By Sheila O’Hearn, Zoocasa
Preconstruction condos are the wave of the present and future, eagerly sought after for their lower price tags, in comparison to the cost of detached homes, with fabulous condo and area amenities. Resales offer established neighbourhoods and a turn-key element that’s very appealing to those anxious to start enjoying their home immediately.
While new or “used”, condos and townhouses offer different purchasing experiences; there’s no right or wrong in your predilection for choosing one over the other. To be aware of the pros and cons for either purchase preference, however, will help potential buyers make the best informed choice they can and avoid unforeseen financial pitfalls.
The Peaks of Buying Preconstruction Units
Many condo builders will allow buyers to choose from a variety of materials to customize the look and feel of their future home, including countertops, flooring and exterior furnishes. Sometimes, wiggle room exists to change the design of your floor plan.
Lower utility bills are thrilling and, by investing in a preconstruction unit, you should expect modern, energy-saving appliances. In addition, you’ll spend less time and energy on renovating, because everything will be new and fresh.
Basically, new condos are less maintenance and repairs and upgrades should be a few years down the road, as long as the builder has done the initial job properly.
Sales incentives and fabulous amenities
Preconstruction suites nowadays often come with competitive sales incentives, lots of condo and area amenities, and, in some circumstances, can cost less than a resale condominium.
Dirt, dust, and noise
If you’re moving into a new multi-residential development, expect plenty of mess and noise from ongoing construction.
Here’s an Einstein thought experiment: Picture your ideal condo and, then, cut down the size of your unit considerably. Developers want to make money, so if they can make double the profit by cutting condo unit sizes, they will and they are.
Potentially dashed expectations
The floor plan of a preconstruction condo you see on paper can often turn out differently from the end result.
With condos under construction, completion can be delayed and your move-in date postponed indefinitely, sometimes by a year (or more), causing huge stress and expense for buyers.
Speaking of expense . . .
Besides occupancy fees, you’ll need to be prepared for a substantial outlay of closing costs, plus hefty one-time development charges that fund infrastructure. The city spreads this cost out by the proposed condo’s square footage, which means the developer pays by the unit, who, in turn, charges you. If the condo build is delayed, you can bet that the development charges will be much higher than anticipated (we’re talking a double-digit price tag). A most unpleasant surprise! That’s because the charges are payable at the time the building permit is issued, and not at the time of a condo’s project launch or presales event.
Before you sign your purchase agreement, you and your real estate lawyer should negotiate for “incentives” that include limiting how much you pay on closing, such as capping development charges. In fact, negotiating for low or zero-dollar caps requires you to approach the developer about buying a condo unit early, such as VIP sale, presale, and first block sales. If the developer refuses to agree to capping, you’re urged to run and seek elsewhere.
To avoid these unforeseen pitfalls, do retain the services of a condo-savvy real estate lawyer (even before the real-estate agent), as your best defence against making an ill-informed purchasing decision.
The Peaks of Buying Resale
It’s already built!
One of the most obvious pros is that the resale condo or townhouse is already in place, which means no precarious development charges that are associated with preconstruction builds.
Depending on how established the community is, you can see and get a feel for the local neighbourhood, including green spaces, you’re considering moving to − a decided advantage over the preconstruction condo and infrastructure still in its birth pangs.
No move-in delays
Moving in to your resale condo entails a sure date, ready or not. Once the offer has been accepted, the paperwork signed, and the move-in date established, get packing and hire that moving van for the big day!
Many first-time buyers are settling for micro-condos (less than 600 square feet), because they are more affordable. Even a new three-bedroom condo will entail some fancy footwork to make the most of the space.
One source notes that a builder’s three-bedroom micro-condo, selling over the half-million-dollar mark at its cheapest, can be as small as 742 square feet, as displayed by Toronto’s 93 Condo project. Developers, in fact, are reluctant to build three-bedroom units because of affordability deficits; in short, they can make more cash per square foot on smaller condos. Not much help to families!
Conversely, resale units built a decade or more ago often equate to more breathing space and, arguably, more storage space. Townhouses might have a modicum more yard, especially corner lots.
Some realty experts will caution (arguably) not to buy townhouses or condos that are more than five years old, as it takes that long for major construction defects to materialize. If you still wish to buy an older unit, retaining the services of a savvy real estate lawyer can help you investigate the condo before signing on the dotted line.
The Valleys of Resale
A resale condo is usually an as-is proposition, so don’t count on many, if any, customization options.
Buying a resale condo does not exclude you from hidden costs, such as long-term leases on building fixtures, which will be passed along to owners. Be aware, too, that some older condo constructions might not be up to code anymore and, often, repairs of some sort will be required of you when you take possession, or the cost of major repairs might be reflected in your condo fees, which for some unwary buyers, could mean financial doom.
These four handy tips will help protect you BEFORE you commit to a resale condo:
- First, retain a real estate lawyer before you choose a real estate agent. Make sure the lawyer carefully checks the title and reads the status certificate. Ask if they have ever recommended that a client walk away from a closing and ask for specific details.
- Next, select a home inspector who has specific condo/townhouse experience.
- Then look for a real estate agent. Let them know what you’re looking for and if you’re pre-approved for a mortgage.
- Before putting in an offer on a unit, ask for the sales history on the MLS on the number of units in that building that were put on the market, the asking prices and actual sale prices and how long they took to close. Discuss the implications of those findings exhaustively.
A Pragmatic Checklist for Potential Resale Condo Buyers
- Condo buying exacts patience, so before signing on the dotted line, find out what your monthly condo fees include and when they are likely to increase.
- Ask your lawyer or agent to verify that enough money has been placed in a condo’s reserve fund to cover the cost of major repairs and renewal projects.
- Find out whether any special condo assessments are anticipated, what they’re for, how much they might cost, and when they’ll need to be paid.
- Ask what municipal services the condominium receives, such as garbage pickup and snow removal.
- Confirm that no legal actions against the condominium corporation are in progress.
- Consult with your lawyer, before signing any documents.
Whether buying a resale or preconstruction unit, do your homework with the aid of a real estate lawyer! Happy hunting!
Zoocasa is a real estate brokerage based in Toronto.
Sheila O’Hearn is a freelance and creative writer, and has worn many hats throughout her career, from general staff reporter to magazine editor. She has a keen interest in business entrepreneurship and currently writes for several outlets. Visit her at LinkedIn for more info.
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Writer: Sheila O’Hearn
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