There are many advantages to buying a pre-construction condo from a developer. It can be the ultimate in customization; the ability to pick where in the building you are located, the condo’s layout, and other features and finishes.
But it may come as a shock that the stunning model suite you saw when you decided to buy may not look like condo you’ll be living in and the final cost may be a lot more than the price you thought you were agreeing to.
Buying a new condo can be risky business; here’s what you should know.
Know what you’re signing
Have a real estate lawyer – one that is familiar with condos – review the builder’s contract. A lawyer will be able to advise you of any fine print in the agreement, including any “adjustments” chargeable on closing; these are fees that you may not be aware of that will be added to the purchase price when it comes time to close the deal.
A lawyer may also be able to add clauses to the contract to protect your interests, including having floor plans, including room dimensions, finishes or other details written into the contract itself.
Don’t believe everything you see (or hear)
The glossy brochure and dazzling model suite may not be representative of what you’re really getting. Your ceilings may be a foot lower than the ones in the model suite and the den on your floor plan may be a walk-in closet by the time you move in.
If it’s not in writing in the contract, the glossy promotional items mean nothing. Verbal assurances by the builder’s real estate agents are also not binding. In fact, they are not legally obligated to tell you certain things unless you ask. Remember, they are representing the developer’s interests, not yours!
Consider using your own real estate agent
Having your own real estate agent will ensure your interests are represented. They can help you navigate a tricky market, and help you avoid common mistakes. Best of all, it’s free! If you haven’t registered at the development’s sales site, the developer will pay you agent’s fees.
Do your research
A realtor can be an invaluable source of information but they may not know details of a developer’s track record. Find out what other condo developments (if any) they have completed. Don’t rely on the developer’s website alone. Some digging on the Internet can also prove helpful, as there are many discussion boards, forums and articles discussing the ins and outs of buying condos in new developments.
Be aware of surprise costs
Be prepared to pay between 1.5 and 2 per cent in closing costs. These include the “adjustments” mentioned above, which range from the unit’s share of the building’s sewer connection charges and education development charges to estimated property taxes for the year after closing and the initial reserve fund contribution.
Also watch out for equipment leasing; developers can pass on the cost for everything from water heater to elevator rentals to the buyer.
