Buying a Condo: The Where & What & Why
You’re about to buy a condo. Well, you're almost ready to buy. You understand the basics of buying and owning, your first-time buyer plan checklist is checked and your mortgage pre-approval has clarified your budget. You know what you can spend, so it's time to connect what you can afford with where you want to live.
In this chapter, we'll cover the different options you'll come across when you start your search to buy a condo in Toronto, and how to decide what's the best choice for you. You should have a condo-specialized Realtor by this point.
Buying a condo in Toronto - Picking a neighbourhood
At this point in the process you should have completed your budget research and number crunching. You’ve got a rough sense of area based on your budget and preferences. Your Condo Pro should play a role in what happens next.
Choosing a neighbourhood in Toronto is mostly about lifestyle. You should ask yourself why you want to buy. It will help to have an idea of what your 5 and 10 year future looks like. Choosing a condo is about your emotional connection to the space, the value of the unit (price) and the financial health and management of both the unit and the building.
Questions:
• Do you want to be near good public or private schools?
• Are city parks & dog parks important to you?
• Do you want to enjoy Toronto’s nightlife?
• Are you studying at one of Toronto’s downtown university campuses?
Finding a condo that matches the lifestyle and area you want—and your budget—can take time. That’s ok.
A great agent will help you:
• Circle your desired areas like a hawk, so that you see new listings fast
• Know when the numbers don’t add up, despite the pretty pictures
• Narrow your search to buildings with a real history of good value
Certain neighbourhoods in Toronto have a “prestige” value. For instance, Toronto’s Yorkville. Condos in Yorkville are more expensive than nearby condos simply because they can be.
The same can be true for condo buildings and condo developers. Higher end developers like Menkes can drive a premium price on their buildings because of their high-end “brand.” Knowing something about condo developers in Toronto can also help you decide where to buy.
A local area specialist will know the character of different neighbourhoods and buildings and the impact on the condo value.
Buying a condo in Toronto - The What
Once you know where you want to buy, you can tackle the question of what type of condo fits your timeline. Do you want a family-friendly condo or something suited for single-living? Do you want a stylish conversion loft or do you want a condo with modern tech amenities?
Ultimately, you’ve got two options: resale versus pre-construction.
You can move into resale condos as soon as your deal closes. Pre-construction condos usually take 3-5 years for occupancy to begin, though you can buy assignments in projects that are closer to completion.
Buying a resale condo
Resale condos are previously owned condos in an established condo building. You buy resale condos from the previous owner, and you usually find them listed on MLS or awesome-sauce sites like ours, Condos.ca.
Even two identical units in a building can have different value and price. One of them could be on a higher floor (higher floors usually have higher prices), while the other could have been renovated and upgraded, pushing its value up or the seller simply thinks it is worth more. Your real estate agent should be a good resource for your questions about price and value.
When can you move into a resale condo?
You can move in as soon as the deal closes. The closing date is an important element in the offer. Sellers often need to also buy a home, so flexibility around 'the close' is sometimes the reason why they will accept an offer that has a lower price.
How are resale condos priced?
When your real estate agent takes you to view resale condos, what you see is usually what you’re going to buy. Because the condo is already built and has been lived in for some amount of time, you want to be really thorough about the condo’s current quality. Are there any wear-and-tear issues that the seller is hiding?
Resale condos are usually priced at current market value. That being said, some sellers (or their agents) may choose to list their condo for sale below market value to make it look more attractive to buyers. Your realtor must be able to tell you whether a condo is priced accurately for the market, neighbourhood and building.
Buying a pre-construction condo
Pre-construction condos are condos for sale in a new condo project that hasn’t been built yet. The developer will start selling units to the public to help pre-finance the project. The developer usually needs to sell at least 70% of the building before they begin construction.
Are pre-construction condos more expensive than resale condos?
Yes, pre-construction condos are typically 10% more expensive than resale condos. There is a premium on pre-construction condos for a few reasons:
• The buyer gets to pick the condo, including what floor, what layout, and what suite finishes
• Pre-construction condo prices look ahead 3-5 years to estimate market value once the building is built
• Pre-construction condos have different financing options, letting buyers pay less up front, but more in total
When buying pre-construction condos, you want to research the condo developer and make sure they are a quality home builder. Choosing the right builder is equally (if not more) important as choosing your premium features.
When can you move into a pre-construction condo?
As the building is being constructed, the developer may decide that certain floors are ready for occupancy. It’s rare that the entire building is completed all at once. When your floor and unit are ready for occupancy, you can technically move in under interim-occupancy, but you might not want to because the rest of the building might still be a construction site.
Interim occupancy or “phantom rent”
Once your pre-construction condo unit is ready for occupancy, the developer will start charging you a monthly fee called interim occupancy, a.k.a phantom rent. Watch a video about it here. This fee is charged to new owners to cover:
a) Property tax
b) Building maintenance fees
c) The interest on the unpaid balance of your condo purchase
Buying (and selling) an assignment sale
In the pre-construction condo market, there is a type of deal called an assignment sale. When you buy a pre-construction unit, you aren’t buying the property —it doesn’t exist yet—you are buying the legal document that says you will own the condo to be built. It’s an exchange of paperwork.
The key document is called The Agreement to Purchase and Sale, which can be bought and sold like an actual piece of property.
You will find pre-construction condos listed as assignment sales on Condos.ca. Here are some tips on how to approach them. If you have purchased a pre-construction condo and decide it’s not what you want, you can put it up for assignment sale.
Now that you know where you’re buying and your budget its time to prepare for the trench warfare of the offer stage.
