Frequently Asked Questions

Frequently Asked Questions

What are the benefits of pre-construction?

There are several major benefits of buying brand new. For one, you can forgo the stressful bidding wars that often occur in hot markets. You can also lock in a favourable interest rate at the beginning of the process—and then watch as the value of your unit grows. We’re talking about a very low-maintenance investment—and the protection of a Tarion warranty is nice, too!

Perhaps best of all, developers often offer customization options. If the idea of choosing your own colours and finishes appeals to you, pre-construction may be the right choice!

How does the deposit structure work?

While you can get away with putting down as little as 5 per cent on a resale condo, your pre-construction down payment will be 20 per cent. The good news? You’ll pay it in installments. That means more time to save up—another benefit of being a pre-construction buyer.

You’ll generally pay your remaining deposit amount in 5 per cent increments—at 30 days, 60-90 days, and 120-270 days. The exact timing will vary from one project to the next.

Will my deposit be protected?

A typical deposit for a pre-construction condo suite for a Canadian buying from a builder is 20% of the purchase price. Even though your deposit is fully protected by the Condominium Act, it’s always a good idea to ask the developer what other rules and approvals they have in place to prevent fraud and ensure your deposit is completely secure.

When buying a pre-construction condo from a reputable developer, your purchase fees will include a Tarion Warranty Corporation enrollment fee that provides deposit protection of up to a maximum of $20,000. This way, in the unlikely event that the condo project is not completed, the financial loss will be less significant.

Can I sell a pre-construction condo before itís complete?

Life happens. If you realize that owning your pre-con condo no longer makes sense, you can make what is known as an assignment sale. Through this process, you can sell the purchase agreement to your unit. A word of warning: you’ll want to ensure that your contract allows for assignments—and that your developer signs off on it.

If you’re an investor, be aware of your tax obligations. Failing to pay what you owe on an assignment sale could land you in hot water, so make sure you speak to a financial professional with the right expertise.

What Are The Closing Costs?

Buying pre-construction real estate has some additional expenses you should budget for. The amounts will vary depending on purchase price.

  • Land transfer tax
  • Legal fees
  • Development charges and educational levy
  • Tarion warranty enrolment fee
  • Builder adjustment fees

What is an Assignment Sale?

An assignment sale is the sale of the contract for a newly built or still under construction condo unit or home.

Who is the Assignor & is the Assignee?

The Assignor is the original purchaser of the Agreement of Purchase and Sale from the developer. The Assignee is the purchaser of the Agreement of Purchase and Sale from the Assignor.

What is the Assignor Responsible For?

The Assignor will usually have to pay a small fee back to the developer and a legal fee if they choose to assign their purchase. These costs will be outlined within the Purchase of Agreement and Sale. Also if for some reason the Assignee does not close the sale at final closing. The Assignor may still be on the hook for the contract.

What is the Assignee Responsible For?

The Assignee is now responsible for any and all fees and charges related to the contract; deposits, charges, occupancy fees, closing costs, etc.

How does an Assignment Sale Benefit the Assignor (Original Purchaser)?

Depending on how much time has passed and how much the land has appreciated the Assignor may make a profit off of his original purchase.

How does an Assignment Sale Benefit the Assignee (New Buyer)?

When the Assignee takes over the contract for the home in question, they will inherit any incentives that were included with the original purchase and will not have to wait years to move into a brand new, never lived in home.

Should I Seek the Advice of a Lawyer During This Process?

Whether you are the Assignor or Assignee, it is always essential to seek the expertise of a lawyer that specializes in real estate to look over any and all paperwork and contracts and help you navigate through any legal jargon you may not understand.

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