There are two sides to every coin. It’s always a good idea to find out as much as possible about purchasing in new developments. The first step you need to take is have a brief discussion, with your Realtor®, about "pre-construction" pricing and discuss the points mentioned below. Remember, there's a difference between buying around the developed urban areas and going a bit "out of town".
Here are a few points to ponder on so that you can make an informed decision:
The main benefits of buying in a new development are the sparkle and shine of a new home with new appliances, modern fixtures and the fact that you’d be the “first” person to live in it.
You can also choose the colours and designs of your tiles, cabinets, fixtures, etc. This will give you a sense of excitement in the process.
You’d also get all the warranties of a new home.
On the flip side, any upgrades you may want, will normally be charged for, and normally, at a higher price. If they offer you say $10,000 worth of upgrades, I’d say, take the $10,000 as a credit, in the purchase price, and get the work done yourself. You’d possibly get more out of that money as it’s normally less expensive if you upgrade on your own. Unlike resale homes, where you'd get someone else's choice of upgrades which may, or may not, be to your taste.
Most of the time new home purchases are done off floor plans, which means you have to visualize what the sizes/layout will be like. This can sometimes be a bit of a challenge. Also, if you see a model unit/home, be sure to ask what fixtures, cabinets, tiles, countertops are standard and which are upgrades as model homes are normally staged to look great.
In the case of resale homes, what you see is what you get. You know exactly what size/layout you'd be getting. You could actually visualize your furnishings in that layout. Looking beyond the staging items, you'd know the quality, and condition, of the fixtures, appliances, etc. You can also be pretty sure that the possession date (closing) will be as stated in the Agreement of Purchase and Sale. In the case of new builds, this can be a couple of years away with every possibility of delays, often more than once.
In the case of investment properties, with resale units, your investment can start working for you immediately, as soon as a tenant takes possession. With new developments, you, obviously, have to wait till the development is ready. You also have to wait till the area around the development is done up with respect to landscaping, amenities, etc. You may have to put up with a lot of work going on around; dust and noise too.There's also the settling process that takes place in new homes. You'd get nails popping out, cracks in basement walls, and other minor changes which are normally rectified by the builders if reported in time. Things like shopping, and schools come up over time.
With new developments, make sure you are aware of all additional charges which will be added on to the purchase price. These are normally education levies, utility hook ups, development charges, etc. Your lawyer will normally request the builders to cap the levies to certain amounts. You don't have this with resale homes.
New condos normally have what is called an Interim occupancy period which is a time when they give you possession of the unit but you don't have title transferred to you until the building is registered. You would be asked to pay a monthly amount which is a total of the property tax, maintenance fee and the builder's portion of their mortgage interest for that unit. This payment does not go towards the purchase price but works almost like a rent. Your mortgage only kicks in once title is transferred to you.
A consumer safeguard, with new developments, is the 10-day recession period, whereby you get to check the condominium documents (the lawyer does this). If there are things that are not acceptable, you can back out of the deal with no fuss. A mortgage pre-approval letter is just a formality because you don't know what your employment/finance situation will be 2 years down the road, or whenever the closing takes place.
Does all this mean that it's a bad idea to invest in a new development? Certainly not! So long as it fits in with your long term investment plans and you are aware of timelines and the extra expenses, you're fine. You'd be getting a brand new property with all the warranties. Still need to discuss? Call me at (416)520-5621