Pre-construction Condos Buying Guide
When you read or hear the term ‘pre-construction condos’, where do your thoughts go first? Are you eager to learn more about the pending beginning as to when construction will commence and when the condominium suites and units will be up for sale?
Buying Pre-construction Condos
Most buyers/investors tend to look at purchasing/investing in a condominium that has already been built and usually for quite some time. However, you do get a special echelon of investors that get in early on by investing in a pre-construction condominium. Doing this gives them the ability to have a greater level of customization dictation over the unit, as well as being able to move in themselves if they so desired at the time of the unit’s completion. However, if you’re looking to join this group of few as an investor yourself, there are several things that you need to know before doing this.
The Protection Offered by Fees For Pre-construction Condos
The purchase price of a pre-construction condo already includes the buyers’ agent’s fees, thus making the purchase of such a unit beneficial. However, when approaching the builder of this condo, you must have a real estate agent at your side and promptly introduce them as your representative. Failing to do so prevents you from being able to be represented by this agent, which would spell disaster.
Beware the Sales Representative
If you want to know right off the bat someone whose loyalties do NOT lie with you, it is the builder’s sales representative. They are acting entirely in the interests of the builder, and thus, your real estate agent will be able to step forward and prevent the sales representative from giving you any sort of hard time during the process of your purchase.
Deposits For Pre-construction
Unfortunately, your deposit that you will put down on this pre-construction condo unit will ultimately end up higher than a resale condo unit, and can go upwards of 25% the full purchase price of the condo unit. The payments of this percentage usually come in intervals, be it on a timed basis or a basis of the phases of construction of the condominium.
The “Cooling Off Period
It seems like an odd name, but this term is used to refer to the ten days (by calendar reckoning) in the province of Ontario after acquiring the purchase agreement, in which you can either change your mind about the purchase altogether or continue forward. During these ten days, it’s highly recommended that you obtain a legal representative and be sure to have your mortgage financing arranged properly.
The Importance of the Disclosure Statement
In any respect whatsoever, the developer of the pre-construction condo building MUST provide you with a document detailing the start and completion dates of the condo’s construction, the condo fees, the condo bylaws, various rules and restrictions, the total number of units within the condo building, and a description of the property. This document is known as the “disclosure statement”, and it is absolutely vital that you have it with you through the entire purchase process, as in some ways, it’s a lot like a “receipt” for your purchase.
Inspection Of The Condo Is The Must
It’d be very unwise to bypass a home inspection for your brand-new condominium unit when it’s finished, as it’s erring on the side of safety despite the condo and all of its units being covered under the Ontario New Home Warranties Plan Act.
Day of Construction Delays
It is actually best to anticipate the condominium NOT being completed by its finish date. The reason for this is that a great deal of unexpected issues may arise during construction, and thus the completion of the construction can be rather delayed. Make plans for what you can do in the meantime while you’re awaiting the completion of your unit.
Caveat Emptor?
It’s not exactly “buyer BEWARE”, but more “buyer BE AWARE”, for the information laid out in your disclosure statement may actually be subject to change for a wide variety of reasons. The number of units within the condo, the final height of the building itself, or even certain amenities within the units and building itself may all potentially change before the building’s construction is finalized.
The Occupancy Fee
Naturally, there is an interval between the completion of a condominium unit and when the buyer/investor can move into it…thus, in that interim, a fee is imposed upon you by the builder. This fee is decided based on the cost of your mortgage in addition to pre-construction home fees and taxes. A real estate broker can help you navigate this otherwise annoying surcharge and make sure you’re getting fair treatment all across the board.
Maintenance Fees for the Condo
When a board is elected for the condominium you are investing in, and the building itself is properly registered, the condo maintenance fees that you were originally told the price of will most likely increase. This amount can increase as much as 10-15% at that time and tends to happen at roughly the second or the third fiscal year of your ownership. The reason for this increase is that the board of directors begin a reserve fund study, and are able to ascertain the true costs of maintaining the condominium and thus adjust the condo maintenance fees accordingly.
The Costs of Closing the Deal On Pre-construction Condos
When you are finalizing the purchase of the pre-construction condo unit, you will be paying out additional costs in the form of HST on any appliances within the unit, as well as utility installation fees, development fees, and builder adjustments. If you set aside for your budget an additional 3-5% of the full purchase price of the condo unit, then you should be able to cover all of these closing costs.
The Reserve Funds
When the closing of the sale happens, you will need to front an additional 2 months’ worth of condo maintenance fees that go into a pot of “reserve funds” for the board of directors to use in the event of the condo building having an emergency of any sort.
Sales Taxes and the HST Rebate
The concept of whether or not you are going to be the actual occupant of the pre-construction condo unit you are purchasing is actually very important. If you ARE going to be the occupant, you may be eligible for a rebate on your HST payment towards the unit. In order to ascertain whether you qualify for that or not as the occupant, you can ask the legal representative you will have chosen for these matters.
The Long and Short of It
Essentially, when making the investment into a pre-construction condominium unit, there are many benefits to doing so, but there are (as you can see) a great deal of steps that need to be taken in order to do such a thing. But when you do, whether you’re the occupant or not, you will be able to be the proud owner of a brand-new condominium unit; never lived in, you will be the first, and thus you can truly make it your own! Contact our team for more information on pre-construction condos.
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