Do your due diligence before you proceed
Advice When Buying Pre-Built Condominiums
George was excited when he bought his newly built condominium, but he noticed that the showroom model was larger than the one he bought. The salesperson assured George that he would hardly notice the difference. It turned out that the difference was significant.
Buying a pre-built condo is exciting. You will be the first to experience it. However, it is difficult to look at a floor plan and imagine the actual size. If the builder does not have that specific model on display, look at resale condominiums with similar sizes to have an idea of the space you will live in. Sometimes the floor plan is larger than the floor area because the plan may include internal and external walls as well.
Expect long delays when buying a pre-built condominium. In some instances, delays can last for years. The builder must sell a certain number of suites before construction begins. Once the building is completed, you will be charged occupancy fees known as “phantom rent” to cover the builder’s monthly expense plus property taxes and maintenance until the building is formally registered as a condominium.
Condominium living is not for everyone with regards to the confined space, the rules, and the regulations. Many buyers would rather spend more time shopping for groceries than buying a condominium. First, make sure that you are prepared to live in a condominium. The purchase of sale agreement should be reviewed by a real estate lawyer. There is a ten-day cooling off period when purchasing a pre-built condo and after the time expires, you are bound by the contract.
When purchasing a pre-built condominium, height matters. The higher the suite, the better the view but the higher the cost. The view is very important because you don’t want to be overlooking the garbage pickup area or the garage entrance. If there is vacant land, find out what’s going up next because another building might block that view.
The best advice is to buy the largest suite you can afford. Small suites such as studios are much more difficult to sell when you are planning to move. It is better to buy premium, live in it and then sell premium. Avoid buying close to elevators because of the noise factor. It is a good idea to buy the parking space and locker as well because if you do not use it you can easily rent it out. When buying parking spaces and lockers, be careful where they are in comparison to your suite. You do not want to spend quality time navigating between parking, accessing your storage and going to your suite.
With pre-built, always request a condominium disclosure statement. This will give you an idea of the rules, governing documents, and budgeting for the first year. Some condominium buildings do not allow pets, and this could create a problem for a purchaser. As a buyer, you would have an idea as to the estimated condominium fees. Usually, it is relatively low in the first year and jumps substantially after that. The more amenities in the building, the higher the maintenance fees. Some builders, to reduce construction costs, would lease equipment such as the heating, cooling and hot water systems, and this would trigger an increase in condominium fees.
Pre-built condominiums take time to complete. If the market is good, then the value of your suite will appreciate. In a declining market, price drops can be devastating. In some instances, prices can drop to the extent that wipes out your deposit. If a buyer fails to close, they can be sued as well. An increase in interest rate can trigger a decline in price and at the same time an increase in your mortgage payment.
The bottom line is to do your due diligence before you proceed. First get your bank’s blessing, then research the builder and consult your lawyer. The next step is to continue to save because it will be worth the wait.