Pre-Construction Condo – The Sales Process
The Mississauga City Centre pre-construction condo market is booming with new condo developments around the Square One area.
As a first time condo buyer, it is essential to become familiar with the unique differences surrounding the purchase of a pre-construction condo in comparison to a resale condo. The following are the most important and relevant items to consider: Deposit Structure, Cooling Off Period, Move-In Date & Closing Date (there is a difference), Closing Costs and Why You Should Work with a Realtor.
When purchasing a resale condo, one can put down as little as 5% of the purchase price of the property, whereas with the purchase of a new condo from the builder, the deposit is typically around 20%. Although the percentage is high and can be intimidating, fortunately the payments are broken down into smaller, affordable installments. A typical deposit structure entails a $5,000 deposit with the Offer, followed by the balance to 5% in 30 days, then another 5% in 90 days, another 5% in 180 days and finally 5% at the time of occupancy. Some developers offer an extended variation to this deposit structure, where the fourth installment is extended to 365 days, or something along these lines.
Cooling Off Period
It is the law in Ontario, that every buyer who purchases a high-rise pre-construction condo has a 10-day cooling off period during which they have the opportunity to review their decision and ultimately have the power to cancel the contract. During this period, buyers can have their Agreement of Purchase and Sale reviewed by a lawyer, as well as obtain a mortgage approval.
Move-In Date & Closing Date (there is a difference!)
It is important that buyers of pre-construction condos are familiar with the differences between these two dates, as they generally differ. The Move-In Date, also known as the Occupancy Period, is when the buyer can move into the unit, but does not own it yet and therefore must pay “rent” (right to occupy unit - think along the lines of a Vendor Take Back Mortgage (VTB)) to the builder up until the Closing Date when the buyer goes on title and their actual mortgage payments begin. The Closing Date is when the title of the unit is transferred to the buyer, who now owns the unit and is responsible for mortgage payments. Although times vary amongst developers and projects, the Closing Date can range from weeks to even months after the buyer moves in. Also, it is important to note that the Move-In Date can change at anytime and can be pushed as far as two or more years (depending on the height of the tower) from the original date stated in the contract without any penalties. Once the buyer officially owns the unit, they can choose to put down additional funds towards their condo.
With the purchase of either a resale or a pre-construction condo, the buyer is faced with additional costs at the time of closing. The costs vary and therefore it is essential that new condo buyers are aware of common closing costs. Although it is difficult to provide a general estimate due to developer differences, the following can be expected: TARION Warranty enrolment fee, utility hook-up fees, development and educational levies and occupancy fees.
Why Work with a Realtor?
Although one can go directly to the condo sales centre to explore floor plans, ask questions and essentially finalize a purchase, it is imperative to consider the advantages of having a professional real estate broker represent you as a client. Firstly, your agent has the legal obligation to work in your favour and for your benefit. Your agent will not only take the time to discuss your wish list, but will also offer you sincere and knowledgeable advice. Most importantly, you do not pay any fees to your agent when purchasing a pre-construction condo, ultimately making agent services free. A knowledgeable Realtor should be able to add additional clauses to the Agreement, which will be advantageous to you and will save you money if you find the need to utilize them. The sales representatives at the Presentation Centre work for the developer or for a brokerage representing the developer. Who's interest do you think they have in mind?
Also, it is important to keep in mind that pre-construction condo sales are most often released in four stages, granting VIP Brokers access to the best layouts at great prices. Here is a breakdown of the four stages:
In the first stage, a percentage of units typically with the lowest prices and top layouts are sold to the builders’ VIP list, which includes investors and employees and/or are allocated to VIP Brokers. In the following second stage, the prices may be slightly higher, but still a good buy and are released to agents and buyers of previous projects. In the third stage, the units become open to the pre-registration group, which are the people who signed up online and requested more information about the project. At this time, chances are that many of the better units are sold out and the prices may have gone up. Finally, the last stage is open to the public where a good chunk of the units are sold out and the low advertised price units are no longer available.
We guarantee first access to various developments across the GTA. inCondo team members always work with your best interest in mind, ensuring that you are satisfied with your purchase and get a great deal to go along with it! Don't delay, get in touch with us today and we will be more than happy to share our knowledge with you.
If you are looking for some further insight about the details of purchasing a pre-construction condo, take a look at our Purchasing a Pre-Construction Condo - What You Need to Know blog post.