A Primer to Buying Pre-Construction
To put it in the simplest way possible, buying a house or condo pre-construction means buying while the building is still in the planning phase, before it has been constructed. In Canada, this is not uncommon, as developers have to sell a certain percentage of units before financers will permit the development to begin construction. How does this work? Here’s a primer:
Where Do You Find One?
There are a few ways of purchasing a unit pre-construction. There are agents who specialize in this market and have access to units as soon as the developer makes them available. These agents usually receive an allotment of units to sell before they hit the public market. At some point, the developers will set up a presentation center—usually on the development site itself—and the public will be allowed to make an appointment and purchase. Sometimes these centers will have a model suite available for you to view. Since the construction process can take up to several years, it’s also possible for you to purchase a unit under construction from someone who bought even earlier in the pre-construction process. This is often called an “assignment sale,” as only the contract can be sold, not the actual suite itself (remember, it’s not even built yet!)
Buying from Plans
This kind of sale is unique because unlike a re-sale home or condo, you can’t attend an open house or book a showing. While the presentation center will sometimes have a model suite for you to tour, you’ll likely be choosing your suite solely from floorplans and professional renderings. These will give you an idea of what the completed suite will look like, as well as the amenities and the building’s exterior. Many people like the idea of buying from plans because in many cases you can choose your suite’s colour palettes, cabinet styles and flooring.
Pay in Installments
Buying pre-construction requires many of the same steps as buying any property. You must qualify for a mortgage and cough up a down payment, usually 20 per cent. The payment structure is a bit different with this type of purchase, however. Typically, you pay a portion of your down payment up front and then pay the rest in instalments throughout the pre-construction process. Many people—especially first-time buyers—find this a more economical option, especially because the purchase price of pre-construction homes tend to be slightly lower than a finished home.
The Waiting Game
One of the only drawbacks to buying this way is the waiting period. It can take a few years—sometimes longer—for your gorgeous new suite to be move-in ready, and not everyone has that time. There’s also a chance your unit might be ready while other parts of the building are still under construction, which can make for a noisy, chaotic place to call home, at least until everything is completed.
Many people love the idea of buying from floor plans because you get the chance to own a home that’s completely new. You might even get to customize your finishes and colour palettes. It can also be a great way to break into the housing market. Though like any major purchase, it’s not without its risks.