not alone. Real estate markets can shift quickly, and many Canadians are facing similar situations. The good news is that you have legal options that can protect you from overwhelming debt.

At MORATAYA Corp, our Licensed Insolvency Trustees will review your situation, explain the difference between a Consumer Proposal, Division I Proposal, and Bankruptcy, and guide you toward the solution that best protects your future.

📞 Call us today at (416) 784-0904 or 1 (888) 880-0904 in Alberta, to book your free consultation.