Toronto continues to see a booming business in new condo developments. I am frequently asked whether it is better to buy a condo suite new directly from the builder or to buy a resale unit. Let me offer these things to watch out for.
Buying from Plans
If you are buying a Toronto condo suite pre-construction, then you only have the sales office and suite plans to go by. Make sure you understand what these plans are telling you. Looking at the plans, try to imagine the space around you. Examine the compass points and get a sense of what might be out the window. Be careful if there are less desirable and more desirable directions to face. Be aware of what the standard suite finishes are and what the upgrades you will be able to choose from.
How big is it really?
When the builder tells you it will be a 850 square foot suite, you won’t actually end up with that much space. There are several ways to measure the space and the sales materials are usually from the middle of the bricks inside the walls.
Watch out for Builder’s Agreements
The purchase agreement you enter into with the builder is weighted heavily in the builder’s favour. You have to accept that. They have lots of protections of their interests, to change your suite, the completion date and certain aspects of the building. Once signed, you have a 10-day period in which to review the agreement. It is best to take it to a lawyer for review. Watch out especially for additional charges you will be responsible for on closing – like paying a share of the cost of the gym facilities, guest suites or other common elements. Then there are the development charges they are passing on, extra levies, land transfer taxes and HST.
There could be 3 to 5 years between the time you sign the agreement to purchase a new condo suite and the actual closing. Your personal situation very well could change over that time. You might get married, un-married, have a larger family, smaller family, aging parent to care for, an employment change or a transfer to a different city. While this suite was perfect for your situation when you signed-up for it, will it still be right years later? Most builders are permitting you to re-sell your contract to purchase to someone else before the building is finished, but there may be a fee to pay up front and another fee to actually carry out the assignment. You might be able to give it back to the builder or have them market it on your behalf.
New-new or Retrofit
New condos come with a government-backed insurance plan called TARION. It ensures that the whole building is built appropriately and it covers the major elements in your suite. It is good protection if really needed. But, if you are buying a loft suite, converted from an industrial building of some sort, then it is not considered “NEW Construction” and there are no TARION warranties in place on these buildings.
How’s Your Credit?
Buying a new condo requires you to make a down payment of 15% to 25% in installments in the first few months after signing the agreement. You’ll need the cash for that. The rest of the purchase can be done with a mortgage. You’ll need to get pre-approved by the lender before you make your condo purchase. But be mindful of changes to your employment situation and credit score during the years leading up to closing. The lender will be re-evaluating your credit-worthiness just before lending you the money for your purchase. If you have made major purchases on credit, like a car loan or lost your job you may not get the mortgage financing you were counting on.
In resale condos, you know exactly what you are going to get. The suite exists. You can visit the unit and see the overall size, see the amount of cupboard space, counter space, living room space. You can look out the window and see the view. There will be no surprises about what you have purchased. With closing dates ranging from 30-days to 90-days from when you sign the agreement of purchase and sale, there is less likelihood of major change in your person situation. The real estate agreement for resale condos is standard across the province of Ontario. To be acceptable to both parties, it is more balanced between protecting the interests of both the buyer and seller. There are no additional surprise costs. The same land transfer and legal fees apply to any condo you would choose.
No matter what type of property you are buying, always make sure you do so with your eyes open and you know exactly what you are getting into. Ralph Evans can assist and represent your interests when you are planning on buying a new condo or when you are buying a resale condo.