Whether you’re a first-time buyer or a seasoned investor, buying a preconstruction can pose some risks for you. Working with an agent who specializes in preconstruction condos can help you prevent stress that may come from unreasonable contract terms or surprise costs. Having years of experience selling preconstruction condos, here are four things I think you need to know before buying:
Preconstruction Projects Are Launched In Phases
When developers are building their projects, they release banks of condos in phases. The first phase is usually known as the “family and friends launch”. The next phases are based on the preconstruction agent’s sales volumes. Generally speaking, the more units an agent sales, the better access they have to a project. Many preconstruction agents have a network of affiliates to share access of the phase and help increase sales. At Sotheby’s we have a dedicated condo forum where agents share their exclusive VIP access with each other.
Delays Are Inevitable
It is a truth universally acknowledged that construction always takes longer than originally anticipated. This is because developers arbitrarily set their closing dates. For them, it is easier to push a date back for construction delays than it is to pull a date earlier. Therefore, when you are looking to purchase a preconstruction, always anticipate at least two delays, as developers are given two chances to push the date back for their own delays (i.e. delays within their control).
➤ If you’re thinking of investing in pre-construction be sure to read:
Closing Date And Interim Occupancy – 2 Closing Dates
Did you know that preconstruction condos technically have two closing dates? The first first is the interim occupancy (when your title transfers) where you pay the builder a stipend that essentially seal the deal on your ownership costs. This amount of money is calculated based on a mortgage of 80% plus maintenance and mortgage taxes. You are in interim occupancy for anywhere between a few months to a couple years. The second closing date you should be aware of, and this is the one you are likely familiar with, is the day your unit is ready for occupancy.
The reason these two dates exist is because during interim occupancy, the unit is not 100% yours yet. You own it, but you are not entitled to rent it out or complete renovations without written consent from the developer.
Marketing And Reality Are Two Different Things
You may have been sold a beautiful unit with a great layout that is in a building with fabulous amenities. However, this is all subject to change. What is put in the pamphlets and video tours are “best-case scenarios” – however every preconstruction condo will have a contract clause that discloses that the final product is subject to change. Be prepared that your unit might have a structural beam in it. If you really value your amenities, try to go for a developer that is famous for its amenities such as Tridel, rather than a smaller developer who sometimes remove amenities to make the building viable.
➤ For a detailed overview of the pre-construction process check out: How to Buy a Pre-Construction Condo
Are you thinking about buying a preconstruction condo but you need some help? Please feel free to reach out to me here. I would love to help you find the preconstruction condo unit of your dreams.