What is a pre-sale?
Presales generally refer to developments being offered for sale prior to completion of construction (Presales can be offered prior to start of construction and/or during the construction period). There are both - pros and cons to buying a pre-sale condo. Below are just a few examples:
What are some of the advantages to buying a presale?
- You are first owner of the unit and you get to customize certain things (such as appliances, cabinetry, flooring).
- Pre-construction condos tend to be cheaper because of there is a risk of that the project will be delayed or even called off, but this is not always the case nowadays, especially in certain high-demand areas.
- You have more time to save up for your condo. You pay the builder a series of payments as a deposit. The deposit usually adds up to 20 to 25% of the purchase price by the time of occupancy, depending on the builder’s deposit structure.
What are some of the disadvantages to buying a presale?
- You are buying based only on a floor plan without seeing the finishes, the layout or outside view of the building.
- Prepare to pay “phantom rent.” You are allowed to occupy your unit when it’s ready, but other parts of the building may still be under construction. Until the building is completed and officially registered as a condominium corporation, you pay the builder phantom rent — you can’t start paying mortgage payments at this stage, because you don’t officially own the unit.
- At the time of closing, you have to pay a number of fees to the builder that can be confusing.
- Unlike a resale, a pre-construction sale is subject to HST. But if you are planning to live in the new condo (rather than rent it out), you might be eligible for an HST rebate.
- Nothing is guaranteed. A condo building usually takes several years to complete. There is always a chance that the builder won’t sell enough units to proceed with construction, or can’t finish construction for some other reason, so you don’t get your condo. And sometimes the condo may look a bit different when it’s finished compared to what was initially proposed by the builder.