What to Expect When Buying Your First Toronto Pre-Construction Condo
Purchasing your first Toronto pre-construction condominium can be a very exciting but at the same time challenging proposition. Facing a multitude of Toronto condo project options along with a complicated and unfamiliar purchasing process can leave many first time buyers feeling uncertain and frustrated. At InstaCondo we are committed to not only guiding you along the journey of making your first purchase but also educating you so that you can be armed with as much knowledge about the process as possible.
At InstaCondo we are committed to not only guiding you along the journey of making your first new condo purchase but also educating you so that you can be armed with as much knowledge about the process as possible.
Whether you have researched Toronto condo projects by yourself and have focused in on a specific unit that you are considering purchasing, or are totally new to the world of Toronto pre-construction condos and want to explore all the various projects we are here to assist you at every step of the way.
The Research Phase
Before our team can recommend and present any Toronto condo projects that would be suitable to you we first and foremost have to learn about the criteria that are most critical to you, such as:
Do you have a specific area in mind that you wish to purchase in or are you flexible to explore various neighbourhoods? With todays mobile and remote workforce growing steadily more and more clients are not tied to specific areas based strictly on proximity to work. Other location factors to consider are proximity to schools, transit lines and highways, parks and recreation as well as entertainment depending on the lifestyle of the individual.
Budgetary constraints are of course a leading factor in considering which condo project is presented. All factors of the purchase price have to be clearly stated, not just the unit sale price. Other expenses to consider are the legal fees, interim occupancy fees, closing costs, maintenance fees, land transfer tax and others to ensure that the condo unit you are considering is within your budget. While many agents focus only on the unit sale price we are transparent in showing you all costs involved.
Todays Toronto pre-construction condo landscape offers resort style living options that are above and beyond what clients could have dreamed of even just a few years ago. Todays condo projects offer amenities that cater to the most discerning of tastes. Some of the amenities that are available include saunas, steam rooms, hot tubs, plunge pools, indoor and outdoor pools, cabana beds, yoga studios, cross fit studios, dance studios, cinemas to name just a few. If certain amenities are important to you then this needs to be taken into consideration.
Size and Floor Plan
Depending on family size and space requirements various units and floor plan layouts are available. Note that the smaller sized condo units typically sell faster than larger ones so its best to get early access to any condo project if you are considering a 1 bedroom or studio size. Make sure to sign up for our newsletter to get early access notifications for any future new projects before the general public.
In addition, its important to consider the direction that any potential condo unit is facing to be aware of any buildings or other structures possibly impeding your view. Also, knowing of any future development plans near the building you are considering moving into will save you a nasty surprise years down the road when that beautiful ravine lookout you thought you were getting turns out to face another new building that sprung up a few years after moving in. As part of our due diligence process we will research any plans for such developments to ensure you are informed prior to making your final decision.
Parking and Storage
Due to the ever growing population of Toronto certain condo projects are restricted by the city in terms of how many parking units they can offer (this is done to lessen car congestion in certain neighbourhoods). Because of this, some builders only offer parking to units that are 2 bedroom and larger, therefore its important to determine how critical parking will be for you before selecting a specific project.
Making the Final Decision
Once we have gathered all your requirements we will conduct comprehensive research to narrow down the condo projects and floor plans meeting the outlined criteria. Upon completing the research phase all information will be presented to you free of charge and with no obligations.
Upon completing the research phase all information will be presented to you free of charge and with no obligations.
Once a final decision is made on which condo project and floor plan is most suitable a worksheet needs to be submitted to the builder. Because of the popularity of certain projects a lot of the most desirable units are allocated before they are even released for sale to the general public. This is why its so critical to work with us to ensure you get allocation to the unit that you want.
Once this has been accepeted a meeting with the builders representative can be arranged in order to review and sign a purchase agreement.
Because of the popularity of certain projects a lot of the most desirable units are allocated before they are even released for sale to the general public. This is why its so critical to work with us to ensure you get allocation to the unit that you want.
Meeting The Builder
Depending on the builder there are various payment structures but typically upon signing the first deposit will have to be paid which on average is $5000. Post dated cheques have to also be given in accordance to the structure but a typical example would be:
- $5000 due on signing the purchase agreement
- Balance to 5% in 30 days
- 5% in 120 days
- 5% in 270 days
- 5% in 540 days
For a total of 20% of the purchase price. International clients typically need to pay 35% deposit.
Builders generally need 75% of the building to be sold before they are able to get financing for construction. If a builder is having trouble selling at least 75% of their condo units within a certain time period they will very often offer very attractive incentives and discounts. Make sure to sign up for our newsletter to be informed about these special promotions. In some cases tens of thousands can be saved or certain perks given such as free interior upgrades, free storage lockers or parking space promotions.
At the builder meeting certain options will be presented such as colour schemes and other interior upgrades (such as floor colour, backsplash options, counter tops, cabinetry colour etc.). Storage locker and parking options can also be discussed at this point.
Once the contract is signed the client has 10 calendar days to review and reconsider their purchase. This is also known as the "cooling off period". During this time the buyer needs to arrange for financing pre-approval as well as have a lawyer review the purchase agreement. If the buyer changes their mind for any reason during this period, they can back out of the contact and have the entire deposit returned without any penalties.
If the buyer changes their mind for any reason during this cooling off period, they can back out of the contact and have the entire deposit returned without any penalties.
Toronto Condo Assignments
After some time but before you even take possession of your unit you may choose to “Assign” it to another willing buyer. The willing buyer will take over your agreement by paying all deposits you have made to the builder plus the profit you have made since the original purchase. Beause the real estate market has been so strong in the last few years this has been a shrewed investment option as it maximizes profitability.
Consider this example, you have purchased a Toronto pre-construction condo unit in 2014 and it is due for occupancy in 2019. You wish to reassign the unit to a willing buyer. You have already paid all your deposits.
- Original Purchase Price in 2014: $450,000
- Current Market Value in 2019: $580,000
- Deposits Paid by You to the Builder: 20%
The willing buyer will have to pay you the following in order to take over the purchase agreement:
- Your Profit (Current Market Value - Original Purchase Price) = $130,000
- Your Deposits (20% of $450,000) = $90,000
- Total Cash Required by Buyer: $220,000
As you can see assignments can be potentially very profitable. Using leverage by only putting down a deposit while gaining profit on the entire purchase price is a great way to diversify your overall investing strategy.
However, certain Toronto condo builders place restrictions on the amount of times a unit can be reassigned or whether it can be reassigned at all to another party so it is imperative that this is verified prior to signing the purchase agreement. Alternatively you may wait until you take possession of your unit and then live in it or rent it. Contact us for more details about the Toronto condo assignment market and to learn about all of your options!
Once Construction has Finished
Once the building starts nearing completion the builder will notify the unit owners to conduct a pre-delivery inspection (PDI). This inspection gives the buyer the opportunity to inspect their unit with the builder to ensure it meets certain standards and that there are no deficiencies. If any are found they can be addressed and documented so that the builder can rectify all outstanding issues. Please also note that all new condo units have a multi-year TARION warranty which covers certain aspects of the unit during various phases of ownership and construction.
All new condo units have a multi-year TARION warranty which covers various aspects of the unit.
TARION is a Government of Ontario organization which was established in order to administer the Ontario New Home Warranties Plan Act. Its mandate is to protect consumers of new homes by ensuring that builders adhere to legislation and standards that have been set forth by the government.
This warranty covers issues such as workmanship, materials, Ontario building code violations, defects in electrical, plumbing and heating systems, major structural defects and more. In addition they also provide coverage for deposit protection in case the builder declares bankruptcy or breaches the purchase agreement. Please visit the TARION website for more details as well as review the TARION warranty agreement that will be included in the purchase agreement for more details.
Once enough units are ready for release and certain common areas are completed the building can start being occupied (known as interim occupancy). Usually builders release units and floors on a staggered schedule, lowest floors released first, while higher ones are released later. Not all floors and units are released all at once. At the time of taking interim occupancy certain interim occupancy related fees have to start being paid to the builder before closing takes place. Even though the unit owner is allowed to occupy the unit at this time because the condominium is not yet fully registered the buyer will not be getting title to the property at this time.
After the building is registered by formally creating the Condominium Corporation and plans and paperwork to the appropriate government authorities are submitted closing can take place. This is the time where the title of the property is assigned to the unit owner. At this time any final closing fees have to also be paid to the builder. These closing fees (or sometimes referred to as builder adjustments) apply to all new pre-construction projects. Usually they amount to 1-3% of the original purchase price and are intended to cover the HST on appliances, utility connection costs and other development expenses. Finally, the land transfer tax is paid at this time as well, usually at 3-4% of the original purchase price.
At this point most of your administrative work is completed and you can start enjoying your brand new condo and all the great amenities and features that it offers!
Starting your new condominium purchase journey can seem daunting, but having our expertise always at your side will give you the confidence that you are always making an informed decision based on the criteria that matter the most to you. That is our promise.
Having our expertise always at your side will give you the confidence that you are always making an informed decision based on the criteria that matter the most to you. That is our promise.
If you have any further questions regarding the process of buying a Toronto pre-construction condo make sure to contact us today!