Everything You Need to Know About Buying Pre-Construction Condos
Moving into a new home is one of the most rewarding experiences you can have as an adult. In fact, many people see this as a great opportunity to finally feel independent and design something that will be their own.
In general, out of the few housing options available, almost all first-time Torontonians choose to buy a pre-construction condo as their new living abode. This is because they are less expensive than resale and allow residents to choose the upgrades and finishes based on their preferences and needs.
In addition to the benefits of buying pre construction condos, there are a few things that must be taken into consideration before making any investment. From choosing a solid developer to making a deposit, the process of buying a Torontonian condo can be quite stressful if people are unaware of the steps they need to take.
To make things easier for you, here is a brief guide that explains everything you need to know about purchasing your new Torontonian home.
Making the right investment
Since you will be investing a significant amount of money in this new property, it is important that you don’t take it lightly. This simply means doing thorough research on the construction company in order to know who you are doing business with.
For example, you should look for past projects the builder has done to find out the basic information associated with the overall construction. Some of these include learning how long a particular construction took or what materials were used. You can even book showings through the condos to see the amenities and finishes and even talk with past owners to learn about their experiences.
Doing such research will give you more insight into why that particular builder is the best investment or not.
The deposit amount
In general, pre-construction deposits are meant to be higher at the beginning of the project because banks are usually financing the building and have this set out as a requirement.
So, as opposed to the resale condos in Toronto which provide a deposit of 5% upon signing of the agreement, the deposit for a pre-construction condo can go up to 20%. This amount does seem high, but the full payment is actually broken up into smaller installments which can be staggered over time.
For example, 5% of the deposit will be paid at signing, the next one within 30-90 days or a year or on occupancy. Although every project is different and builders may have their own incentives, this payment schedule is the most common.
The cooling-off period
Once you have put down a deposit on your pre-construction condo, you will be given a short period of time to reconsider your decision. This is referred to as the cooling-off period which gives you the legal right to step down from your purchase and have your deposit returned without deduction.
This period can last up to 10 calendar days from the date of signing during which it is advised that you have a lawyer review your Agreement of Purchase and Sale with the builder so you will be aware of the closing costs and other important aspects.
In the meantime, you can look at other pre-construction condos and compare prices and incentives to make sure you are making the right decision.
The two closing dates
One of the most unique things about pre-construction condos is that they have two closing dates. The first one is the interim occupancy period which refers to the date the condo is ready for occupancy, and the second one is the date the title is transferred.
During the interim occupancy period, you are required to pay the builder a monthly fee which lasts until you completely move into your new place. In general, it covers the interest on your purchase price balance, estimated condo fees and property tax.
Although you will be able to move in, it is important to note that not all common elements such as some amenities, the hallways or elevators will be fully completed at this stage.
Assignment of a condo
Another useful piece of information about buying pre-construction condos in Toronto is that you can assign your unit to a new buyer. This usually happens at some point throughout the construction period during which you have decided that you no longer want to make your purchase or you want to flip it to make a profit.
In order to avoid any potential issues, it is advised that you include this clause in your contract beforehand. This will give you the legal right to cancel the sale and assign the condo to a willing buyer before the closing period. In such a case, the builders must allow, approve and sign off on this agreement closer to the occupancy date in order for it to go through.
Potential pre-construction risks
Despite the benefits of purchasing a pre-construction condo, there are some potential risks that every Torontonian buyer must be aware of.
For example, one of the biggest downsides is whether the construction of the building will be completed on time. Although builders provide an expected completion date, they still have the right to delay the construction for many reasons and for a longer period. Such information is usually outlined in the agreement, so it shouldn’t come as a surprise to buyers as much.
Another potential risk is that the development could be canceled either at the start of or throughout the construction. In such cases, the deposits, as well as the calculated interest, may be returned to the buyer under the Condominium Act.
Although the process of buying your own place is one of the most exciting experiences as an adult, it can still be costly and stressful if it isn’t completely thought through. This is especially important to know if you are thinking of purchasing a condo from the pre-construction market. You must be well acquainted with all the steps and information in order to make the right investment.
In case you need help, you can refer to this post to guide you through the process and help you land the home of your dreams in the beautiful city of Toronto.