So it’s been a while since my last blog post and, to be truthful, I was struggling with a topic to write about this time. I was inspired, however, by a friend of mine who recently signed a preliminary contract to buy a new condo from a real estate developer. Knowing that I have had experience in delivering condo projects in the past, she asked me to look it over for her and point out any issues that might be of interest to her.
Let me first say that it is my opinion that buying a newly built condo is a great way to enter the real estate market. Here are some of the reasons I believe this to be a good idea:
- More often than not, you get a great return on your investment: one of the trade-offs of buying a new property is that you are more likely than not to see a considerable return on your investment. By agreeing in advance to buy a property (sometimes years in advance) and choosing to live in a quasi-construction site for a while when you first move in, you often benefit from an attractive sales price. Once the area becomes more developed, property can increase dramatically (especially if you buy one of the first developed properties).
- There are some great financial assistance packages available: a lot of people don’t know this, but the City of Montreal offers some really interesting incentives to citizens purchasing a new home. There exist certain programs that offer financial assistance to families purchasing a new home. The amount each family receives depends on the type of household and the price of their new property, but to give you an example, a family with at least one child can receive 10,000.00$ to go towards the purchase price, a refund of the famous welcome tax, and 6 months of free public transit in Montreal (for a property with a sales price of a maximum of $ 280,000.00). You can visit this website for more information: http://ville.montreal.qc.ca/portal/page?_pageid=5097,16351566&_dad=portal&_schema=PORTAL
- Preferential rates from the Bank: while this is not always the case, many of these new condo projects are often associated with a particular bank that might offer preferential rates and/or conditions to potential purchasers (i.e. they can guarantee your interest rate until date of delivery, which is usually at least months or a year away).
So these are some of the main benefits of buying a new construction. That having been said, I also believe that it is extremely important for everyone to do their due dilligence before buying a property. Many people do not know this, but developers are required by law to provide potential buyers with a ten day window to back out of the deal after signing their preliminary contract – these ten days should be used to get all the relevant information they can about the property they will potentially be buying (once these ten days are up, the deal goes firm and there is no more backing out – unless you are okay with paying large amounts of money in dammages). Here are some of the things you would want to know:
- Deposits: When buying a new construction from a developer, you are often required to pay a certain sum up front and then pay certain amounts as the project goes forward (the deposit structure will always be written in the preliminary contract, but feel free to ask questions if anything is unclear). With regards to this, you should ask whether or not the deposits will be payed directly to the developer, or if they will be deposited in the Notary’s Trust Account (until, for example, construction starts on the project). Having your money be deposited in the notary’s trust account will provide you with the peace of mind in knowing that your money will not be lost. We have all read the stories of people being cheated out of thousands and thousands of dollars in deposits made towards the purchase of a new condo – these types of situations can be avoided if you have assurances that the deposits will be kept in the Notary’s trust account.
- Declaration of Co-Ownership: Developers are required by law to provide potential buyers with a Summary of the Declaration of Co-Ownership upon signature of the Preliminary Contract (it is usually annexed to the Preliminary Contract). While this is only a summary, you should take the time to read it in detail because it will give you a basic idea of the way in which the building is intended to be used. For example, if you intend to use the condo as your place of business, there could be restrictions in the Declaration of Co-Ownership (it often times states that a person can exercise their profession out of their home, as long as the primary use is residential and there is no bother to the neighbours). To be sure, you should have your notary look it over and point out any issues that might be of interest to you.
- Date of Delivery: Often times, there is an approximate date of delivery stated in the preliminary contract but there are certain contingencies included in case of a delay in construction (i.e. the soil is too hard and it takes longer to lay the foundations than initially intended). You should check to see what these contingencies are to make sure that you will have enough time to make plans and avoid being put out on the street. You should also check and see how much leaway is given for date of delivery.
So these are the main things you should be looking for when buying a newly constructed home. To be safe, I strongly encourage you all to have your notary look over your preliminary contract and point out any issues that might be of importance to you – buying a property should not be taken lightly and it should be a (primarily) positive experience.
Have a great week everyone!