Condominiums

Buying a condominium before it is built is a lot different than buying a resale condominium. It is important to have a good understanding of these differences, so you can make the best-informed decision as to whether it is the best option for you.

The Down Payment and Schedule

While you may be able to put as little as a 5% down payment on a resale property, pre-construction developments usually expect you to pay around 20%. You are not expected to pay the whole 20% right away. This down payment is broken down into 3 or 4 scheduled payments. The way these payments are structured varies from builder to builder but usually look something like this: you pay 5% upon signing the agreement, 5% due 120 days after signing, 5% due 270 days after signing, and the other 5% due 365 days after signing to equal 20%.

 

Cooling Off Period

In Ontario, you get 10 calendar days from the day you sign the agreement where you can back out of the agreement anytime with no reason. It is a good idea to get a pre-approved mortgage before or during this timeframe. You would bring the agreement of purchase and sale to your lawyer during this time as well, so they can review it.

 

Levies

Make sure to get a cap on levies. Local governments charge the developer educational and development levies for the infrastructure needed to service the building such as schools, water, parks etc. The builder can then pass these charges onto you, the buyer. You will want to make sure to work with your realtor to negotiate a cap on these levies to limit the amount you will need to pay.

 

Closing Costs

With pre-construction condos there are other closing costs in addition to the closing costs associated with resale condos. These include: the Ontario new home warranty plan, development and educational levies, common expense contribution, utility hook-up fees, occupancy fees (to learn more click here), assignment fees (if you are planning on selling before final closing), and more. These usually amount to 2-2.2% of the purchase price in addition to the other closing costs you would normally know about (for more information on closing costs click here).

 

 

Interim Occupancy Fees

When the building is close to completion and “liveable”, there is a period called the “interim occupancy”. The buyer can move into the unit, but no transfer of land has occurred. Buyers are expected to pay an amount that roughly equals the interest portion of the mortgage payment, maintenance fees and property taxes. The average timeframe is 3-6 months. For more information on this click here.

 

HST

With most builders, the HST will be included in the purchase price if you are planning on moving into the condo yourself. If you are an investor and plan on renting the unit out, you will be expected to pay the HST separately. It will then be up to you to apply for an HST rebate to get the money back afterwards.

 

Change Is Inevitable

It is important to keep in mind that many things change in the process when it comes to pre-construction condos.  For example, the floor plans can change a bit, the maintenance fees you see when the building is advertised is an estimate (they could be much less than the actual amount you will be paying), and property taxes take a while to be assessed, you may not get a bill until 1-2 years after you moved in. Also remember that condos are rarely completed by the projected completion date.

 

Conclusion

Every developer works differently, which is why working with your own real estate agent, as opposed to the sales representative at the sales office will help you tremendously. Remember that the sales representative in the sales office is representing the builder’s best interests. Bring your own real estate agent with you so you have a professional there representing your best interests. Make sure you are working with a real estate agent and lawyer who have a good understanding of pre-construction condominiums, as the process entails many details not necessary in resale properties.

 

For more information contact me anytime.