THE 12 CRUCIAL STEPS TO PURCHASING PRE-CONSTRUCTION CONDOS

Monday Mar 18th, 2019

Ready to master the art of purchasing pre-construction condos? Let’s take a closer look at the steps involved.

Buying a pre-construction condo isn’t nearly as straight-forward as buying a resale condo.

In my earlier post, I emphasized the importance of knowing whether investing in pre-construction condos was right for you. I cannot stress how important this is – don’t do it because it’s a trend. Really analyze if it’s the right option for you. Remember to stick to the Triple Constraints.

Pre-construction condos have become a booming market in Toronto. As echo boomers start making lifestyle choices that will involve the real estate market, this will result in a huge need for space in the downtown core.

Let’s explore the steps involved in purchasing a pre-construction condo from an investment perspective.

1. IDENTIFY THE RIGHT PROJECT

Using the triple constraints,weigh the pros and cons of similar projects
Evaluate the needs and wants of the prospective tenants’ condo lifestyle
Determine budget and affordability
Evaluate the location based on transit-friendliness, walkability (WalkScore) and surrounding amenities

2. SCOPE OUT THE PROJECT

Learn about the builders and their reputation
Identify any other current and future developments in the same vicinity
Compare similar projects with respect to prices and incentives
Identify the return on investment (ROI) and calculate whether you will have a positive cash flow from your investment

3. THE BLUEPRINT

Review and pick the best floor plans
Keep in mind the impact of floor level, the view and physical location of the unit on the floor

4. THE DECISION

Once all the above steps are complete, you’re ready to make an informed decision

5. SIGNING THE AGREEMENT

The agreement of purchase and sale will be drafted and the buyer will sign
The builder will execute the agreement
Post-dated deposit cheques will be provided

6. THE “COOLING OFF” OR RESCISSION PERIOD

Once the agreement is signed by the buyer and the developer, there is a cooling off period of 10 calendar (not business) days to finalize the decision
During this time, it’s crucial to have the agreement reviewed by a real estate lawyer who is familiar with pre-construction condos. The lawyer should outline:
The additional costs involved at time of closing
Suggest changes to the clause, if any
Recommend putting caps on any fees such as development fees

7. THE FIRM DEAL

After the 10-day cooling off period, the deal becomes firm and binding

8. FINANCING & MORTGAGE

One of the benefits to buying pre-construction is that a mortgage is not required until closing
Some developers may ask for mortgage pre-approval

9. UPGRADES & DESIGN SELECTIONS

Most builders will have a few design palettes to choose from. Normally, this collection has been picked out by professional designers
Upgrades are based on availability and they vary from builder to builder

10. PRE-DELIVERY INSPECTION OR PDI

The PDI is a walk-through of your condo after it’s completed
This will be the first opportunity to point out any issues, deficiencies or incomplete items
The PDI takes place just before the interim occupancy

11. INTERIM OCCUPANCY

The unit can now be taken possession of – but the condominium corporation hasn’t been registered (i.e. the buyer does not own the condo unit as of yet)

12. FINAL OCCUPANCY

This is the final closing when legal possession of the unit is granted
A mortgage will be required at this time
You will need to work with a real estate lawyer for the closing
Register with Tarion Warranty – a 7-year warranty program for new homes and condos purchased in Ontario

These crucial steps are significant to your condo investment experience and ensuring that the information you need is available to make the process as smooth as possible. Every deal can be structured differently – so having someone guide you through the hype is important. In my next post, I will review the costs involved in purchasing a pre-construction condo.