Important Facts about Pre-construction Condos in Mississauga
Buying pre-construction condos in Mississauga
Pre-construction condos means buying a condo from a builder on an off-plan basis. You will buy the condo after looking at the floor plan or after viewing a few floor model suites at the builder’s site office. Most high rise condominiums take two or more years to build. Unless the builder sells up to 70% of units and has collected some 15% to 20% of purchase price in deposits, he does not get a loan from banks to start construction. And in order to sell condominium units before they can be built, builder sells pre-construction condos.
Developers create a marketing campaign or a media hype about their condo projects. This is followed by a flurry of activity from the public, real estate agents and their clients, all anxious to buy a piece of real estate that seems like “the best deal in town”.
How are pre-construction condos unveiled?
To sell pre-construction condos from builder, builder starts with a pre-launch event. These events are by invitation only and are reserved for friends, family, VIP REALTORS® and their preferred clients. Builders offer lower rates, special terms, better choice of floor plans etc. at these events. Rates normally move up after the brokers’ preview. The project is then offered to the general public.
Experienced pre-construction condo realtors act as your buyer agents. As part of their fiduciary duty, VIP realtor’s role is to work for their clients (that’s is you). They compare data on different projects, suggest best models, floor plans, help clients in choosing best views, finishes etc. They might also negotiate some special terms in the contract that a novice buyer may not be aware of. You do not pay a premium price (this price is always lower than the public launch price), or any commission to the realtor, when buying pre-construction condos from VIP realtors.
How do pre-construction condo realtors get paid?
Builders pay anywhere from 3% to 4% to realtors to help them sell pre-construction condos. This amount is approx. 0.5% to 1.5% more than what resale condo sellers pay to real estate brokerage. However, the full commission is only paid once the building is registered, which means that it can take two to three years for a realtor to receive his money from the builder. If you take the future value of money, it might make sense why a builder would pay more commission than a resale seller who pays at the same time as sale of a property.
How pre-construction condo prices compare with those in resale market of similar sized condos?
Pre-construction condos have different prices depending on the stage the project is in. They are the lowest at the time of their launch (with VIP realtors) and slowly increase with time as project commences. Builder continues to sell condos during the construction phase until all of his inventory has been sold. Since the builder’s price is based on future delivery of a brand new unit, pre-construction condos are priced based on many factors. Some of these factors include land cost, construction cost, price of similar units at other pre-construction projects, development charges and other government fees etc. Builder also does his own research of future real estate prices before coming out with his price lists, from time to time.
Resale market on the other hand works on the real demand and supply and price is controlled by prevalent market forces. For example, in a resale market, a same model within a building can sell for different prices based on their finishes, views, no. of parking spots, seller’s motivation etc. Unlike builder units where one pays a premium of $1000 or more for every floor as one moves up, resale market does not pay a premium based on the same principle.
Pre-construction prices are always more than current market prices of similar units in the resale market. So before looking into pre-construction condos, it will be wise decision to meet with a local market condo expert. He or she can tell you how a particular condo project fares in terms of price, and if it makes sense.
A few points to consider before buying pre-construction condos in Mississauga:
- How do pre-construction condos compare with similar condos in the resale market?
- What is included in the price? Is there any extra cost to purchase parking or locker?
- How does closing cost of pre-construction condos and resale condos compare?
- What is included in the condominium fees?
- What are condominium rules regarding pets, BBQ on patio/terrace etc., short term leasing etc.?
- How long can it take for a condo to transfer in my name from the date I receive my keys from the builder?
- When buying pre-construction condos would the builder allow leasing during interim occupancy?
- What about the future construction plans for adjacent open areas?
- Can the builder change minor dimensions of my unit?
- What about HST? Will I pay HST if I decide not to move into my builder condo on occupancy?
Read more about new condo projects if you are considering buying a new condo in Mississauga.