Pre-Construction Condos: Should You Use A Realtor?
Tuesday Jul 12th, 2016
PRE-CONSTRUCTION CONDOS: SHOULD YOU USE A REALTOR?
Should you use a realtor when buying a new pre-construction condo?
The answer for this is a definite YES. Toronto Realtor Matt Smith, who specializes in helping buyers navigate through the complicated process of buying new condos, has shared with me the many pitfalls and disadvantages of buyers going at it alone when dealing with the builders' sales staff.
Above all else, realize that the builder's sales team works for the builder and only the builder. That is where their loyalties lie. They simply have zero interest in protecting you or your rights, or in getting you the best deal or best location within the building. By using your own real estate agent, you get the advantages of comparative shopping as well as their specialized knowledge of these complicated transactions, which can potentially save you both legal and financial problems and surprises down the road. It is important to declare and introduce your Realtor to the builder when you register as a client at the new condo site.
Here are twelve ways a Realtor can help you through the process:
1. Your Realtor can gain you access to VIP events. This is where the best prices and floor plans are available for sale. By the time the building goes to public market, often the choice units have been sold with up to 50% of the units being taken before the general public gets to pick any suites. VIP Realtor events help you get better suites and prices.
2. Your Realtor knows how to ask the right questions - and many you don't know to ask.
3. Your Realtor can guide you through the important steps during the 10 days of the Cooling Off Period. Skipping these steps can create problems.
4. Your Realtor can help negotiate the agreement in your best interest. Many things are negotiable and your experienced agent can help you navigate through this process.
5. Your Realtor has access to MLS. This is important for pricing advice so that you can compare both new and resale properties and be better informed on what is a fair price.
6. Your Realtor can explain the importance of "The Right to Assign." Once the property is constructed there is interim occupancy then there is registration. You as a new buyer may want to assign (sell your rights) your agreement at any time during this lengthy period and you may be just selling your paper. The purchase agreement must spell out the fees and conditions for this privilege so that you know these well in advance. Many builders will deny this right and you should know this before you buy.
7. Your Realtor understands how to read the building plans. It is important to know where the garbage chute, elevators and stairwells are, as well as your underground parking space, storage locker and additional amenities such as the pool, party room and gym.
8. Your Realtor has a good general understanding of the neighbourhood and any potential new developments that could restrict your views later on and cause traffic issues.
9. Your Realtor can help you co-ordinate all of the closing costs and details with your lawyer.
10. Your Realtor can explain how the HST will affect your closing costs and can help determine whether you are eligible for any HST rebates on your purchase.
11. Your Realtor can explain to you how the interim occupancy costs work, and more importantly, how the builder calculates these charges.
12. Your Realtor can explain the changing reality of your monthly condo fees. The builder generally underestimates these fees for a variety of reasons, and you should be aware that the fees that may be quoted can escalate, sometimes very dramatically, in the first few years. You probably should budget for increases of somewhere between 10% and 20%, though many actual condo fees have gone up significantly more than that.
The expert advice of a knowledgable Realtor can save you tens of thousands of dollars on a pre-construction condominium. They can help you negotiate everything from upgrades to a cap on your development closing costs, which can be signiciantly more than a resale condo. The builder has also built in the fees to the buyer's agent - in fact, they do not reduce the purchase price if you don't use one. This transaction has so many nuanaces and subtleties that it is definitely worthwhile to get the help of an experienced professional.
Stephen Moranis, B.Comm., MBA, FRI, CMR has been active in the North American Real Estate Industry for more than 40 years. He is a former President of the Toronto Real Estate Board and a former Director of the Canadian Real Estate Association.