Things to be Aware of Prior to Purchasing a Pre-Construction
If you are considering purchasing a pre-construction home it is important that you do your homework and make sure you know exactly what you’re getting into before taking the plunge. From the developer’s history to locking in mortgage rates, here are some of my top things you need to know before buying (and falling in love with) a pre-construction property.
Prepare for Move-In Delays
Building and
renovation delays come with the territory. With pre-construction condos and
housing developments, it’s not unusual to have multiple delays that can last
months, if not years. Many
professionals suggest planning to move in six months later than the original
move-in date and have an additional backup plan just in case. Everyone wants to
think it won’t happen to them, but it’s better to be safe than homeless!
Be Knowledgable of Developer History
It’s easy to get caught up in the excitement of buying a pre-construction
home. Between the marketing tactics used in presentation centres and the
promise of something brand new, it’s easy to overlook certain things. No matter
how impressive they may seem, however, always do your research on the developer
before committing to anything. Take a look at their past projects and note how
successful they’ve been in terms of quality and timelines.Always Keep the Closing Costs in Mind
Closing costs are different for every pre-construction condo, but be aware
that they can be a little higher than for existing buildings. These can include
everything from development charges to initial utility hook-ups. Development
charges (or development levies) are fees put on the developer of any new home
or condo by the local municipality, and they should always be capped in your
contract. If they’re not, you could be on the hook for a lot of money upon
closing.
Don’t Forget the Taxes
If you’re buying the home as a primary residence you might qualify for
certain rebates, depending on where you live. However, if you’re buying it as
an income property you can’t. Make sure you know exactly what you will owe
before you sign on the dotted line.
Be Flexible About the Looks
Don’t get too caught up in what the exterior of the building looks like,
because it may change. Developers have a certain amount of leeway to alter
their plans, so don’t be surprised if colors and materials are different than
the plans you first saw. Changes come with the territory so be prepared to be
flexible.
Lock in Your Mortgage Rates
Don’t wait to lock in your mortgage. Developers often work with preferred
mortgage providers and – provided you qualify – you may be able to lock in now
at a lower interest rate than if you wait until closing. But make sure you do
your research before committing to anything.Be Aware of Any Condo Fees
This can happen in any condo, but be aware that your monthly maintenance
fees may rise. Developers often try to entice people with low monthly fees, but
in a year or two they may go up, and it could be by quite a bit.
Renting vs. Owning
When you
purchase a pre-construction condo it’s possible that your unit will be move-in
ready before the building is totally complete. If that’s the case, you can take
occupancy, but you won’t officially own it because the building can’t yet be
set up as a condo corporation. Therefore, you’ll have to rent your unit from
the developer rather than owning it and paying your mortgage to the bank. Once
the building has been registered, the ownership will transfer to you. But
before making any kind of move make sure you understand what you’re paying and
to whom.
Check for a Cancellation Clause
Before you sign a contract see if it’s possible to add a clause that allows
you to cancel the sale in case of extenuating circumstances. Job loss, critical
illness, and other drastic circumstances could prevent you from following
through. Make sure there’s something in there that allows you to cancel without
losing any deposits or down payment.
Hire Your Own Home Inspector
Sounds strange for a pre-construction, right? Wrong. When you go for your
pre-delivery inspection with a representative from the builder, bring along
your own inspector. It will probably cost you a few hundred dollars, but it’s
worth it for the peace of mind that comes with a professional, third-party
inspector checking everything out.