Buying Pre-Construction

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WHAT YOU NEED TO KNOW

Pre- construction sales have always been a core part of our business. We are well versed in both the Builder’s Agreements and the Condominium Act. First time buyers, savvy investors, and downsizers can all benefit from buying a pre-construction unit from a reliable builder. There are numerous complexities that come in to play, and an experienced agent can be an incredible help when it comes to deciding what and where to buy.

THINKING ABOUT BUYING PRE-CONSTRUCTION?
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THERE ARE 5 REASONS TO WORK WITH US IF YOU'RE THINKING ABOUT BUYING PRE-CONSTRUCTION.

No.1
We know developers. We’ve worked extensively with many of the top builder / developers in Toronto.
No.2
We know the condo act. We have first hand experience with what are extremely complex agreements, which can be quite overwhelming.
No.3
We have great relationships with lenders who will provide guidance and assistance through the borrowing process.
No.4
We know plans. We’ve studies thousands of them. Some work, some don’t. Rest assured, you will buy what works.
No.5
Upon completion, you may want to sell, lease, or live in the property. Whatever the decision, we are here to help.

Question & Answer

A.
There are so many factors that come in to play when we consider investing in pre construction condos: Firstly, what will the unit be used for when it is built? Will you live in it? Will you rent it? Will you flip it? Determining the purpose is the first step. If you are buying it to live in it, then consider what your needs will be by the time it’s built. You may want two bedrooms, a nice view, and a location close to where you work. If you are buying it to lease it out, you may want to consider a smaller unit, close to transportation with amenities that tenants look for. If you are flipping it, you have more options as larger units and upgraded finishes may be the way to go. A word of caution when considering flipping though: there are tax advantages to holding the unit (renting or living in it) for at least a year before reselling it. This is where a knowledgeable accountant can help before you buy.

A.
Typically, a deposit of 15 to 20 percent of the purchase price is required within the first 6 to 12 months after your purchase. This usually gets topped up on the “closing date” to 25 percent. Non-residents should note most builders will require 35 percent on closing. Builders need these deposits to finance the building; and their banks will want to see credit worthiness of all purchasers. Once the builder meets their sales target to get the building financed (typically 60 to 70 percent), and then deposit structures can usually be negotiated down. But keep this in mind: the sooner you get in the door to buy, the better the price. It’s a simple equation.

A.
All deposit monies are held in trust by the Builders lawyer. In Ontario, all Builders must register with Tarion: the new home builders warranty program. The first $20,000 of the deposit is covered by Tarion insurance. Should the builder require any of the funds, the law firm is required to put an insurance policy on the deposits. This is where dealing with a known builder with a good track record is important. Having the Agreement of Purchase and Sale reviewed by a lawyer who specializes in condos is equally important.

A.
All new condos are subject to the laws in the Condo Act. By law, anyone who purchases a new condo has a 10-day rescission period. The 10 days start after an executed copy of the Agreement of Purchase and Sale, along with the Condominium Documents are delivered to the buyer. This is the time when to have a lawyer review the paperwork. It’s also a time to get pre approved by a bank. If for any reason, a buyer decides not to go forward with the deal, as long as notice in writing is delivered to the a vendor within these ten days, all monies will be returned without deduction or penalty. If the 10 days go by and no notice is given, it’s a firm and binding agreement.

A.
Builders need a pre-approval from the bank. This is usually in the form of a letter, stating the unit number, the address of the project, and the amount needed to close on the unit (total purchase price minus deposits). It must be exactly that amount. Post dated cheques for the deposits are needed, the name of the lawyer to be used, and personal identification for Fintrac legislation. This is mandatory for all real estate transactions, it Canada’s anti-money laundering legislation.

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