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Often I’m asked about buying new construction vs. buying in a pre-existing structure. Here are the main differences you should have in mind when making a decision:
+ It’s new. No-one had lived here. Everything should work. at least in theory. Flipside: TARION provides some level of consumer protection, yet a builder is allowed up to a full year to correct any problems with your unit, and you can only apply to TARION within the first or last 30 days of your residency. Confusing? you bet. Is TARION enforceable? in theory it is.
+ Hope of a lower Purchase Price. When a new building is released to the public, “Investor Units”, usually lower floor, bachelors and compact one-bedrooms, sometimes with inferior views are sold for lower PSF (Per Square Foot). Flipside: Closing Costs in the thousands can easily add up. Read Closing Costs article here.
+ Advertised vs. Realistic Move-in Date. Occupancy move-in dates advertised are usually very optimistic. Most cases, you’ll get your keys months to a year later. The fine print in the contract generally protects builders and allows for late handover of units. Flipside: you may find yourself homeless while waiting on your new condo.
+ Advertised vs. Delivered Amenities. “Five Star Fitness Facility” advertised and you just can’t contain your excitement about working out in your new complex. Flipside: unless you see the amenities, do not assume what they will be like, what kind of fitness equipment to expect, how much of it, and what it will look like.
+ Closing Costs. Creep right at time of closing, and quickly adding up, closing costs are in the thousands. Did you plan for this? without reading the fine print you may be into surprise. That Heat Pump that is already installed in your unit may not be included in your purchase price… and now you’re asked to cough up more money to a unit you believed you were good for. Your Realtor and Lawyer will mitigate. Read Closing Costs article here.
+ Occupancy Fees, or “Phantom Mortgage”. When a new building is occupied but pre-registration you must pay the builder your share of the builder’s mortgage, condo fees and taxes, as collected by the builder. Sometimes the builder will over-collect, and you’ll have to try and find that money later. Flipside: occupancy fee do not count towards your mortgage. It’s somewhat similar to renting, and it can run three to twelve months.
+ It’s existing. Simple. You can see what you’re getting. Walk around the area, inspect the building inside out, speak to your potential new neighbors, take a look at the amenities, and understand your condo fees.
Flipside: “someone slept in my bed” syndrome. You can’t make any changes to the unit, or you may have to paint, renovate and refurbish a unit that is already existing.
+ Finding a Sweet Deal. While no-one could foresee the future, there is a lot more room for negotiation when buying a pre-existing unit. The discrepancy between the value offered and the potential value you see in the unit may be significant. An older building that commends lower average PSF may represent a great value to you; or, a quick and easy update of a unit could give it a value boost. And, there are a lot more of them on the open market.
+ Guaranteed Move-in Date. When you sign your deal, a move-in date in scheduled as a part of your contract. It is a lot easier to plan a move (and sell your existing condo in the meantime) if you know for sure when you have to move.
+ Existing Amenities. No surprises here. What You See is What You Get. And of course, make sure the management company in the condo building you are interested in is reputable and is known to correct any issues quickly and efficiently.
+ Known Closing Costs. Again, no surprises. There are no funny charges such as Education Levy, Aet Levy, Sewage hookup, School Levy, the list for new construction closing costs is long. You will have legal and possible other fees to pay, however they are usually much lower then closing on a new unit.
+ Immediate Mortgage, No Occupancy Fees. With existing condo, there are no occupancy fees and there is no builder to deal with. That’s a lot better financially, as you start paying your mortgage right away with no delays. Flipside: no warranties. Do you inspection first.