Whether you’re a seasoned investor or a first-time buyer, the purchase of your pre-construction condo poses significant risks. To avoid unnecessary stress, hidden closing costs, and unreasonable contract terms, it’s essential to select a skilled real estate adviser. The pre-construction market is hot right now, below are some of the reasons why both international and local buyers are entering this potentially lucrative market.
Honestly, buying preconstruction condos in Toronto is not for everyone. Even if they are priced well, and offer a high return once they are completed. Sometimes the best option is to by something ready now, and rent it out. That way, you immediately start receiving income on your investment, and start paying back your mortgage. If you’re trying to decide whether to buy a preconstruction condo, or a buy a resale home, we can help.
If you choose to go it alone, you might end up regretting your decision like this guy, who made the mistake of assuming it was the best option for him. While the article is bias, there might be some truth to it. An honest real estate agent that sells preconstruction and resale properties could have helped him decide whether to buy preconstruction or resale based on his investment goals.
Hiring a pre-construction Agent for the job
Pre-construction Buyers often find themselves at a crossroads, do they hire an agent? or go it alone? Buyers who go it alone, are often surprised on closing when they are hit with outrageous closing costs, development levies, and delayed closing. An agent that specializes in preconstruction condos can help you navigate the potential downfalls of buying preconstruction.
Many builders include a noncompetitive clause in their contracts, which prohibits the buyers from reselling the condo before the builder has sold all their units. Since it can take the builder years to sell all their units, it locks the buyer into a contract for years with no possible out. An agent that specializes in preconstruction can help buyers navigate the contract and avoid unfair conditions. Some builders also prohibit agents from selling the home on the MLS, so the agents resort to using Kijiji, a much less reliable source of real estate.
hire a real estate agent when purchasing pre-construction
- A real estate agent works on your behalf and owes you fiduciary duties. While a builder’s salesperson works in the builder’s best interest.
- The builder pays your real estate agent. The builder does not add the real estate agent’s fees to the purchase price. Not hiring a real estate agent only gives the builder a higher profit.
- Real estate agents are the builder’s cheapest means of selling property. The builders release projects to real estate agents before they release it to the public for sale. The first wave of sales are often the cheapest time to purchase, and also get the best available floorplans.
- Real estate agents know what is negotiable, and what is not. Usually the purchase prices is non-negotiable, but builders do credit buyers with free parking, free lockers, capped development fees, prepaid maintenance, and other incentives, if you ask.
What can go wrong with preconstruction condos?
It’s important to recognize that when you purchase a preconstruction condo you are buying a right, not a condo. You purchased the right to buy a condo, once it’s built, in 2-4 years. That right comes with many stipulations, such as a large deposit. One of the largest ones clients overlook, is that the right to sell the contract prior to it being complete, can be arbitrarily withheld. If you go against the developers wishes, and advertise your condo for sale, they will cancel your contract and keep your deposit. It’s very important to hire an agent that will help you purchase a preconstruction condo, but also remain in contact until the project is complete and you take possession. Do not get caught up with someone who you do not trust.
The pre-construction market is exciting, and there are many options for investments, as well as personal residences. But, make sure to hire professional representation before you start registering for projects. If you register for a project on a builder’s website, or in house, you cannot hire a real estate agent after. For help or if you have any comments or questions, Contact us.