Effie | Pre- Construction Condos
Effie also represents buyers with pre-construction condominium purchases.
One major advantage of working with a realtor is that a limited number of agents have access to the builder’s VIP or Platinum pricing, depending on the development. Buyers benefits from better pricing and choice of suites before they become available to the general public.
A pre-construction condo purchase is potentially a good opportunity to own a unit for better value than resale. However, there are a number of points buyers should be aware of:
When registering with a developer
It is important to ensure the developer knows upfront that you are working with a realtor and identify the realtor. Failure to do so may result in missing better pricing available to realtors’ clients, selection of better units and priority. The sales representatives at the Presentation Centre work for the developer and not for the buyer. Having your own agent representing you in the purchase provides you a certain amount of protection and guidance, at no extra cost to you.
Deposit Payments
Deposits are much higher than in the case of re-sale units. Often it can be 25% of the purchase price. A deposit schedule will be provided by the developer. It’s usually a number of payments at 5% each, due at various phases of construction.
10 Day Cooling Off Period
In Ontario, buyers of new condominiums have ten calendar days to reconsider their purchase. This begins after receipt of the signed purchase agreement or disclosure statement. If the buyer changes their mind during this time, they are free to cancel the purchase and get a full refund of the deposit. Otherwise this time should be used to arrange for mortgage and retain a lawyer for document review.
Delays
Builders will provide an expected completion date, however they have the right to delay for a number of reasons. Delays could be from a few months to perhaps one to two years.
Interim Occupancy
When the condo is completed and ready to move into, there is a period of interim occupancy. The Buyer can take possession of the unit and move in, however the buyer does not own the condo at this point. The buyer must pay the builder a specified amount monthly. This cost is approximately the expected mortgage amount, plus condo fees, plus taxes. This will continue until the building is registered with the local municipality. Payments made during this time cannot be applied toward mortgage.
Condo Maintenance Fees
The condo maintenance fees quoted at the time of purchase are usually set low, compared to actual fees after the first year or two of ownership. This is due to the fact that developers may not know the expense of running the property, as sales occurred years in advance. Buyers should be prepared for an increase in fees.
Closing Costs
Buyer can close on the unit after it is officially registered with the City. A number of closing costs are expected at this time. Re-sale condos are not subject to these costs. These include developer’s levy, that should be capped, HST, education costs.
Reserve Funds
Pre-construction condos at closing require the buyer to contribute two months condo fees to the reserve fund.
HST
Pre-construction condos are subject to HST. If you choose to live in the unit, you should be eligible for a HST rebate. Your lawyer should be able to advise you on your qualification for this rebate.