Should I Use a Realtor If I Plan To Buy Pre-Construction?
SHOULD I USE A REALTOR IF I PLAN TO BUY PRE-CONSTRUCTION?
This should be the 4th Golden Rule of Real Estate. The answer is a definite Yes! The reason for this can be summed up by realizing the builder’s sales agent(s), work(s) for the builder and only the builder and that is where his/her loyalties lie. They simply have zero interest in protecting you or your rights, or in getting you the best deal or a great location within the building. By using your own Realtor you can tap into his specialized knowledge of these very complicated transactions and potentially save yourself both legal and financial problems or surprises down the road. Be sure to register your Realtor with the builder when you register, this enables him to act as your advisor. Your agent should similarly register you as his client.
Here’s a list of my first twelve reasons how a realtor can help you with the complex pre-construction transaction.
1/ You need access to the VIP events. This is where the best prices and floor plans are available. By the time the building goes to the public market place, oftentimes the choice units have been sold, sometimes as many as 50% of the units are sold before you actually get to pick your suite. VIP events can get you special treatment from the builder.
2/ Your Realtor can ask the right questions in the negotiating process for you. Questions you may not know to ask.
3/ Your Realtor will tell you what steps you should take during the (10 days of the cooling off period (calendar days). Skip these steps at your peril.
4/ Only your Realtor, not the builder's agent, can negotiate the Agreement in your best interest.Prices are generally not negotiable, with or without an agent, but other important things can be.
5/ Your Realtor will access the MLS System and give you valid comparisons of competing projects in the area.
6/ Your Realtor can explain the importance of the “Right to Assign” and assist in that regard should you elect to exercise that option. Fees and conditions should be understood and spelled out in the Purchase Agreement. Even with the appropriate due diligence there are certain conditions where the builder will deny this right. Understand the related fee’s to avoid surprises.
7/ Your Realtor should understand how to read building plans, not just your floor plan. It’s important to know where the garbage chute is, where the elevators and stairwells are. And where the party rooms and gym are. Where the above/underground parking is and how these things could impact your suite.
8/ Your Realtor will have some understanding of the neighborhood and any potential developments that could affect views, traffic patterns etc. in the future.
9/ In coordination with the lawyer, your Realtor should have an understanding of closing costs and whether or not they are legitimate and can be challenged.
10/ Your Realtor will explain how HST will affect your closing costs, and again with your lawyer determine if you are eligible for an HST rebate.
11/ Your Realtor will explain fully Interim Occupancy Costs to you. How they work, how long they can last and how the builder calculates them.
12/ Have your Realtor review with you the moving target of Condo Fees. The builder always underestimates condo fee’s and there are several reasons for this but you should be aware that the fee’s quoted can escalate, sometimes dramatically in the first two or three years. You should budget for this, somewhere between ten and twenty percent, though I have seen examples where the actuals can be even higher.
The most important benefit of using your own Realtor is that they have your best interest at heart. Your Realtor will represent you honestly and ethically and will assist you in making the best decision for your needs.
Buying a pre-construction condo is complicated and there are a lot of legal intricacies and details involved – just ask all the Buyers at Trump Tower who just found out they signed contracts that barred them from selling their units before completion and their units are now tangled up in litigation that will drag on for years.
And just think, all the expert advice the Realtor has to offer is at no charge to you, could potentially save you many thousands of dollars and the cost is born by the builder and you can only but benefit. And to push this thought a little further, no, the builder will not give you all or part of the Realtor's commission if you went direct to him, they will keep it for themself.
Use a Realtor for pre-construction purchases? It's a no brainer!
Yes, Builders are notorious non-negotiators. But there ARE things that a knowledgeable Realtor can negotiate for you – from upgrades to a cap on your development closing costs (See? you probably didn’t even know that closing costs for pre-construction condos can be thousands and thousands of dollars more than a resale a condo and they CAN be capped).
If you are thinking about purchasing a pre-construction condo, please call me and let's discuss what the best project is for you. You can reach me at email@example.com or call me direct at 647-929-7674.
MBA, Real Estate Broker
ENGEL & VÖLKERS TORONTO CENTRAL, Brokerage
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