Purchasing a pre-construction property, whether it’s a condo, townhome, or single-family home, holds undeniable appeal. It offers the allure of a brand-new home, often in a fresh neighborhood, and grants you the ultimate say in selecting fixtures and finishes. Moreover, pre-construction purchases typically come with a longer lead time from your initial payment to receiving the keys, allowing you to spread your costs over years rather than months.
However, before finalizing your decision, it’s essential to consider both the advantages and potential drawbacks of a pre-construction purchase.
**Does the Process Differ for Condos and Development Properties?**
Cheryl Longmire, a seasoned REALTOR® and Certified New Home Specialist in Halifax, Nova Scotia, who has been selling pre-construction properties for over two decades, notes that while there are some similarities between building condos and development properties, the overall process differs.
“In a new subdivision, the process is much simpler for buyers because they can usually see model homes and walk the lots, allowing them to make selections and adjustments to the home plans,” Longmire explains. “Both types of purchases are based on buyers reviewing finish samples or model homes and making selections based on plans and the seller’s scope of work.”
**The Pros**
- **Incentives from Developers:** Developers often offer incentives for pre-construction units to drive sales. These incentives may include design bonuses, free upgrades on flooring, cabinetry, and appliances, among others.
- **Less Competition:** In a competitive real estate market, purchasing a resale property can involve multiple offers and the uncertainty of seller decisions. Pre-construction purchases, while still competitive, can reduce bidding wars, particularly for homes not yet built.
- **Customization:** Pre-construction buyers have the advantage of customizing their new homes, including layout adjustments, color choices, and upgraded finishes.
- **New Home Warranty:** In Ontario, purchasing a pre-construction home comes with the Tarion new home warranty, providing financial protection and coverage against construction defects.
- **Extended Lead Time:** Longer lead times allow homes to start building equity before completion, with a flexible down payment structure that can be advantageous, especially for first-time buyers.
**Considerations**
- **Financial Requirements:** Pre-construction down payments are typically structured differently, with an initial 5% of the purchase price and the balance paid upon closing. Additional costs can arise from upgraded finishes chosen by buyers.
- **Interest Rate Risks:** Locking in mortgage rates after home completion means rates may change after the initial deposit. Buyers should account for potential interest rate fluctuations in their budget.
- **Sales Tax:** Depending on the province, buyers may be required to pay HST or GST upon closing, necessitating upfront payment with the possibility of rebates.
- **Build Delays or Cancellation:** Pre-construction projects can experience delays or even cancellation, potentially resulting in the loss of the initial deposit.
**Choosing the Right Builder**
Selecting a reputable builder is paramount in pre-construction purchases. Trust and rapport with the builder’s team are essential since you’ll collaborate throughout the build. Reputation and positive reviews should guide your choice.