Thanks to Canada’s condo building boom and a competitive market, many luxury buyers are making the choice to buy a condo from floorplans; that is, a condominium unit that hasn’t been built yet. Buyers put a deposit down after reviewing the building plans in a sales centre, and continue paying instalments until the building is built, which could take up to five years. If you’re considering this route, here’s what you should know:
Move-in timelines can be hard to predict. When you purchase pre-construction, the developer will give you an estimated move-in date, but ultimately these depend on many factors outside the developer’s control, such as sales volume, vendor supply and city bylaws. Keep in mind that your occupancy date can be delayed by months or even longer.
Closing costs are different than with a re-sale home. In addition to your down payment instalments, there will be closing costs when you take possession of your new luxury unit. These include HST, development levies and initial utility hook-ups. A skilled real estate lawyer will be able to explain these to you.
Secure a mortgage rate early. It often pays to lock down an interest rate early in the process, as opposed to waiting until closing.
Expect possible building changes. A lot can happen between the time a building design is proposed and when it’s actually completed. When you buy from plans, you will have access to renderings, 3D models, maybe even a model suite, which can give you an idea of what the building will look like. Developers, however, have a certain amount of leeway in their contracts to alter plans, based on material availability or city planning policies. On the flip side, many buyers are drawn to pre-construction because it often means they can choose their unit finishes.
Know about the occupancy period. With pre-construction, you may be legally able to occupy your luxury unit on a certain date, but if certain parts are still under construction (such as units on higher floors or common amenities), the building may not be “official.” This means your mortgage won’t kick in and instead you will be paying “occupancy fees” to the developer. This period may last for months.
Buying a luxury unit pre-construction can be a smart way to get the condo of your dreams while avoiding stressful bidding wars. The process, however, is somewhat different than buying a re-sale home. Make sure you work with a real estate agent who is experienced in pre-construction sales.