Buying pre-construction has many advantages. You are the first owner of the property, pre-construction condos are cheaper due to the risk of project setbacks, and you have more time to save up for your condo.
However, purchasing a pre-construction condo also has its downsides. Having someone to guide you through all the sales pitches and hype surrounding the new development is important. A local realtor will not only have your interest at heart, they will also bring you back to reality and ensure the home really does fit your needs.
Here are 6 things to keep an eye on before purchasing a pre-sale condo:
At the time of closing, you have to pay a number of fees to the builder that can be mystifying. Your realtor can explain the changing reality of your monthly condo fees. The builder generally underestimates these fees for a variety of reasons, and you should be aware that the fees that may be quoted can escalate and sometimes very dramatically in the first few years.
Unlike a resale, a pre-construction sale is subject to GST. Your realtor can explain how the GST will affect your closing costs and can help determine whether you are eligible for any GST rebates on your purchase.
In the Dark
You are buying based only on a floor plan without seeing the finishes, the layout or outside view of the building. Your realtor understands how to read the building plans. It‘s important to know where the elevators and stairwells are, as well as your underground parking space, storage locker, and additional amenities.
You are allowed to occupy your unit when it’s ready, but other parts of the building may still be under construction. Until the building is completed and officially registered as a condominium corporation, you pay the builder phantom rent — you can’t start paying mortgage payments at this stage because you don’t officially own the unit.
Cooling Off Period
If you’re buying a condo, after you receive both the Agreement of Purchase and Sale signed by both you and the Developer and the Disclosure Statement, you have the right to change your mind within a certain time period. Your realtor can guide you through the important steps during the time of the Cooling Off Period.
No Guarantee of a Mortgage
Your best bet is to talk to a Mortgage Broker before buying a pre-sale condo to increase the chances of you getting a mortgage on that property. Most lenders can guarantee a mortgage rate and qualification by up to 120 days. Mortgage qualification criteria is always changing therefore it is difficult to determine if you will qualify for the mortgage if completion takes place 2 to 3 years from when the purchase is firmed.