If you're looking to buy a pre-construction condo in the GTA, it's important to do your research and be prepared for a potentially complex process. Here's a step-by-step guide to help you navigate the process:
Work with a pre-construction broker: It's recommended to work with a realtor who specializes in pre-construction condos, as they can negotiate beneficial terms for you.
How Pre-Construction Condos Are Sold: The suites are released in two phases - General Broker Release and Public Release, with the lowest launch prices available in the former.
Your Deposit/ Down Payment: You will need up to 20% (or more depending on the development/builder) of the purchase price, spread out incrementally over time.
ex. Requires 5% at signing, 5% 6 months in, 5-10% 1 Year in, and 5-10% at time of closing (or some structure resembling this)
Research: Research the developer's reputation, location, pricing, and other factors that can affect the value of the condo in the future.
Review the Agreement of Purchase and Sale: Ensure that the agreement includes all critical elements, such as deposit structure, unit price, closing costs, and other fees.
Land Transfer HST: HST is actually built right into the builders price. So the builder does the market research on what prices should be and right off the top buries HST 13% into the purchase/ advertised price. If it is not for personal use as a principal residence at closing the buyer will face paying the HST credit they would have received if it was principal residence ($25,000 approx).
Closing Day: On this day, the property officially becomes yours, and you will need to provide the balance of the purchase price.
Additional Factors to Consider: These include interim occupancy timelines, rental allowance, Tarion warranties, development fees, land transfer HST, closing date, deposit structure, assignment allowance, and the sales procedure.
Benefits of Working with a Realtor: They can provide invaluable guidance, support, and advocacy throughout the purchasing process, ensuring that your best interests are taken care of. Inspection: Have a home inspection done after approximately six months of owning the property to take care of any covered items under the Tarion warranty.
When choosing a realtor to work with, it can be helpful to look for someone who has experience specifically with pre-construction properties. This can help ensure that they are familiar with the unique considerations and potential pitfalls of buying a property that is not yet built.
When reviewing the Agreement of Purchase and Sale for a pre-construction property, it's important to pay attention to details such as the deposit structure, potential fees or charges, and any restrictions on making changes to the unit or choosing finishes during the pre-construction phase.
Buyers should also be aware of the risks involved in buying pre-construction, such as the possibility of delays or changes to the development plans. While a reputable developer will typically work to minimize these risks, it's important to be prepared for the possibility that things may not go exactly as planned. It's also worth noting that pre-construction properties can be a good option for investors, as they offer the potential for appreciation in value over time. However, it's important to carefully consider factors such as location and the overall demand for the property before making an investment.
Finally, buyers should have realistic expectations about the timeline for a pre-construction property. While some properties may be completed relatively quickly, others can take several years to be built and occupied. Buyers should be prepared for a potentially lengthy interim occupancy period, during which they will need to pay monthly fees to the developer before the property is officially transferred to their ownership. Make sure to ask if you can rent the unit out during interim occupancy.
Do you need a Realtor when buying pre-construction?
The answer is absolutely YES!
Firstly, if you're interested in the initial launch of new construction, having a realtor who has access to the sales division within their team that focuses on pre-construction opportunities is crucial.
Secondly, having a realtor represent your pre-con purchase at any time can add beneficial terms to the agreement. Not every Realtor has experience in pre-con so make sure to ask that they do. Most people dont realize that as a Realtor we can help you through this process.
Considerations for buying a new build (freehold or condo):
- There is no recision/ cooling off period anymore on new builds unless it is a condo (i.e. has a common element fee)
- Is there a Tarion warranty on the home?
- Capped development fees? $5k-10k (hydro hookup ect.)
- What is included in the purchase price? Finishings. Appliances. Window coverings. decor credit?
- Be careful to understand builder inclusions/ upgrades.
- Upgrades and finishes: Consider any upgrades or finishes you may want in your new home and the costs associated with them. Upgrade costs. (very rare to find a builder that will have the trendy selections without heavily inflated upgrade costs
- See if these are negotiable. - Is there room to negotiate? If so, its best to build in extras you would like into the price. They dont cost builders much and they like to keep up the sale prices. Also at design centers you cannot build these amounts charged into the mortgage as they are billed separately
- Land Transfer
- HST - HST is actually built right into the builders price. So the builder does the market research on what prices should be and right off the top buries HST 13% into the purchase/ advertised price. If it is not for personal use as a principal residence at closing the buyer will face paying the HST credit they would have received if it was principal residence (+$24,000 approx) or a long term rental.
- Closing date - does the builder have a record of delays?
- Builder reputation - Research the builder's reputation, including their history of building quality homes and addressing any issues that may arise.
- Taxes on close. How will you designate the property?
- Deposit structure.
- Premium: Assignment allowance usually around $5-15K - this will alleviate all the costs of closing if it is a quick flip. Will the builder put it in the agreement now and then if the assignment is executed, they would charge then?
- Are the views and land surrounding the property protected? I.e. if its on a ravine, is that ravine protected by conservation authorities ect?
- Are you in early enough to take advantage of builder incentives?
- Are you in early enough to take advantage of release pricing?
- Will the builder allow an assignment clause during contract negotiations, or after? Get them to commit to their price now.
- If you are going to sell or lease the unit what are the rules built into the contract about that?
- What is the sales procedure?
- If I obtain an appointment can I book more than 1 unit?
- Does the person who booked the appointment / submitted the worksheet have to be the same person on the agreement?
- Can I purchase under a numbered company?
- Views
- Floorplan functionailty
Considerations for buying a new build (condo):
- Interim occupancy timeline? essentially renting from the builder 4-12 months - pays rent to builder until condo corp is registered with city. Will the builder allow rentals during this period?
- Parking and locker extra cost/ discount? (pick close to elevators - if condo)
- Views
- Floorplan functionality
Check and double check.
For a condo, check with your lawyer on your rights/ ability to delay the closing date if the registration has not been completed by the occupancy date (i.e. interim occupancy)
Make sure to understand your rights as far as delays go.
***When you buy a new build its a good idea to have a home inspection done, do it at approx 6 months into owning the home so that you can make the arrangement with the builder to take care of all the items as they would be covered under the Tarion warranty.