Welcome to this month’s instalment of ‘Dear Urbaneer’ where I answer my clients’ real estate queries. With so much to consider when buying or selling real estate, there are always abundant questions, which I am more than happy to answer! This time, I’m helping a client who is thinking about buying a condominium being sold by a developer in the preconstruction phase.
During my property search, I've toured numerous condominiums, but I haven’t been able to find anything that suits my taste, desired layout and budget. I’m thinking about going the preconstruction route as I like the idea of getting a brand new product, but I am a little nervous about buying my home that way when it still has to be built. What should I be looking for when I’m buying a condo preconstruction?
With more and more homebuyers favouring condominiums as an affordable housing type and the fact it's the only new supply of housing being created in the central core of the city, buying a condo preconstruction is commonplace.
However, as a realtor in his 28th year who began his career in the preconstruction condominium and loft conversion market, it's critical you research every developer before proceeding with a purchase, especially when it comes to buying a condominium where there are many variables to consider. I've had the good fortune of working with some fantastic developers and some not-so-good groups, so I encourage you to do your homework.
Have you read this informative post of mine Five Points to Ponder Before Buying a Condominium? And check out this piece that explores the history of condominiums in Toronto and my query: Does The Exterior Of A Condominium Influence Value?
There are a number of upsides to buying pre-construction, namely that you get to benefit from a new home warranty and have the opportunity to choose your desired finishes right out the gate, which is nice. There is also the likelihood that you’ll need to wait upwards of three to four years while the condo is constructed and registered, which would give you the opportunity to save more. The price point can often be attractive as well, giving you the chance to lock in at a competitive price, especially if the developer is offering an incentive package for those buying early in a project. However, there are developers who offer their product with its projected future value included in the asking price, so I encourage you to research how much similar sized resale units are garnering nearby, so you can determine whether this is the case.
There are additional downsides to be cognizant of as well, namely surrounding risks on whether the project will ultimately be built and the possibility that you might not be as pleased with the quality and delivery of the finished product. I did touch on several of the pros and cons of a pre-construction purchase in a past Dear Urbaneer On Buying A Toronto Condominium Pre-Construction. In this post, I also outline what prospective buyers should expect, in terms of subjects like deposit, hidden costs, as well as some background information on aspects like the interim occupancy period necessary before taking ownership or buying a newly-completed but still unregistered condominium by assignment. If you are thinking about buying your condo preconstruction, you’ll find this post an essential reference guide.
As with all real estate purchases, your chances of satisfaction and happiness as a homeowner rely heavily on the weight and extent of your due diligence. Here are some additional critical questions you should answer before you make a purchase.
A Base Unit Versus Available Upgrades - And What They Cost!
While you complete your due diligence, determine what exactly is included in the list price of a prospective unit and then confirm what upgrades are available, and what they will cost. Set a budget for your upgrades and prioritize your upgrade wish list accordingly. It’s important to select upgrades that will help you to love the look and feel of your home, but also be mindful of resale. When you're in the sales centre, anticipate the Model Suite(s) to be presented with numerous upgrades which cost sums over and above the base unit.
When it comes to upgrades, developers will frequently offer quartz or stone countertops at an additional cost which are a big draw. Flooring is an important upgrade as well, whether it be in the entertainment areas or the washrooms. Pay attention to the quality of both the standard and upgrade options. Cheap finishes will translate into a lower resale price when the time comes to sell, so it may be prudent to upgrade before your take occupancy yourself, as switching out flooring while you live in a space can be onerous and time-consuming. An appliance upgrade may be an intelligent option as well, as the cost can often be recovered on resale. However, it's important to complete your due diligence early to compare the prices being charged by the developer and the costs being charged by retailers. This is because developers build some of the largest profit margins in their Upgrade Packages.
Visit the developer’s design centre ahead of time to get a sense of colour palettes and material finishes, but be aware that the items in the sales centre may not be the specific options available when it comes time to select your preferences. The model suites are intended to show prospective buyers what the different finishes will look like, but those materials may not be available in the future. The Agreement of Purchase and Sale will explain this in detail, and don't be afraid to ask questions. The sales centre staff are accustomed to these kinds of queries.
Wondering about how to get the best bang for your investment in your condo? Read Dear Urbaneer: How Do I Boost The Value Of My Condominium?
Remember that a condominium tends to get dated more quickly than freehold dwellings because the pace of new condominium construction is constant so trendy new finishes and fittings are being introduced to the buying pool frequently. If you are intending to stay put for an extended period, be cognizant you may need to refresh your suite in advance of selling if your objective is to realize top dollar.
Is Outdoor Space Available And Is The Developer Charging A Significant Premium?
Having outdoor space is essential to many buyers for their physical and mental health. If this option is available, pay attention to the dimensions and what can you expect in terms of view and noise whilst sitting outside? Are there restrictions around what you can place on your balcony/terrace or how you will use it? Does it come fitted with a water line, electrical outlet or gas barbecue hookup? Will it fit a cafe table or lounge chairs? There's no question having a knockout balcony or terrace is attractive to future buyers, garners a premium, and can really help your unit stand out from the competition, so gets as many answers to these questions as possible.
I explored this in detail not too long ago in my post called What Is The Value Of A Condominium Balcony Or Terrace?
Are Deeded Parking Spaces And/Or Lockers Available For Purchase?
It's not unusual for a developer to have limited parking or storage units for sale, and they may be restricted to specific or more expensive units. If parking or a locker is available to you, inquire as to what are your choices? Will the developer provide the dimensions of the parking or storage lockers? Are you able to choose a specific deeded unit, or not, and how much are the common fees for each? In some cases, the developer has the right to assign the specific unit to you closer to the delivery date, but obviously it is preferable if you are able to personally choose a size and location that suits your required needs and intended use in advance.
Review The Exact Sightlines You’ll Have Looking Out the Unit
Remember, your daily experience will be influenced by what you are faced with -literally- when in your home. Obviously, when looking at a condo that is already built, the sightlines are evident when you walk through the door. In a preconstruction scenario, however, you need to review the information available and determine how the sightlines will unfold.
With respect to sightlines, pay attention on whether the vantage point of the proposed condominium unit you're considering faces a busy street, a transit stop, blue-bright streetlamps or directly into electrical wires or satellite dishes? Does it face a property which could potentially be redeveloped into a complex with a higher density or large building envelope, potentially blocking sunlight or your views, compromising privacy, or introducing a noxious or incompatible use? Will it get sufficient natural light? Consider the location in the building of the condo as well as its aspect and the number and size of windows.
Is The Suite On Top Of Retail?
Yes, it’s super convenient and desirable to have retail opportunities located right in your building, but you need to consider the potential negative impact of having retail mixed in with your residence. What sort of retailers are proposed or restricted? Might they be noisy, operate late hours, or attract vermin? Are there loading docks for retail, moving in and out, or automatic garage doors to the underground parking which can impact quiet enjoyment? What about the location of garbage and recycling pickup? If it's close to the suite you may hear trucks idling, backing up, or moving bins at all hours of the day.
Are You Satisfied With The Proposed Amenities? Will They Benefit You?
Consider your lifestyle now and think about what amenities you require onsite. Is having a gym in the complex important? How about a swimming pool? Is access to multiple common areas of value to you? While having a host of amenities certainly gives you options, don’t forget that you will be paying for them in your monthly common fee. Don’t pay for amenities that you will rarely (if at all) use. And be aware that whatever promotional materials the developers provide conveying the lifestyle being offered, the contract does not specifically outline exactly what will be delivered on completion. I've seen many buildings being registered with fitness centres which are ill-equipped, media rooms which have mediocre equipment, and party rooms that are bland and uninviting.
By the same token, don’t compromise on a building that doesn’t offer amenities that are critical to enhancing your lifestyle.
What Are The Construction Specifics Of The Unit?
If you're serious about a particular unit, have the developer explain in writing the construction specifics of the suite. For example, is the building made with concrete slab floor plates? Having floors and ceilings made of concrete is preferrable than wood to muffle sound transmission. The same goes for demising walls, so confirm what they are constructed of, and what the STC (sound transmission coefficient) rating is. The code required by the National Building Code of Canada is a minimum of 50 - which means 50% of the sound does not come through, so the higher the rating, the better. And be aware that despite the higher the number, a noise like the base in a stereo speaker, the pitch of a musical instrument, of the dropping of a cast-iron skillet is less likely to be blocked.
Of particular note, if the demising walls are not concrete, but are steel frame with insulating blankets and resilient channels with one (or hopefully two) layers of drywall, there can be serious sound issues if the installation is inferior. A wall could be built perfectly excepting one error the size of a pinhole - like around an electrical outlet - and unfortunately, all the sound from a neighbouring unit will come through that pinhole. You should ensure the purchase includes a warranty to cover these kinds of defects.
Details Detail Details!
There are a lot of details to pay attention to when you're looking at a floor plan and the Model Suite is more inspirational than accurate. For example, will the suite be delivered with popcorn stucco ceilings or exposed concrete that looks like it was cheaply formed? Are you able to confirm where the bulkheads are located which accommodate the HVAC ductwork, or the plumbing lines for the unit above? These sorts of details can have a huge impact on how clean the lines of a space will appear, in addition to how well-proportioned a room presents.
The location of lighting, electrical outlets and switches can be notoriously problematic in some condominiums, so it is wise to proactively enquire in the pre-construction phase if only to see if any information can be disclosed or provided. Count on the lighting fixtures that are included in the purchase to be cheap, and be prepared to upgrade them after taking possession (along with dimmer switches). And understand that it’s difficult, if not impossible to relocate in-ceiling outlets once a condominium has been constructed. Also, while it's common to have electrical outlets for light fixtures in kitchens and washrooms, they may not be present in the entertainment or sleeping spaces, which can be problematic if your intention is to showcase your art collection. Be aware of what's important to the living environment you want to create, and ask the developer the necessary questions so you are aware of whether you have to make compromises to secure the unit you covet.
How Much Smaller Can A Unit Be On Delivery Than What's Stated On The Floor Plan And Still Be Considered A Valid Contract?
The developer's Agreement of Purchase and Sale should mention the variance any unit can be from the square footage on a delivery versus the size stated on the floor plan. Also, be aware that the total square footage of a unit includes the entirety of an exterior wall and half the width of a demising common wall between two units. In other words, the calculated square footage of the unit is not the livable square footage, and that the units which have more exterior walls may read as larger but may, in fact, not be as big as units which have more shared party walls. If the unit with more exterior walls also has more windows this may be a suitable trade-off, so pay attention to the size of each unit and the list price as a price per square foot.
Are Any Of The Mechanical Or Utility Components Rental Items?
When determining your cost of living in a particular condominium, you need to have a comprehensive picture of all the costs that you’ll be responsible for. For example, is the heat pump, hot water tank, or Energy Recovery Ventilator delivered with the condominium a rental unit? If yes, confirm how much the monthly rental cost will be so you are comfortable knowing what your total operating expense will be including the common fees (including locker and/or parking space), annual property taxes, independent utility costs (if additional) and communication services. You don’t want to be surprised with additional costs that you weren’t expecting.
Click here to read Dear Urbaneer - Understanding Condominium Common Element Fees.
Read The Contract In Detail And Don't Be Afraid To Negotiate
It's not unusual for a developer's Agreement of Purchase and Sale to include a number of give-away clauses which are placed in it so the lawyers representing the Buyers can strike them out so it looks like there's been some 'negotiation'. Be prepared to sleuth for potentially problematic clauses the further you delve into the contract too, as buyers (and sometimes their lawyers) tend to get tired of multiple pages of legalese and their attention to detail can erode. Look for escape clauses that allow the developer to cancel the project if there are issues obtaining approvals or financing, And explore the contract for additional charges - which can sometimes be significant - that oblige you to pay for the cost of utility hook-ups, education and/or park levies, and enrolling your suite in the Tarion home warranty programme.
Ensure your lawyer catches all of these potential items so you can ask the developer how much those expenses will realistically be. You may be able to negotiate with the developer and cap all these additional costs so they don't surpass a specific amount in aggregate that you're comfortable with, in order to protect yourself.
With experience in the Toronto real estate trenches for nearly three decades, I am grateful for my knowledge and experience afford my clients a unique vantage point on how to navigate Toronto real estate successfully and profitably.
May I and my team be of assistance to you, or someone you love?
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If you enjoyed this post you may like these other Urbaneer blogs!!
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With a multi-disciplinary education in housing - and 28 years experience in the property market - I believe the search for Home requires gently guiding you through the search process without pressure or hassle. In fact, I'm renown for talking you out of a property purchase when I truly believe there are better options.
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Steven Fudge, Sales Representative
& The Innovative Urbaneer Team
Bosley Real Estate Ltd., Brokerage - (416) 322-8000
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