Buying during the pre-construction phase is a popular way for homebuyers to approach the purchase of a new home or condominium. The unit is offered at a competitive price and earlybirds get to decide on their lot sizes, floor location and layout well in advance.
There are definitely some risks involved with buying pre-construction, and if you’re not careful you could end up wasting a lot of time and money if anything were to go wrong.
Today we’ll go over some of the steps to take which mitigate the risks involved with buying pre-construction.
Research the developer
This should be your first stop to avoid a financial disaster or a cancelled project. Look into the track record of the developer and see if they have a strong history of completing projects, on time and on budget.
If the developer is new to building condos, if they’ve been gathering funds to break ground for years, or if the area isn’t desirable enough to secure investors, you might want to try another pre-construction project.
Talk to a real estate lawyer
Real estate lawyers are essential for every home purchase. And before you even put down money, you should have a real estate lawyer look over the pre-construction down payment schedule and the Agreement of Purchase and Sale.
Getting one that specializes in pre-construction would be an asset as they’ll help you translate any tough legal jargon that not everyone can navigate. A real estate lawyer can spell out the risks involved in buying pre-construction while being on your side of the transaction, protecting your best interests, not the condominium’s.
When you’re buying any home, the first step (once you’ve decided on an ideal property) is to secure a mortgage. Buying pre-construction will involve the same mortgage loan as a normal resale purchase, though you may have to enter into a long term pre-approval process that sees you re-evaluated over the length of construction.
Pre-approval will show you the maximum amount you can borrow based on your income, plus the interest rate you’ll pay on the principle. Pre-approval means you’ll know how much you can afford to pay for a property before signing up and risking financial hardship should you default on the deal.
Don’t underestimate fees involved
Even though you’re ahead of the ball purchasing a unit during the pre-construction phase, there are still numerous fees that come with the new purchase of a home. One mistake would be underestimating these mandatory fees which include:
- Land transfer tax (twice)
- Condo fees once you move in
- Condo insurance for your contents
- Home inspection fees
- Utility hookups
- Legal fees
- Costs involved with moving