For many prospective homebuyers, there are perks to purchasing a pre-construction condo. Whether buyers are seeking something brand new or need more time to save money for a stand-alone home, pre-construction condos can offer some advantages. For one, condos traditionally provide a type of maintenance-free lifestyle that homeownership does not. Buying brand-new has even more advantages; namely, the power to customize the condo with the amenities and finishes you prefer.
In Toronto, the rising costs of existing or resale condos created a surge in the number of pre-construction condos sold in 2017-18, with almost 60,000 deals, according to Shaun Hildebrand, president of Urbanation Inc.
While the advantages of living in a brand new condo can be enticing, real estate experts advise: there are many important factors to consider before investing your money in a pre-construction condo.
Let’s explore further.
In a pre-construction transaction, you’re essentially buying a future property at today’s market prices.
These condos tend to be lower-priced because the developer is still working to raise as much money as possible before breaking ground. As mentioned previously, buyers may also have a say in the design of the floor-plan and amenities of the home, which they can’t get with a finished property. Another perk: if a buyer decides to invest during the pre-construction phase, the value of the condo may go up significantly during the time it takes to build the unit and could even fall!. In addition make sure you understand all the hidden costs – pre-closing occupancy rent; delays in construction etc.
Larry Weltman, Toronto customer representative at AccessEasyFunds, a commission advance company, advises buyers to take their time before rushing into a decision.
“Investing in a pre-construction property can be risky, but the rewards can outweigh the risks if you do a little bit of research first,” explains Larry Weltman.
Since most of the risk lies in the fact that you are purchasing something that hasn’t been built yet, buyers can start the process by researching a reputable builder.
President of Realosophy Realty in Toronto, John Pasalis, suggests asking questions such as: “Were past projects completed on time and if not, how delayed were they? Did the developer raise maintenance fees after the condo was built?”
“Some investors have found themselves buying pre-construction units and then several years later, the builder just cancels the project,” Pasalis told CTVNews.ca.
Prospective buyers should always ask how the company will construct the building and unit, including the materials they’re using. As an early investor, you will likely get first pick of the premium units with the best amenities or views. Those extras also help increase the value of your property if you plan on selling down the road.
Keep in mind, like with any new construction, there may be delays. Any number of things can occur during the building phase that can push the closing date out. If you buy a pre-construction condo, be sure to plan accordingly in case the development isn’t completed by the date you had agreed upon.
It is also important to hire the help of a professional, someone like a lawyer, to look over your contract with the developer. Real estate lawyers are likely to already know all the best developers, their reputation, and they can negotiate for you.
Lawyer Lisa Laredo tells her clients that the most reputable builders have been around the longest and tend to get the job done as quickly as possible without sacrificing craftsmanship.
“Who are you buying it from and what is their track record?” says the real estate, wills and estate lawyer.
She advises her buyers to hire a lawyer so that they can look over the sale agreement to avoid some other risks of preconstruction condos. She also says the developer should be accommodating, taking care to address any questions and concerns the investor may have. Also, look into finding others who have purchased with the same builder, and who have already moved into their condos. Their advice will be invaluable.
The condo space can be an affordable path to homeownership. After you’ve made the decision to buy pre-construction, and as with any real estate transaction, be sure to hire a seasoned real estate agent who can guide you with the process so you know exactly what you’re getting into.