This article will take you step-by-step through the buying process of a pre-construction house or condo. This is an overview of all of the basic steps on your journey to homeownership of a pre-construction condo.
The path to buying a pre-construction home begins with information. You need to understand which projects are on the market and those that are about to launch. As with any investment, there is much to consider, and buying pre-construction is no different. You must assess many factors such as your budget, location, construction timing, finances, and more.
We encourage you to register for the projects that are of interest to you on our preconstruction real estate website. After registration, you will receive email access to the builders’ price lists, floor plans, brochures, incentives, and other information. ATeam Condos is a builder-approved pre-construction access team that will help you make informed and intelligent investment decisions. We want you to have an enjoyable experience with purchasing a home. And we want to help make sure that you don’t have any surprises. Reach out to us at any time for advice.
1) Learn About Prices and Locations
You will find that our website is an excellent resource for learning about the various locations of projects in the GTA. You will learn about the pricing and incentives offered by each builder by registering for projects you find interesting. Research is the first step. Armed with knowledge, you will better understand the market and the choices you have, whether you are looking for a condo or house as an investment or live-in purchase.
Of course, talking with us will give you the best opportunity to discover what is available to you and where your money is best spent. We are available by phone, email, and text. Please don’t be shy. We are here to help and answer all your questions.
Once you have narrowed down your selection, it is time to make the first steps towards purchasing a condo. You will need to let the builder know about your wants and needs by submitting a worksheet.
2) Submit your worksheet to the builder
The first step in buying a GTA pre-construction condo is to notify the builder of your interest in purchasing a unit. Once you have determined the building and the unit you wish to buy, we can help you submit a Worksheet to the Builder. A Worksheet is simply a request form with your unit choices/preferences along with personal information and proper government identification. All Builders require a Worksheet to begin the process to purchase a unit.
A Worksheet does not obligate you to anything. View it simply as a way to reserve a unit in your name before it is offered to another purchaser. Pre-construction sales move very fast. Often, builders will receive many Worksheets for the same unit in a building once sales have begun. Worksheets are time-stamped upon submission and are allocated on a first-come-first-served basis. Time is of the essence. The sooner that a worksheet is submitted, the better your chances are of being allocated the suite you want. Don’t worry, the ATeam is here to help you through the whole process.
3) Sign The Agreement
Soon after submitting your Worksheet, the builder will announce their allocation. If you are lucky and a suite has been Allocated to you, then you will have the option to proceed with a sale or not. If not, the unit will be released to another purchaser, and you are free to walk away. But, if you wish to proceed with a purchase, you will be given a signing date to sign the Agreement Of Purchase And Sale (APS).
You must remember that you will need your government ID and also have a checkbook. There will be deposit cheques that need to be submitted to the builder along with the Agreement of Purchase and Sale. Once signed and executed by the builder, the 10 day cooling off period begins.
4) The 10 Day Cooling Off Period
Congratulations! You have signed an Agreement of Purchase and Sale, and you are on your way to homeownership. The 10 Day Cooling Off Period begins once the Agreement Of Purchase and Sale has been executed by the developer. You legally have 10 days to review and rethink this purchase before it becomes firm.
During this time, your unit is secured and cannot be sold to another purchaser. The Cooling Off Period allows you time and space to do your due diligence and make a comfortable final decision. It may feel stressful but remember, you are in the driver’s seat, and we are here to help you.
We strongly recommend that you take this Cooling Off time to find a Pre Construction lawyer to help you review your purchase agreement. A legal professional can best explain your rights and responsibilities with your Agreement. 10 Days is ample time if you are prepared. This is also an excellent time to begin to think about finances and your future mortgage requirements too.
You will be required to provide the Builder with a letter from a financial institution regarding a Mortgage Pre-Approval or a Commitment Letter from the bank. The builder will need assurances that you are capable of financing the purchase. Your pre-construction Lawyer will help you understand the closing costs.
Generally speaking, one should be prepared to spend roughly 4-5% of the purchase price on Closing Costs. At ATeam Condos, we are happy to share our network of trusted pre-construction legal experts and financial specialists to help you close your deal in comfort.
Here is a breakdown of the major items you can expect to pay, included in Closing Costs:
- Land Transfer Tax: This is often the most significant expense upon closing, with monies going to the province and the city.
- Development Charges: The other significant charge upon closing is the development charges (or Levies, as they may also be called). These are fees collected by cities and municipalities which are used towards items like education ex[enses and expenses for public parks.
- Legal Fees: In Ontario, you must have a lawyer handle the closing of real estate transactions. Fees usually range from $1,500 to $2,500. We strongly recommend you hire a pre-construction lawyer as this is a different process than typical resale purchases.
- Utility Hook Up Charges: When utilities like gas, water, and hydro are connected to a home for the first time, you usually have to pay for this.
- Tarion Warranty: You will get a warranty for your new home, and you will have to pay an Enrollment fee.
- HST Fee: The HST is usually included in the price of your unit. The HST is only included if you or your immediate family are moving into the unit as a principal residence. If you are an investor and will not be moving into the unit at final closing, you are not eligible for the built-into-the-price HST Rebates. You will have to pay an additional amount but can apply to the CRA and be refunded once you have rented out the unit and have a legal lease in place.
If, during the 10 Day Cooling Off Period you have a change of heart, you have the right to cancel with no questions asked, no pressure, and no incurred costs.
If you decide that you want to go ahead and purchase your suite, congratulations! At the end of the 10th day, your purchase will have gone firm. This means that your contract is binding, and your first deposit cheque may legally be deposited by the builder.
As a matter of strategy
We encourage all interested buyers to at least get to the 10-day cooling-off period. If you are unsure, sign the Agreement with the intention to buy. Once signed, you have complete power over this unit. It is in your hands. You have control of the unit’s ownership and are in the driver’s seat, and it won’t cost you anything – for 10 days. In Real Estate Investing, this is an enviable position to be in, and there is no legal or financial obligation to you until the cooling period is over.
5) Once You Go Firm
Hurray! You have just bought a home. It is time to sit back and relax.
You have bought a pre-construction condo. Now it is time to wait a few years.
6) Colour Selection
When your building is well into construction, and you are closer to your Occupancy date, the builder will call you in for a Colour Selection appointment. This is a one-on-one consultation with decor representatives to help you customize and craft the look of your new home. At the Colour Selection meeting, you will be choosing the finishes, colours theme, and any upgrade packages that will make your condo personal and truly yours.
PDI stands for Pre-Delivery Inspection.
Once your home is almost ready for occupancy, it is time to inspect your future home. The PDI is a guided, thorough inspection of your suite with a representative of the builder. This is the moment to inspect for any items that are not up to expectations. You will examine your unit for any errors, deficiencies, scratches, and other deficiencies. Any items discovered will be noted and corrected by the builder. Your condo should be perfect when you take possession.
8) Interim Occupancy
Interim Occupancy occurs when the condo building is completing its final work and is legally allowed to be lived in but is not yet registered with the city. While you can live there, you technically do not own your condo, and you cannot register a mortgage at this time. The Interim Occupancy Period usually lasts a few months, as people move in, floor by floor, from bottom to top.
During Interim Occupancy, you will have to pay the builder a rent until you reach Final Registration or Final Closing. This rent is called Interim Occupancy Fees. These fees will be similar to a typical monthly carrying cost for the unit. They are calculated based upon an estimation of monthly property taxes, monthly condo fees, and the interest on the unpaid balance of the unit’s purchase price.
9) Final Closing
You have finally made it!
At this time, you will meet with your lawyer to sign very specialized paperwork. Final Closing is when the builder registers the condo corporation with the city, and your mortgage will commence, and you will hold legal title on your unit. At this time, you will need to pay the closing costs as outlined by your lawyer. Do not worry. Your ATeam Condos agent is here to guide you through the whole process.