Monday, May 10, 2010

Hints & Tips: Buying A Unit In A Pre-Construction Condo Project

With such high demand for pre-construction condo projects, the LiveHigh Team recently interviewed some buyers who have purchased units in pre-construction condo projects - both for principal residence and investment - to gain some insight into their experiences.

Benefits buyers sought from a pre-construction project:
  • Appeal of moving into a brand new, never-been-lived-in home 
  • For investors, renters’ preference to move into brand new unit 
  • Coverage of major deficiencies under the Tarion 1-year warranty 
  • Longer length of time allowed for saving of down payment 
  • Potential for suite customization 
  • Potential for capital appreciation
Of the buyers interviewed, all agreed that overall, their pre-construction purchase was a pleasant or well-managed experience, though they provided some tips that other buyers may find helpful:

Making Your Selection
  • Where possible, perform a physical check of the building and suite’s expected location to get a better idea of the neighbourhood and the anticipated view from the unit. You don’t want to be surprised by a brick wall or alleyway on closing!
  • When deciding on your unit’s floor location, keep in mind that premiums for higher floors are sometimes offset by "phantom rent" as purchasers of lower units typically have earlier occupancy dates and move in earlier than higher units.
  • Review the property’s estimated maintenance fees. Take note of any additional monthly fees for parking spots and lockers where applicable, and find out how long the maintenance fee will be guaranteed for (at minimum, one year).
  • Carefully examine your floorplan and suite features to understand what’s included with your purchase and any available upgrades. Be sure that all features and finishes are clearly outlined in your purchase agreement, including brand names and/or model numbers of appliances where applicable. The buyers we’d interviewed shared the following experiences:
  1. One buyer was surprised to find that installing a bathroom door was an optional upgrade; a careful review of the layout drawing should have revealed this;
  2. One purchaser was sold on KitchenAid appliances but received Frigidaire;
  3. Another buyer was sold on an 'upgrades included' promotion and thus had the builder include unlimited potlights in the agreement.
  • Be sure to also review the layout or plan of the floor your unit will be situated on. Take note of special items such as garbage chutes, elevators, stairwells, storage lockers and amenities where applicable. You’ll want to know their proximity to your unit so that you have a thorough understanding of what you’re buying into.
  • If you’ll be purchasing a pre-construction condo and would like to get in early for a better selection, contact your realtor or register on builder's websites as early as possible. Those registered through a realtor or through the builder's website will typically be contacted for previews before the project opens to the public. 

The Agreement
  • Have your lawyer review the agreement during your 10-day cooling period to ensure that it’s legally sound. Some items to be aware of include the Educational/Development fees or levies, which should be capped in order to avoid a very expensive surprise on closing.
  • As mentioned previously, be sure that all features and finishes are specifically outlined in your purchase agreement. Remember, without written documentation, you won’t have much power if the unit doesn’t turn out as you’d expected.
  • If this is or could potentially be an investment, confirm whether you’ll be able to rent the unit out during occupancy, and whether you can sell the unit on an assignment basis. Be sure that this is outlined clearly in your agreement, or have it amended accordingly.
  • Note that some projects require mortgage pre-approvals at the time of signing the Purchase and Sale Agreement.

Click here to access and register for a list of condo projects that are coming soon.