Buying a condo: Pre-construction or resale?
Author:
Chloe Lai
Date: December 1, 2016
Buying a resale.
This is the most straightforward way to buy a condo.
Advantages include:
• You can see what you’re buying. You don’t have to imagine how it will look from a floor plan.
• There is no wait. You get to move in as soon as you close.
• The math is a lot easier. You can get your mortgage pre-approved right away and calculate your monthly payment based on the current rate.
But there are some disadvantages, too:
• If the unit has been lived in for more than a couple of years, you might need to set aside money for renovations.
• You can end up in a bidding war for a good unit in a popular building, and have to drop out when the price goes over your limit. Selling prices for condos purchased pre-construction from the builder are fixed.
Buying pre-construction
As you can guess, you are buying a not-yet-built condo directly from the builder before construction begins. This, too, has its advantages:
• You are first owner of the unit and you get to customize certain things such as appliances, cabinetry, flooring.
• Pre-construction condos tend to be cheaper because of there is a risk of that the project will be delayed or even called off, but this is not always the case nowadays, especially in certain high-demand areas.
• You have more time to save up for your condo. You pay the builder a series of payments as a deposit. The deposit usually adds up to 20 to 25% of the purchase price by the time of occupancy, depending on the builder’s deposit structure.
Again, there are disadvantages:
• You are buying based only on a floor plan without seeing the finishes, the layout or outside view of the building.
• Prepare to pay "phantom rent.” You are allowed to occupy your unit when it’s ready, but other parts of the building may still be under construction. Until the building is completed and officially registered as a condominium corporation, you pay the builder phantom rent — you can’t start paying mortgage payments at this stage, because you don’t officially own the unit.
• At the time of closing, you have to pay a number of fees to the builder that can be confusing.
• Unlike a resale, a pre-construction sale is subject to GST. But if you are planning to live in the new condo rather than rent it out, you might be eligible for an GST rebate.
• Nothing is guaranteed. A condo building usually takes several years to complete. There is always a chance that the builder won’t sell enough units to proceed with construction, or can’t finish construction for some other reason, so you don’t get your condo. And sometimes the condo may look a bit different when it’s finished compared to what was initially proposed by the builder.
Both pre-construction and resale have their pros and cons, depending on your preference, your budget and the amount of risk you’re comfortable with. Before you make a decision, it’s a good idea to consult a real estate agent to find out your options.
Retrieved from: http://brighterlife.ca/2014/05/05/buying-a-condo-pre-construction-or-resale/
Buying a condo resale pre-construction
