Buying a New Condo? Take your Realtor with you.
(February 2, 2009)
New condo sales have been a very significant part of the real estate market in recent years with many buyers choosing affordable downtown living, combined with manageable costs and a maintenance free lifestyle.
For buyers thinking of buying a new condo from a builder - make sure you take your Realtor with you. Although builders don’t use the standard OREA Agreement of Purchase and Sale form but their own Purchase and Sale Agreement, which is a significantly lengthy document, your Realtor can still negotiate some beneficial changes on your behalf.
All builders Agreements include clauses that on closing there will be a number of
adjustments i.e. added costs which Buyer must pay. These costs include costs of meters or readings, cost of enrollment under the New Home Warranty Act, levy payable to Seller’s lawyer, increase in development charges levied by city, deposit to reserve fund etc.
These costs can be capped by your Realtor in negotiation with the Builder. Many builders will agree to a $2,000 cap on a mid-level sale. You will probably still be responsible for the Tarion enrollment fee of $200 - $250 and deposit to the reserve fund.
The Condominium Declaration may include additional costs which will be passed on to the Buyers once the condo is registered. An example is the purchase of additional suites from the Builder for guests or superintendent at a specified costs payable over a number of years at a per annum interest rate. The cost is applied to the condo corporation and passed on to the unit owners in the form of higher monthly maintenance fees.
The Buyer needs to know what this additional future monthly cost will be and your Realtor can assist in ensuring you find this information.
Parking and Locker Costs:
Your realtor can assist in pre-negotiating a maximum cost of parking and lockers if they are unknown by the builder at time of signing an agreement.
The clause allows the buyer to list for sale, advertise for sale, offer to lease, transfer or assign their interest in the unit prior to the unit transfer date. Usually the condition will require prior written consent from the builder and may include an administrative fee (ex. $3,000). The buyer is not released from the original agreement irrespective of the assignment and must complete the transaction in accordance with the builder's consent document.
Your Realtor should request an assignment clause to be included with the agreement.
Preferred Parking Spot:
Your Realtor can request the option to select a parking spot on a preferred level
within an acceptable number of spaces from the elevator. This is an important request for Buyers concerned with additional comfort and safety.
Down payment Increase:
Increasing the down payment if viable will reduce the occupancy fees i.e. the rent a Buyer would pay between the possession date and final closing or registration date. During this period the Buyer is essentially a tenant in the unit and must pay rent based on the Condominium Act determined by adding the estimated monthly realty taxes, condo expenses and mortgage on the balance due on closing. Therefore the lower the mortgage the lower the calculated rent. The Buyer does not have title to the unit during this time and rent payments do not get applied to the mortgage.
Your Realtor should request including the option of increasing the down payment amount prior to occupancy date in the Purchase and Sale Agreement.
Cost of Upgrades:
Upgrades to a unit which a Buyer has paid for may not be included in the unit and the Buyer's only remedy is to get a refund for the extras paid for. If a builder does not close, even if it is not the Buyers fault, the Buyer is not entitled to a return on monies paid for extras. In the event that the builder has financial problems the monies paid for extras are unsecured therefore would not reasonably be available for refund to the Buyer.
Your Realtor and Lawyer can explain and highlight this topic for you.
These are just some of the areas that the Condominium Builder will be prepared to negotiate. In most cases the changes made to the Agreement of Purchase and Sale will not cost the Builder in real dollars but are of significant value to the Buyer. It is clearly the case of ‘If you don’t ask you don’t get.’ With your Realtor’s assistance throughout the buying process you are much more likely to be successful in attaining these valuable concessions from the Builder.
Royal LePage Real Estate Services Limited
JOHNSTON & DANIEL DIVISION
477 Mt. Pleasant Road
Toronto, Ontario M4S 2L9