Buying Pre-Construction - BRING AN AGENT

Bring a licensed agent

Sometimes buying a pre-construction condo can be a good idea. Many times, it's risky and it's a bad idea. 

How can anyone know what will happen 3-5 years into the future?

How do you make a good decision and what should you look for in your purchase? Ask a licensed agent. 

BEFORE you go to the builder sales centre, speak to a licensed agent, and make sure to go together on the first visit.* 

So why is that though? Here are 6 reasons: 

1) your agent SHOULD BE LICENSED, and therefore working for your best interest, not for the builder. 

2) repeat - a builder sales rep is working for the builder, not for you. They will give you a booklet, show you a nice building model, and will give you a price list and inventory sheet. These are units they release periodically. 

3) a builder sales rep is typically not licensed. They sell you units that are released at that moment in time. Sometimes better units come up later (for more money). They might want to sell you the one that is the hardest to sell. You know, the one above the garage or garbage entrance, or has low light or a weird layout, maybe with a column or two. 

4) a licensed agent will ask the builder reps about closing costs (and making sure they are capped at a fixed amount on closing), development charges, assignment privileges (ability to sell your contract to a new buyer if your situation changes), will try to negotiate upgrades if available, and any other questions you need to know. 

5) a builder rep will take you through the process to buy, but may not get specific on the consequences if things change in the future.. for example, interest rate increases, builder delays, mortgage challenges, builder extortion fees before closing, and proper referral to lawyers. 

6) CHOOSE A REPUTABLE BUILDER WITH A TRACK RECORD OF SUCCESS OVER A LONG PERIOD OF TIME. Your licensed agent should know who they are, and if they don't, choose an agent with experience in pre-construction sales. 

*if you don't bring your licensed agent on the first visit, the builder typically won't pay a commission and subsequently your licensed agent will not be able work for you in the transaction, for your best interest. 

Buying A Condo, Think About Resale

Toronto Condos

There are certain things to consider when buying a condo. 

One of the most important things to know when buying a condo is actually not just the unit or the actual building, but focus on the resale potential. 

Make sure it has what the next buyer will want: 

• a nice view
• an open balcony
• not above the garage entrance or garbage area
• not beside the garbage chute

It is also important to get as much square footage that your budget allows. If you can get the den, get the den. If you can afford the 2nd bedroom, absolutely get the 2nd bedroom. 

In the future, space is sparce, and people in the future will pay to have more of it. 

Builders are always building smaller units, so get as much as you can today. 

Airbnb and STR's

Airbnb Furnished Rental

Airbnb and sort-term rentals (STR's) are popular and can be profitable, but buyer's should be kept up to date on current municipal and provincial regulations. 

Before buying a property, make sure to research the rules and regulations both for your principle residence, and if it's a condominium, if it is allowed per the condo rules. 

In Toronto, STR's are parts of a dwelling unit that are rented for less than 28 days, and must have a City issued registration number. 

Currently there is a City has a one-time licence application fee of several thousand dollars (in Toronto the cost is $5,321.85 and an ongoing fee of a $1.06 for every short term rental night booked through the company).   

Make sure to understand the rules before operating an STR business and make sure to have a good accountant on board to help with your business. 

Photography

When people are looking to buy a house or a condo, or a pair of shoes or jeans, or tomatoes or broccoli, they will click to see more if the photos are really good. 

If the photos are really good, they are likely to proceed with asking questions and eventually buying. 

Everyone has a camera on their cell phone, and in some hot markets it matters a little bit less, but nothing is more appealing to the consumer than professional photography.

If an agent skimps on taking professional photos, it signals that they are going to skimp on negotiating, and it is very likely that you will get a skimpier price. 

If your agent isn't promising to take professional photos, perhaps ask why they won't spend a few hundred bucks to sell your property that is mostlikely worth several hundred thousand dollars. 

Bidding Wars

Bidding Wars

Bidding Wars - people hate losing them, people hate winning them. 

Buyers hate them, Sellers love them. 

There's something unsettling about being in a blind-bidding situation and having no idea if you are close, far, or bidding against yourself. 

The overall outlook should be to remember your budget, and be willing to walk away if you are near your max. 

Every bidding war has a different chance of success, and several factors will determine the chance success, including the area and the starting list price (whether it is very low or priced at market price). 

After December 1, 2023, Sellers will be able to decide if they wish to disclose the contents of offers, but Buyers will not be able to make that decision for themselves. 

Buyers should understand their budgets and not get swept up in the emotional whirlwind of winning. 

The other factor is whether your mortgage lender will have a different opinion on the purchase price, so make sure that your Offers are likely to appraise (your Agent should be able to guide you with pricing), and be prepared to deal with appraisal fallout if more cash is needed. 

Communication is key here, and good discussion about strategy before you submit your offer is recommend. 

How To Buy A House

 So how do you buy a house? Or a condominium? 

Whether you are traditionally employed by a company or institution or are self-employed, the process will be similar as we see in the following points. 

The very first day: Call a real estate agent and have an in-depth conversation about what you want, and decide if it will be a good fit working together. They can help navigate the overall process and can refer professionals if needed, for example mortgage brokers, lawyers and so forth. 

1) Mortgage Broker - this is the first person to call and determine what your budget is. You will fill out a mortgage application, do a credit check and your mortgage broker will find the best lender out of their database. It is recommended to work with an experienced mortgage broker with several years of experience and good connections in the lending space. 

2a) Real Estate Agent - your real estate agent will work to narrow down properties in your search and arrange showings based on your preferences including budget and area. They will also help refer other professionals if needed: Home inspectors, lawyers, appraisers, surveyors, mortgage brokers etc.

2b) Real Estate Agent - once you find a property you would like to buy, your agent will will negotiate the price, conditions, clauses and closing date, and will help to explain the process of successfully closing. Pick an agent with experience in the industry as there are complexities in the process. Agents are for your benefit and protection, choose wisely! 

3) The Lawyer - your lawyer will be the point of contact once you have an accepted Offer on a property. They will connect with your mortgage broker and lender to transfer funds to the seller on closing, and will assist with title searches and even permit lookups if needed. 

4) Closing - your lawyer will let you know when title is transferred on closing day, and when you are fine to pick up your keys and enter your new home.

5) Celebrate! - buying a new property is challenging and complex in process, so enjoy the day! 

Deposits

Bank Draft or Certified Cheque

Why do we need a deposit with an Offer? 

It is a show of good faith that the buyer intends to close their purchase transaction with the seller. There is no specific requirement for how much the deposit needs to be, but in big markets, 5-6% is desirable to sellers. More than that may be offered to the seller to show their strength in financing. 

When an Agreement of Purchase and Sale has been signed by all parties, typically a deposit will need to be delivered to the listing brokerage in a specific amount of time.

The Agreement may say "Upon Acceptance", "Herewith", or "As otherwise agreed",  and there are different timelines that apply.

• Upon Acceptance: the deposit will be delivered within 24 hours after acceptance. That means that it's 24 hours, not business days. If that means it's on a Sunday, that's how it goes. Appropriate adjustment to verbiage is needed if the Buyers cannot deliver it on Sundays. 

• Herewith: the deposit will be delivered immediately after acceptance. Typically this applies in multiple-offer scenarios where buyers show they are ready to hand it over to the seller's brokerage if their offer is accepted. Sellers like this, and ensures that there will not be a problem where the Buyer does not deliver it as agreed. 

• As otherwise agreed: the deposit may take more than 24 hours to be delivered to the listing brokerage, so this would require specific verbiage to clarify the timelines. 

It is important to understand that once an Offer is accepted by all parties, the deposit is due in the timeline agreed to. If the buyer does not deliver it by the due date/time, they are considered to be in a legal breach, and the Seller has powers available to them to pursue legal action, and/or potentially sell to another Buyer. This is a very complex scenario, so it is best to ensure funds are available to deliver it on time.