One of the increasingly popular ways first-time buyers are getting into the housing market is by buying a pre-construction condo. These brand new, never-lived-in-before condos are sold before the building is completed, and the process isn’t exactly simple or cheap. There are some hidden fees / costs that you should be aware of before buy.. Here are five costs you should know about when buying a pre-construction condo in Toronto:
Pre-Construction Condo Finishes
Have you ever visited a model suite in a pre-construction condo building? They’re often packed with upgrades and the highest quality finishes. You might be surprised when you find out that what you see in the model suite isn’t always what you’ll get as a final product. Many developers switch out the beautiful finishes you were expecting with finishes “of a similar standard”. Make sure you read the fine print in the developers “features and finishes schedule”, so you know exactly what you’re buying and there are no costly surprises. Use your realtor to amend the agreement with the builder to the exact details you are expecting to get if you have concerns.
Pre-Construction Condo Material Changes
For example: Short changing the buyer with ceiling height changes; is that considered a material change?
During the 10 day cool off period, consult a real estate lawyer about items of material change before you make your final decision.
HST on Your Pre-Construction Condo
When you buy a pre-construction condo in Ontario, you may have to pay HST on the purchase price. Before you buy, find out whether the developer will include HST in the price or not. Some developers may list their units for “$299,900 including HST” and some may list as “$299,900 + HST”. This is an important distinction to make, because the HST on a $299,900 home amounts to $38,987 (HST in Ontario is 13%).
The good news is if your pre-construction condo is priced under $450,000, you may be eligible for a partial rebate. The GST Rebate amount you receive changes depending on the value of your condo. Pre-construction condos valued at $350,000 or less qualify for a 1.5% rebate (so the GST you pay is 3.5% instead of 5%). The rebate is less for pre-construction condos valued between $350,000 and $450,000, and there is no rebate for condos valued above $450,000. You can claim the rebate when you file your income tax.
Pre-Construction Condo Builder Costs
On closing, builders pass on some additional charges, such as utility connections, mortgage discharge, landscaping etc. These costs are called “development charges” and have to be paid in order to register the title in your name. Note that this is an extra fee which applies only to pre-construction condos. Make sure these costs are capped, and read the fine print to ensure the developer can’t get around the cap. Just how much can you expect to pay in builder costs? Between $5,000 and $20,000 – and that’s on top of the price of your condo.
Selling Your Pre-Construction Condo
Finally, selling a pre-construction condo is very different from selling a resale condo. You can’t sell a pre-construction condo until the building is registered, which could take years. Instead, you can purchase an “assignment clause” which costs $3,000 to $5,000. The assignment clause will allow you to assign the unit to another buyer.
This is another case where reading the fine print will pay off. Developers often have restrictions on how you can market your assignment. For example, you could be restricted from publishing it on the popular MLS website. The extra steps you have to take when selling your pre-construction condo could mean that your money is tied up for a long time, so be prepared for this possibility.
Keep an eye out for hidden costs when thinking about purchasing a pre-construction condo unit.