Walking into a new condo sales centre can be exciting and intimidating. It’s easy to get distracted by the finishes, amenities and model suite. While it can be a thrilling process, one should be aware of the differences between buying re-sale and buying new. There are several things that make a new condo purchase a truly unique experience. These simple tips will make you a more educated buyer and assist you in making a decision that is right for you and one step closer to owning your dream condo.
- Find the condo specialist in your area (particularly new condos) and sign a buyer representation agreement. Condos are a very specific market and working with a realtor that specializes in this area will be to your benefit.
- Research builders in your area and visit past projects they have completed. Looking for online reviews and speaking with past purchasers can be very helpful when making a decision.
- Understand your obligations during the 10 day cooling off period. This is the time to have your lawyer review the documents and seek mortgage pre-approval. Always read your agreement of purchase and sale and if there is something you don’t understand contact the builder and your lawyer for clarification. This 10 day period grants you the opportunity to fulfill your legal obligations, as well as back out of the agreement for any reason. After the 10 day period is complete the deal is firm and binding. So if you have any doubts they should be addressed right away to avoid locking yourself into a legal contract.
- Remember to ask about condo fees. These fees are paying for things that most people are unaware of. A portion of your monthly condo fee is placed in what’s called a reserve fund which is a pool of money that is used to make repairs to the building. The other portion of the fee goes to the maintenance and upkeep of the common areas, building insurance and some utilities. Be sure to always ask what the condo fee includes. Make sure you know what you are responsible for paying over and above your condo fee. For example, most cover all utilities except hydro, property taxes and contents insurance for your unit. Most new condos will lock your condo fee rate in for 1-2 years, depending on the length of time they plan to manage the building before turning it over to the condo board.
- Standard deposit structures are 15% over 90 days. The 5% first time homebuyer down payment does not apply in new construction. This means that on a $300,000 condo, you would need a $45,000 down payment within 90 days (usually spread over 3 payments of 5%). First time home buyers usually take out a line of credit to cover this amount and then roll it into a mortgage upon occupancy. Existing home owners can use the equity on their home to finance the down payment. Remember, most new condos take approximately 2 years to be built so that money will be tied up for quite some time. Be mindful that some new condo builders provide special first time homeowner promotions where they will offer 5% down payment for a limited time.
- Remember that your money is working for you. Sure, you may have $45,000 tied up for two years while you wait to move into your new condo, but remember, you bought pre-construction at today’s prices. This means that by the time you move in, 2 years later, your home will have gained two years of equity. Some people find as much as 15% equity growth in that initial 2 years and 6% each year thereafter. Your $45,000 deposit was in fact making you money.
