The best deals on pre-construction properties are in their very early stages after they just release. That is when builders offer the best units at the lowest prices. As the project sells out, the builder releases additional units at higher prices. Agents are often given first choice on new projects. (Selling through the builder’s sphere of influence, which is real estate agents that they work with often, is the builders cheapest means of advertising.)

The average down payment / deposit price in the city is 20% of the purchase price, but some builders offer deposits as low as 10%. The deposit is usually payable in four segments of 5%. The deposit is held by the builder’s lawyer in a trust account.

If you are buying from a reputable builder, your purchase price will include a Tarion Warranty, which covers your deposit up to a maximum of $20,000 in the rare chance there is a total loss. The deposits goes towards your down payment when
the condo or home is complete.

If you’re buying the condo as an investment:

– The deposits (around 10-20% of the purchase price) 

– The Lawyer’s fee (around $1300-$2000)

– The agent’s fees to resell (around 5% of the sale price)

– Half the profit is taxable at 25%, minus deductions like the agent fees and lawyer’s fees.

– Some builders charge a fee to the seller when they resell the unit. (Around $2000 to as high as 1% of the sale price)

If you’re buying the condo as a home:

– The deposits (around 10-20% of the purchase price)

– The Lawyer’s fee (around $1300-$2000)

– The Land Transfer Tax (at $400,000 the LTT is $8200; but for a first-time buyer it’s $2475)

– The builder’s development levies and fees (Theoretically, these can be as high as $50,000 if you don’t cap them in the offer)

– The Nickle and Dime charges. (Some builders will add small charges like a fee for each time they cash one of your cheques, a fee for dispersing their building loans, or double maintenance charge for the first couple months to build up the reserve fund) 

– The Tarion Warranty (maximum cost $1800)

You need to make sure you buy from a reputable builder, with an outstanding record for providing stellar customer service. Only consider a builder with awards in customer service and build quality. That way you are certain that previous customers are happy with their purchases, and found the floorplans, amenities, and build quality was what they expected. An experienced real estate agent that sells preconstruction knows the cities top rated builders, and can show you the builder’s previous projects, so you can see their build quality, and materials. A real estate agent will also help navigate the sales process, negotiate the contract, and protect your interests. Also, the real estate agent’s fees are paid by the builder.

With the purchase of a preconstruction unit, you get a 10-day cooling off period where you can walk away from your purchase after signing the Agreement. You can walk away for any reason, and you recover your initial deposit in full. While we encourage our clients to sign the Agreement if they are absolutely sure they want to go ahead with the purchase, in some cases it’s better to get your reservation in and sign the Agreement – that way you don’t miss out on the unit you want while still giving yourself some time to get your affairs in order. During the 10 day, it’s key to have a thorough review of the Agreement done by a legal team. They’ll ensure you’re Agreement is in order,
and they’ll review it with you so you understand what you’re getting, of any fees that are involved, as well as any potential risk with your purchase. The cooling off period is also the chance to negotiate with the developer on things like fees, incentives, and anything else you can negotiate on.

There are a lot of moving parts in construction, and a lot of people and processes to coordinate in addition to many factors that are outside of your control, even for the most well planned out developers. Which means there will likely be a delay of some sort on your project’s occupancy date. This typically is 3 – 6 months, but can be upwards of a year, depending on the project, developer and builder experience, and other factors. To set your expectations from the get-go, it’s prudent to expect a delay of 6 months – the developer will always keep you in the loop throughout the construction period though.

Interim occupancy is the period between when you are given the go-ahead to move into your unit, and before the building is officially done and you take ownership of it.

To explain, let me use a simple example: Your unit is on the 3rd floor of a building that will be 12 storeys tall. The developer is completing the project floor by floor, starting from the lower floors.

Your unit is ready in August, even though floors 5 and up, and the building amenities, are not yet completed – you’ve been given the go-ahead by the city that you may move into your unit. You move in, pay interim occupancy fees (which are equivalent to the interest on the remaining balance on your purchase price, plus estimated maintenance fees and property tax)

The building is officially completed in December, at which time the condo board is formed and you officially take ownership of your unit. At this time, your mortgage period begins, and you now pay your mortgage each month plus maintenance fees. Contrary to popular belief, developers do not (and legally are not allowed to) make a profit on the interim occupancy fees. They simply pass on the interest on the outstanding balance plus any maintenance and property taxes owed during that time. And whether you can rent your unit out during interim occupancy will depend on your Agreement. If this is something you are looking to do, it’s important that this option is included in your Agreement at the time of purchase.

When you are negotiating your Agreement during the cooling off period, there are certain things you absolutely should push back on, and certain things that you should ask for. In the worst case, the developer says no – so no harm in trying! 

Certain fees – like Assignment fees, interim occupancy rental fees, and closing fees – should be pushed back on. Either removed or lowered. The same goes with development charges and other levies. Typically, these will be capped – meaning that you never pay more than that amount upon closing. 

Since these charges can change by the time the project is completed, it’s imperative that you protect your risk of a large increase. That’s what the cap is there for – and you can always request that these caps be lowered. 

Developers will almost never negotiate on price. Especially now since demand is so incredibly high. But, depending on what project you’re buying into, and at what construction stage you’re buying at, they may throw in upgrades, or discounts on parking and/or storage, and so on.

Assigning is when you sell the right to your unit to someone else prior to the project being completed and you having taken physical possession of your unit.

You are, at this stage, assigning your contract, or right to take possession of the unit upon close. Most projects will allow assignments, even if there is a fee to do so. If you are looking to assign or want to protect yourself in the chance you may not be able to obtain a mortgage upon closing, then make sure you have the right to assign included in your Agreement.

Many investors use assignment sales as a way to make a solid return without having to go through the process of getting a mortgage. Rather then alter the price, which developers like to advertise on, they will offset the price with upgrades, parking, and other incentives that help you reduce your total cost.

In some cases, developers will have to alter the plan for the project – such as cutting certain amenities or changing layouts in some way.

However, you are typically protected from any substantial changes in your Agreement. For instance, your unit square footage will stay more or less the same, even if the layout changes slightly.

This is something to keep in mind with preconstruction, however, and keep this in mind as far as your expectations go when you are making your purchase.

The developer will keep you informed throughout the construction process, so you are made well aware of any changes throughout.

If you are an end-user, you don’t have to worry about HST – this is already baked into the purchase price.

As an investor, however, you will be required to pay HST on your unit. You can then apply for an HST rebate through the Canadian government. There will be requirements – such as holding the unit for a minimum of a year, in order to be eligible for the program.