PROS AND CONS OF PRE-CONSTRUCTION AND RESALE CONDOS

In GTA, anyone has a choice to buy resale or pre-construction condos as long as you qualify. There are pros and cons to both of these choices. It depends on ones preferences and lifestyle.

The Advantages of Buying a Pre-Construction Condo

First owner, the 'new smell', never lived in!, cheaper than the market value, buy it before its booked are some of the terms used to describe pre construction condos.

These condos are purchased before they are built with 3D images and floor plan and other graphics used to depict the finished product.

Advantages of this type of condos are:

#1: Cheaper than Market Value.

When you buy a pre-construction condo, you’re buying a condo at a fixed price. This price is set by the builder. Real Estate Market going up or down does not change the price.

Why is this a big deal? In major Canadian cities such as Toronto, condo prices have skyrocketed in the past few years.

This means that you’re buying a condo in the future at today’s price. In markets with strong growth, some buy pre-construction condos as an investment strategy.

#2: Pre-Construction Condos Can Be Designed to your Liking.

Part of the appeal of buying a pre-construction condos is the option customize finishes to one’s liking. You get to pick and choose the upgrades and finishes. After all, the condo hasn’t been built yet.

#3: Everything is BRAND NEW!

As the first owner and resident of a newly built condo, you don’t have to worry about blemishes, damage or scratches left by the previous owner. Everything is in mint condition when you move in.

This can be important for condo owners with allergies to pets. It’s also great for those who like a clean house. No one made a mess before you.

#4: Pre-Construction Condo Down Payments are Easier.

Unlike resale condos, the down payment for a pre-construction has a deposit structure where down payment is divided into multiple months. This makes it easier for some households to save up for the down payment.

The Downsides of New Condos

Buying pre-construction comes with challenges. Unlike other aspects of a real estate purchase, you have no control over these. Depending on your situation, presale condos may not be right for you:

#1: You’re Buying a New Condo Sight Unseen

When you choose the pre-construction option, you’re buying real estate before it’s built. That can be problematic for two reasons:

Visualizing: It may be difficult to for you to see yourself in the space. All you have to work with are floor plans.
Subject to change: When condo towers are built, sometimes the builder needs to improvise. That’s why all pre-construction condo purchase agreements come with a standard clause. It gives the builder the option to change the floor plan as construction takes place. Note that these are rarely drastic changes. But you may still end up with a condo that’s slightly different than what you expected.

#2: Expect That You Won’t Get Your Condo On Time

Developers have to deal with all sorts of issue that can delay how quickly they can deliver condos to buyers. Think of variables like: weather, rezoning, accidents, zealous inspectors. These are all out of a developer’s control.

#3: The Condo Building Will “Settle In”

All new buildings go through a period of “settling” in their first years. This causes blemishes to surface during post-construction (when you’re living in it). Over the course of the first year, the developer will send someone to fix them. But this comes with its own set of issues which are:

Dealing with dust from the touch ups;
Contacting the developer;
Taking time to be home for the contractors to come in

The majority of the time, this work is cosmetic. However in rare cases, the work can be major (ie plumbing issues). Unfortunately, major repairs can’t be predicted. Even the best builder could face unexpected problems.

#4: You May Have to Live In a Condo Building That’s Under Construction

One of the benefits of buying a pre-construction condo is the spread out payment schedule. The last payment, however, is due when you get the keys. That means developers will want you to take possession as soon as possible.

What does this mean for you? You may have to live in a building where the final stages of construction are still ongoing. In practical terms this entails:

Some of the amenities not being ready for use yet;
Construction dust in your condo;
In and out of construction workers in the building;
Noise and vibration from the work.

These issues may not bother some. But for others who enjoy their peace, quiet and cleanliness, it can be an issue.

#5: You Have to Pay Sales Tax On Any New Build

Depending on where you live, you may be charged a sales tax on a new condo purchase. In Canada, the harmonized sales tax (HST) must be paid on new condos.

If your condo sale price is too high, you’ll have to pay the HST. The tax is then rolled into your purchase agreement. This means higher mortgage payments. But cheaper condos that qualify for an HST rebate can have the developer apply for the rebate on their behalf.

The Advantages of Buying a Resale Condo

Resale condominiums are units sold by the current owner. In some neighborhoods that are fully built up (example: waterfront in Vancouver), there’s no option but to purchase a resale condo.

There’s a lot of questions you have to ask when buying a resale condo. But buying resale still has a lot of advantages:

#1: The Condo You See Is the Condo You Get

Shopping resale condos is like buying a regular house. You schedule visits with your realtor, go into the property and determine if it meets your criteria. If you like what you see, you put an offer on the condo.

This is a huge advantage over pre-construction condos. Not only do you get to see the individual condo, you also get to see the state of the building. You also get a chance to evaluate if the amenities meet your needs.

#2: The Move-In Date Is Negotiable

After you’ve found a condo that meets your needs, it’s time to place an offer. Part of that involves negotiating the move-in date. Once the deal is final, that move-in date can’t be changed by the seller.

Knowing the exact move-in date is a huge advantage for some households. It’s crucial for condo buyers that have to sell their current property.

#3: You Get to Take Advantage of the Realtor’s Knowledge

When buying resale condos, a realtor becomes an invaluable member of your team. There’s several advantages to having a realtor on your side:

Insider knowledge. Your real estate agent may know the building’s history, if it’s properly managed and what type of neighbors live in it.
Access to previous sales data. Realtors can see how much the sellers bought the unit for. They also have access to “comparables”. This makes it easier for you to know if you’re getting a deal or not.

#4: The Neighborhood Is Already Established

Pre-construction condo developments are often built in areas of neighborhoods undergoing gentrification. But whose to say that area will improve?

On the other hand, resale condos have been built for a few years. That gives you the chance to see how it fits in to the neighborhood. You can easily see if amenities, shopping and businesses have opened nearby.

The Downsides of Resale Condos

Resale condos come with their own sets of downsides. You’re buying an older condo after all. This can come with its own set of aches and pains:

#1: Resale Condos Usually Have Higher Condo Fees

Older buildings need more maintenance and repairs. Since part of your condo fees go towards maintenance, it makes sense they’d be higher compared to a brand new building.

#2: You’re Buying a Condo That Has Already Gained Value

For buyers in “hot” markets, resale can sometimes be more expensive than pre-construction. That can make buying a condo difficult for first-time buyers. A higher sale price means a higher down payment.

#3: Renovations Required

If you’re buying a condo that’s 10+ years old, odds are the decor and design is outdated. You’ll have to spend time and money on condo renovations.

On the flip side, those hoping to buy a turnkey condo (no renovations required) will have to pay more. The seller invested money into the condo and expects a return out of it.

#4: Your Unit May Not Be Energy Efficient

Older buildings unlikely to be as energy efficient as modern ones. That will translate to higher heating and cooling costs for you.

STAY IN TOUCH with the Real Estate EXPERT of YOUR AREA! - Ayesha Khalid

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BUYING - SELLING - INVESTING

AYESHA KHALID

Realtor

Multi-Award Winner

Bronze Award (2019)

HOMELIFE/MIRACLE REALTY LTD, BROKERAGE

Dir: 647-405-3722 Office: 905-455-5100

Some sources cited/taken from https://simplecondoadvice.com (a great website to get information).

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Realtor Ayesha Khalid