Are you thinking of purchasing a pre-construction condo?
Purchasing pre-construction can be an incredible investment for buyers. In hot markets, many buyers flock to the pre-construction market to avoid the competition of bidding wars. With pre-construction, the sales typically happen on a first-come-first-serve basis. More or less, this means that you can avoid the notion of bidding wars and benefit from prices that are generally locked in.
While pre-construction does present exciting opportunities to buyers, it’s also crucial to understand how it works beforehand. After all, pre-construction is an entirely different animal than it’s good friend resale.
If you’re considering purchasing a pre-construction, this one’s for you. This is part one of what to know about buying a pre-construction condo.
So, why opt for pre-construction as opposed to a resale?
Pre-construction can present an incredible opportunity for first-time homebuyers looking to get into the market. As compared to purchasing a resale home or condo, the financing structure helps to make the initial price point more affordable. With this, buyers can lock in at set prices while also avoiding bidding wars altogether.
This is also an exciting opportunity to pick your very own floor plan and finishes. Once the building is finally ready, you can look forward to moving into a building that is entirely new and never lived in.
Choosing a Builder
Choosing a reputable builder is arguably the most important factor to consider when purchasing pre-construction.
Remember, you’re putting thousands and thousands of dollars into something that has yet to be built. Not only do you run the risk of the completion being pushed back, but there’s also the potential that the condo might fail to be built in the first place. While this doesn’t happen often, it’s always a possibility.
This is why it’s so crucial to select a builder that has a solid reputation and one that you trust. In this sense, it’s generally best to go with the big names such as Tridel, Daniels, Menkes, etc. Large scale developments such as these are more likely to uphold their reputation and deliver a project that’s completed on time.
One of the reasons that many first-time homebuyers choose to invest in pre-construction is because of the segregated payment structure. While you’re still generally required to deliver a 20 percent down payment, this amount is broken up into smaller installments. It’s safe to say that this makes the notion of the down payment much less daunting. The following is a generalized example of a pre-construction payment structure:
- $5000 on signing
- 5 percent in 30 days
- 5 percent in 130 days
- 5 percent in 180 days
- 5 percent at occupancy
Just like resale, it’s crucial to account for the closing costs of your pre-construction unit. In knowing the general closing costs upfront, you’re in a better position to avoid surprising fees down the road.
Of course, every pre-construction condo is going to be different in their closing costs. Some buildings might have extra closing costs that other buildings were not faced with. In general, you should expect for these closing costs to be higher than the closing costs of resale condos. This is because you’re paying for additional costs such as development levies, utility hook-up fees and New Home Warranty Enrollment Fees. These are fees that are exclusive to pre-construction condos.
Working with a Pre-Construction Real Estate Specialist
There’s no denying that the pre-construction market is entirely different than that of resale. This is why it’s so important to work with a real estate agent that is well-versed in this particular market. For real estate agents that deal primarily with resale properties, the qualms and quirks of the pre-construction market can be downright confusing.
Are you intrigued? If so, be sure to tune in to the second part of our series. In part two, we’re going to delve into what happens after you purchase your pre-construction unit.
Let Nobul help guide you through this process.