The real estate industry in Canada is growing at a rapid rate. Prices of real estate properties have increased significantly over the last couple of years. Home owners are charging a premium price in terms of rent because there is still a shortage of living spaces in Canada. This trend will continue in the foreseeable future.
If you are planning to invest your money in real estate in Canada, there are multiple options you can choose from. You can either opt for a ready-made property or choose a pre construction option. Moreover, you can either purchase a condo, home or an apartment. If you are planning to purchase a pre construction condo in Toronto, then this article is for you.
In this article, you will learn about things that every pre construction condo buyer must be aware of before making the purchase.
Deposit
Buyers of resale condos in Toronto usually provide a 5% deposit on contract signing but builders asks for twice or thrice as much. They require more money to fund the construction work. Although, you will have to pay the full amount in different installments but you have to be wary of that before buying a pre construction condo in Toronto. Usually, you have to deposit 5% after every few months. In some cases, deposits are linked to different construction phases. In short, you should be prepared to pay the builder 10-20% deposit.
Long Waiting Times
As a buyer of pre construction condo, you might be tempted to know the expected completion date. Unfortunately, very few if any builder will give you a fixed date for the completion of the project. The longer your pre construction condo takes to build the higher will be the cost. Read the agreement carefully for Etobicoke condos for sale as it mentions all the reasons for delay and builder penalties. Expect a delay of 6 months to as long as two years.
Lower Condo Fees For New Buildings
When you are planning to purchase a pre construction condo in Toronto, expect a very low condo fees because your condo will take years before it can be fully constructed. This makes it very difficult to estimate the actual cost of running building operations. As a new building is fully constructed, condo fees will grow exponentially over first couple of years, usually about 10-20%.
Change Is The Only Constant
Builders enjoys the liberty to make changes to units and buildings even after they have pre sold them so as a pre construction condo buyer, you should be aware of that. It is quite common to see builders add and remove floors, change the property layout and more. Pre construction buyers feel safe thinking that builders can not make “material changes” but you will be surprised to know what really comes under material changes and what does not. Make sure you know what material changes really are to avoid unpleasant surprises later on.
Condo Registration
To register your condo, your condo will first have to go through all types of city inspection and legal processes. During this process, condo ownership is transferred to the condo buyers and mortgages come into effect. This condo registration process could last from anywhere from three months to a year or even longer in some cases which might be a bit painful for pre construction condo buyers.
Closing Costs
When your condo is registered, it is time to close the deal. You will have to pay for all the closing costs. It could anything from HST, appliance and utility connections fees, development costs and builder adjustment charges, which applies to all newly constructed condos and other real estate properties. If you are interested in taking over someone else contract through condo assignment, make sure to inquire the seller about these costs when they have negotiated about the unit in the first place. Put a lot of money aside to cover up for the closing costs as these expenses can increase significantly.
Interim Occupancy Period
When your condo is ready and you are planning to move into your condo, there is a interim occupancy period before buyers move into the condo. Buyers are still not the legal owner of condo but will have to pay an amount to builders, which includes everything from mortgage, condo fees and taxes.
HST
Unlike condos in Toronto for sale, HST applies on pre construction or newly built condos. If you are living in a condo yourself or have rented it to someone else for an year, HST might vary. In both cases, you might have to pay thousands of dollars upon closing the deal in terms of HST. It is highly recommended that you seek legal advice as some HST rules might seem a bit confusing.
Condo Reserve Fund
Buyer of pre-construction condos will have to create a new fund called “Condo Reserve Fund” and put 2 months condo fees in that fund. It is just like an emergency fund. People who are interested in purchasing pre construction condo will have to deposit the few months condo fees in this fund when closing the deal.
Cooling Off Period
Depending on the city you want to purchase your property in, you will have to see off the cooling off period, which might vary from city to city. Usually the cooling off period lasts for 10 days which allows buyers to time to reconsider their decision. Buyers can change their mind and back out from the deal during this 10-day cooling off period and get their deposit back. After that, no back out requests will be entertained and you will be left with what you have.Condo buyers should use this time to get their agreement reviewed by lawyers and make arrangements for getting pre financing approval.
What is the most important thing that pre construction condo buyers should consider in your opinion? Feel free to share your opinion with us in the comments section below.