Buying a Pre-Construction Condo: The Ultimate Checklist
Who wants to buy a resale condo, when you can get something completely brand-spanking new?
Instead of buying a condo that’s already been lived in, why not purchase one that can be customized to fit your sense of style? Pre-construction condos are a killer way to get a brand-new space for a decent price.
But, before you decide to purchase a pre-construction condo, learn about the benefits and drawbacks to buying a condo that isn’t built yet. The process of buying a pre-construction condo in Canada is a little different than buying a house, so you’ll want to know how that process will go down.
Why buy a pre-construction condo?
Buying a pre-construction condo comes with plenty of great benefits, including getting a lower price than resale condos, finding a building in the location of your choice, and getting the unit of your choice within the building.
You will also get to decide on your floor plan, choose any upgrades you want, and will enjoy better energy efficiency. New construction units will have a warranty plan in case anything goes wrong in the first 1-7 years.
You don’t have to stress about renovations for about ten years and you get a trendy, modern, and chic space for living and entertaining.
There are some drawbacks to buying pre-construction, which includes your deposit being tied up during the construction period. Also, typically you don’t get to physically see what you’re buying until it is finished and the unit might not get completed on time.
Keep this in mind while choosing a condo
If you are shopping around for a pre-construction condo, you’ll want to keep a couple things in mind. Remember that the sales office of the new condo doesn’t work for you...so be sure to ask good questions in order to get the best deal and a condo that’s right for you.
While shopping around, check out what the city plans to do with the surrounding area in the next 10 years. Find out how close the new building is to local transit and also what the building plans to do for parking.
See if you are getting a good deal with the price per square foot, the market value, and comparables in the building and on the same street.
Ask about how the building will appreciate, find out what floor plans are available, and try to get in early to get the best price and the best location within the building. Finally, ask about all the different features and finishes in the condo and the included amenities.
What’s your time frame?
If you’re looking for a place you can move in to by the first of the month, I’ll let you in on a little secret-- a pre-construction condo ain’t for you.
Buying a condo that hasn’t been built or completed yet certainly has its perks, but make sure the build time suits your needs.
If you will need to move in right away or are in a bind to find a new place, a pre-construction condo probably won’t be the best decision for you. That said, many developers have what's called "move-in" ready condos, so be sure to ask.
Even if you do have some time left on your current lease, make sure that potential construction delays won’t set you back or leave you homeless.
Costs for buying a pre-construction condo
It’s time to raise your hands like the cheering emoji because buying a pre-construction condo can sometimes actually be cheaper than buying resale!
Keep in mind, though, that you will need to pay certain builder closing costs and also that your deposit amount will be higher than that of a resale condo.
You will need to be prepared to put down around 20% of the purchase price of the condo and you will usually put it down in increments, that are sometimes timed with the phases of construction.
Utilize your cooling off period
If you decide to purchase a pre-construction condo, you will have ten days to reconsider your decision. If you decide to withdraw, you’ll receive your deposit back with no penalties.
Just be smart about this time frame by getting a real estate lawyer to review your contract and reveal anything confusing or questionable.
Choosing the layout you want
One of the best perks of buying a pre-construction condo is the freedom to choose exactly what you want in terms of location within the building, square footage, floor plan, and interior design choices. You can select the types of flooring, countertops, cabinets, and more.
Prepare for delays and changes
Isn’t there some saying about how the only constant in life is change? How ironic…
One of the toughest things about purchasing a condo that hasn’t been built yet is potential delays. The construction of your unit or building can be delayed for many different reasons, including the weather, city codes, safety hazards, and more.
Make sure to do your research on your developer and ask the question: have you ever experienced delays?
Also, keep in mind that some buildings might not even get finished at all if the project doesn’t have enough money to go forward. Check out your builder agreement to see if there are any builder penalties for not finishing on time.
Condo fees will rise
Condo fees, which pay for snow removal, grass cutting, and general maintenance of the building, will initially be very low. But--be prepared.
This number will rise like your stress levels if you aren’t prepared for it.
These costs tend to rise in the first few years at a new unit as the organizers learn how much it costs to keep a building like yours up and running. The fees can rise as much as 10% per year; depending on what expenses there are from the previous year.
You can also apply to be on the Condo Association and to take part in the decisions that will affect your way of life as a condo resident.
Prepare to pay closing costs
Finally, when your unit is completed, you may be able to move in and pay for occupancy before the rest of the building is completed. This is generally affordable, but remember that you are not yet the owner of the unit.
Once the building is fully completed and registered, you can go to closing, where you read all the tiny print and sign your name 100 times. You’ll think your hand is going to fall off!
At closing, be prepared for additional fees, including a New Home Warranty plan enrollment fee, utility hook-up fees, occupancy fees, lawyer fees, and development and educational levies if applicable.
When you choose a pre-construction condo, you get to decide on the layout and design options for the condo, thus meeting your own needs first. However, since you will be the first owner and occupant, you will have to pay certain closing costs that you wouldn’t have to pay with a resale condo.
Buying a pre-construction condo can be a fantastic option as long as you decide it’s the right path for you to take.