Hi, This is Thomas!
Are you looking for a presale condo?
Do you know how is the process look alike?
In today’s video we’ll go from the ‘A’s to the ‘Z’s
on how to purchase a presell condo in canada.
Let’s get started!
First, let’s look at what exactly a presale condo is.
A pre-construction condominium is a
real estate property that you purchase
before or during construction.
The beauty of a pre-construction condo purchase is
that you can secure your new home
with a small deposit first
— usually around 5-15% of the total purchase price.
There are also no mortgage repayments until closing,
so you won’t have to start paying
until you can move in which is 2 – 3 years later.
Therefore it gives you extra time to save
for the down payment and the mortgage.
Now that you know what a presale condo is,
how does buying a pre-sale condo work?
It may seem daunting but we will take you through
the entire pre-construction purchase
process in just a couple of steps.
First, give your finances a health check
Being well prepared financially will
set you up for a smooth pre sale experience,
and there are a few things
you’ll want to have checked off your list.
First, you need to understand
your cashflow in the next 2-3 years.
If you’re an employee,
are you up for a big promotion or
will your salary likely stay the same?
If you’re a business owner,
will you need to invest heavily into your business
in the next couple of years or
will you have some extra saving flowing back to you?
Understanding all these factors will determine
if buying a presale condo is
a wise idea for you right now.
Next speak to a mortgage specialist
to get an idea on how much you can afford to spend.
Even though you don’t need
to get a mortgage right now,
they are willing to walk you through the process,
so you can get an estimate
what’s your borrowing power.
or what kind of income you need
to hit before you can get a green light.
Once you’ve got your finances prepared,
you’re ready for the fun part.
Take a look online and
see what construction is coming up.
There will likely be developers advertising so
look at what information they have on their website.
The most important thing is to
review the available floor plans and prices.
You’ll also want to check out the
colour schemes and material choices available.
Once you’ve narrowed down a condo
then it’s time to go visit the sales center and take a
look at the showroom to give you a better idea of
what the finished space will look like.
A benefit of a presale is sometimes
you are able to get upgrade options like
marble counters, better appliances,
customized handles or choose a colour scheme.
However,
the ability to make changes is dependent on the
developer and is only available early on in the project.
Once construction reaches a certain point,
these won’t be able to be changed –
so be sure to chat with the sales consultant
early for more choices.
Once you’ve decided on the unit,
you need to sign the contract and pay a deposit.
Note even though you sign the contract,
you have not bought the condo.
Rather it’s a contract that binds you
to buy the condo at a later date.
I recommend you have your real estate professional
to review the contract for your own peace of mind
before signing and making the deposit payment,
which is usually,
the between 5% and 15% of the total sale price.
Depending on the contract,
you may need to pay instalments when
certain stages of the project are complete.
Check with your lawyer or real estate agent
about the details of the contract.
Once paid, the amount is kept safely until you close.
How long the building process takes depends
on what stage the developer is in but
it can take anywhere from 1 to 3 years on average.
On rare cases it can take longer if something
like COVID occurs that delays the process.
During this time, the developer will send mails
and amendment to keep you up to date.
usually 6 month prior to closing,
the developer will contact you
to give you a series of date.
Like closing date, inspection date, and etc.
make sure you mark it down so you don’t forget.
And also since few year pass by,
your financial goal might change.
So you might not want this property anymore
as you don’t want extra mortgage.
Therefore, you might consider
letting someone else to take over it.
This is called assignment.
And this only happens if the
land developer lets you to do so,
There are chances they don’t let you
so make sure you go over the contract.
When the building is close to completion,
you’ll be invited to an information session to
help prepare you for the next steps:
closing and move-in.
But before you close,
you’ll have the opportunity to inspect your
condo to make sure everything is in order.
You’ll get to walk through your condo and
note any items you’d like to have reviewed
by the construction team.
Now building is completed and
it’s time to get your mortgage approval.
Usually you can lock in the rate
6 month prior to your closing.
If you worked with a bank or a mortgage broker,
it will make the process fast and efficient.
Your lender will let you know what’s required,
such as recent pay stubs,
and bank account statement
You’ll have to decide whether you want
a variable mortgage rate or a fixed rate.
Both have pros and cons depending on
what type of market you are in.
A fixed-rate will give you peace of mind that
if interest rates increase,
you won’t be paying more monthly,
however,
if you are in a market with high-interest rates,
a varied rate might be more beneficial.
If you’re unsure, talk to a mortgage specialist
about your options and which is best for you.
You’ll also need to get a lawyer or notary who
will be able to explain the taxes you’ll need to
pay like GST and home transfer tax.
You’ll be given a summary of the
closing costs payable ahead of time,
so you’ll know what you need to pay
when the closing date arrives.
now all the document is signed,
you got the key!
Then you can pick the date to move in!
and congratulations.
Now you become a home owner!
Now you know the process,
it seems long and lot of things to watch out.
you might be wondering what’s the
advantage of buying a presale condo then?
For starters, the median price of a presale condo
is usually significantly lower than a traditional
single-family home or an already built condo.
This makes buying a condo in your
desired location far more achievable.
You are able to lock in the price.
Hopefully, the price of real estate goes up during
the time it takes the developer to build the condo.
No matter what,
the price of your condo stays the same as the
price you agreed to pay in the initial agreement.
In addition, new buildings are typically more techie.
Like energy efficient for example,
saving you money on power bills.
There’s also the added bonus of minimal repair
and upkeep costs when compared
to a traditional single-family home.
Another main advantage is that it gives you
time to get your finances in order.
When buying a presale condo,
you only need to pay a deposit upfront with the
remaining balance only due
once the property is complete.
This means you’ll have more time to save
for a larger deposit and still lock in
today’s market value for your new condo.
However,
buying a presale condo isn’t for everybody.
As with any property purchase
or large investment,
it’s important to be aware of
any risks to watch out for.
As you can’t see what you’re buying yet,
it’s a good idea to visit a sales center and talk to
the sales agents but there’s always a risk that
the condo won’t be built how you image it.
I heard cases that all the cabinet is not in place
or wrong installation at the time of completion.
It’s rare but it happens.
And just Like any major construction project,
complications can arise and
timelines can be challenging.
If you don’t have any rigidly or ability
to juggle your life and finances around a bit,
then perhaps presale is not a good decision for you.
Do your research on the developer and make sure
they have a good reputation in the market.
Look at what other buildings
the developers have built in your city
and see what type of quality they have.
Lastly, in a very very rare occasion that
land developers have gone bankrupt,
leaving those who have invested in
presale condos with nothing to show for it.
Sure 90% of the time you can get back your money.
But it’s very time consuming and
also you lost that 3 – 4 years of time.
Oh and not to mentioned
that the markets might change.
When COVID hit,
some people lost their jobs and weren’t
able to complete on their presale condos.
If you can’t complete it,
then there are a lot of penalty and fees.
The bottom line is you need to weigh the risk
and potential reward of
buying a condo before it is built.
Talk to your investment advisor,
mortgage broker and other financial experts
before you decide whether it’s right for you.
That’s it for this video.
I hope this will help you
with your home purchasing journey!
Hey thanks so much for watching!
This is Thomas, and I will see you in the next video!