An Article From Anita Deonandan : Sales Representative
Pre-Construction (New Builds)
Pre-construction is a term that is frequently used in the real estate industry and it deals with residential properties for sale that have not been built. In essence, the buyer is buying the floorplans and will take possession once it is completed. It relates to all levels of building, condominiums, townhouses, detaches and semi-detached properties. There is a majority of investors who look to purchase pre-construction properties in order to rent or flip them.
Important Terms to Know:
One of the 1st things I advise my clients to look for is the reputation of the builder. How long have they been building, what projects have they done, what is their reputation in the industry, what type of finishes do they offer, are they energy efficient? The information packages ands brochures they may provide for you may be glossy and beautiful, but remember, there is a whole marketing/advertising team that are creating an image for you to buy. What is beneath the surface? Do your homework.
Have you ever heard the phrase “Location! Location! Location!”? This phrase couldn’t be more true. Location is so important as it holds and increases value over time if the property is close to amenities such as shops, schools, transit and highways. Your Return on Investment (ROI) will be high as people will be more likely to rent or buy in areas where it is considered central to everything. Try and pick a project that is close to these types of amenities.
Price Per Sq. Ft
When the builder provides the price list to the public, it has a price allotted to each unit. A good thing to find out the price per square foot in the area so you have a comparison to know if the new property is a good value or overpriced.
When you purchase a preconstruction property, you don’t have to put down a 20-25% down payment all at once. They way it is done is to break up the deposit into increments. Usually it’s a 25% downpayment and it’s broken up into a few installments. Usually it’s $5,000.00 when you sign the paperwork and the other 4 amounts will be provided to you to fill in on post-dated cheques which they will cash at the time they have indicated to you. Sometimes the builder’s offer incentives such as an extended time to pay the deposits or making the deposit 10% instead of 25%. Each builder will offer different incentives. Have your Realtor explain them to you.
Maintenance Fees and what’s included?
Maintenance fees are specifically for condo apartments and condo townhouses.
The definition is as follows: “Condo maintenance fees are your percentage share of the costs to run the building as a whole,” (Janice Pynn, Style at Home). This can include window cleaning, landscaping, snow removal, cleaning the parking areas, and the list goes on. It will be broken down per square foot when you are purchasing a unit. The best thing to do is to compare it with the maintenance fees in other buildings. Your Realtor can help you to research this information.
One of the more popular incentives that builders include when you are purchasing a unit is capping the fees for levies that the city charges to the consumer (i.e., utility hook ups, tree planting, etc). Levies can be upwards of $10,000.00 but the builders sometimes cap the fees at $2,000-$5,000.00. This means the builder will absorb over and above the amount that they stated on the contract.
An assignment is when a buyer wishes to sell the unit prior to it actually being finished. Technically the new buyer will be purchasing the Agreement of Purchase and Sale. The purpose of doing this is the seller can sell for a gain and perhaps move on to their next investment project. The builder usually assigns anywhere from $5,000-$8,000 for an assignment but most builders offer an incentive if you purchase a pre-construction property. The assignment fee can be waived or offered at a reduced price. Each builder offers something different.
Occupancy vs. Closing
Buyers who purchase condos may get confused when trying to differentiate between occupancy and closing (aka registration). Knowing the difference will impact when the mortgage commences.
When the buyer can occupy the property. The buyer will pay occupancy fees, similar to rent but this does NOT qualify as going towards your mortgage. Your mortgage begins on closing date.
When the building has officially registered as a condo corporation with the city and the buyer legally takes possession of the property. Your mortgage will begin at this point and the buyer starts paying down the mortgage.
Anita Deonandan currently lives in the York Region and is an expert in the area. If you're considering moving to Richmond Hill, Vaughan, Aurora or Newmarket, Ontario don't hesitate to contact her directly at 416.917.6872 or Anita@Searchrealty.ca