How To Buy A Preconstruction Condo In The Greater Toronto AreaJanuary 28, 2023
There is no denying that Toronto is one of the best places to live in Canada. The real estate market is doing well; we share the facts below.
If you want to purchase a preconstruction condo in Toronto, there are steps you must follow. You also need to know some things to get the best deal.
The process can be lengthy; sometimes, excellent properties will pass you by if you don’t have inside information. If you contact a real estate agent who knows the real estate industry, you can be sure that you’ll get the best properties at a great price.
This post discusses why Toronto pre-construction homes are a good investment and the steps you should take when buying a preconstruction home.
- The benefits of buying a preconstruction condo in the Greater Toronto Area
There are many benefits to investing in the Greater Toronto Area. The GTA’s population is growing, and there is a high demand for housing.
Condo prices continue to rise, and patient buyers will receive a high return on their subsequent sales.
The best areas to buy a preconstruction condo are Annex, Leslievelle, Bay St. Line, and Riverdale.
It’s also a good way to get into the Toronto real estate market, where the average price of a home is over $1,000,000.
Buying a pre-construction home may cost half that price. So you pay less to enjoy the amenities and fantastic community benefits.
With a resale, you’ll have to put down a significant amount at once, but with a newbuild pre-construction home, it’s a different story.
Typically, the deposit is at least 15% to 20% of the purchase price, which makes sense since the developer needs money for construction.
But the deposit structure is well divided, so you don’t have to part with large amounts until closing.
- What are the key considerations when buying a preconstruction condo?
Finding deals is more challenging than it seems. There are crucial steps you need to follow and details you should know. It is helpful if you work with a real estate agent, as this will give you inside information on better-asking prices.
In rare cases, a real estate agent will get a 5% to 10% deposit structure, but these properties sell within hours, and the public does not have a chance to apply.
That’s why you need a reputable real estate agent, a renowned real estate lawyer, and an experienced mortgage broker you know personally.
- You need to firm a preconstruction sales agreement with a deposit
Builders require a deposit of at least 5% of the purchase price of a preconstruction home in the Greater Toronto Area. You pay after signing the purchase contract.
Typically, the deposit structure is 5% in 30 days, 5% in 90 days, 5% in 6 months, 5% in 365 days, and the final 5%, which you pay on closure. Every developer has a different payment structure.
- It would be best if you had preapproval on the mortgage.
Before analyzing pre-construction homes buy options, ensure you speak to a mortgage broker.
Be keen on building a cordial relationship with a mortgage broker rather than calling the office.
They’ll check your credit score, employment, and all paperwork, including income verification papers, to confirm if you qualify for a mortgage.
If you don’t, a mortgage broker will advise you and better guide you on how to qualify for a mortgage upon completion of the project.
Many builders ask for mortgage prequalification papers as part of the buying requirements.
- Finding the best preconstruction home in GTA
Before construction starts, a buyer will have sold the lots or units, usually in four phases. Before you even see that construction halfway, chances are the builder has sold all the teams.
Builders sell these projects in phases. Friends, friends of friends, and family get the best units with awesome upgrades like a view, terraces, an extended balcony, parking, etc.
Phase two also called the prelaunch, is where word gets to platinum real estate agents and VIP brokers who have often previously worked with the builder. Their clients claim more units, which is why you should engage a realtor.
The next phase is on a first-come, first-served basis. VIP agents with firsthand information from the previous steps get the best deals.
What is left is then disclosed to the public for them to submit applications. The price is also slightly higher in this last phase.
Working with a platinum real estate agent gives you better chances of getting a unit with an upgrade at a lower price, not forgetting less research and negotiation hassles.
A buyer’s tip is to write a personal letter showing why you love the property and how living in it would be an incredible experience. Builders are inclined more toward personalized letters.
- Reviewing the Agreement of Purchase of Sale
Once you have accepted the offer, the builder gives you ten days to understand a lengthy Agreement of Purchase of Sale (APS). You need a lawyer to go through the technical contract and advise you.
Check on development charges, property taxes, assignment sales, levy, Tarion warranty, and other closing costs.
Remember, closing costs are payable on the closing day, and it’s good to have all the information since it is a significant amount.
Should you have an issue, such as a financing clause, you could step away from the deal and get your initial deposit in full.
The grace period is usually ten days, but some builders restrict it to 24 hours.
- HST and what you need to know
The HST is payable by the purchaser, and there are specific rebates for each location in Canada. You are only eligible for the HST if you plan to use the home as your primary residence for at least one year after moving in.
If you plan on renting the unit within the first year of completion, you do not qualify. It’s always good to wait for at least one year before selling or renting the team to qualify for HST.
- The Takeaway
Buying a pre-construction condo in the Greater Toronto Area is an excellent investment. The real estate market is stable, and the increasing diversity of the population creates a high demand for condominiums.
Still, a layman’s buying process is quite detailed, and the hidden prices can catch you off guard. Get a resourceful team to assist you, and be patient throughout the process. This way, you will get the best deal at a good price.
So, avoid frustrating home-buying experiences and choose a property that suits your needs by talking to a reputable real estate agent.