If you’re thinking of buying a new condo from a builder, there are some things you should find out before you sign on the dotted line. I was recently involved in negotiations with a builder on behalf of a client who was thinking of purchasing one for an elderly relative and wanted my input.
First of all I needed to find out if the builder cooperates with realtors, i.e. if they would pay my commission if I got involved. Usually that requires that we show up for the first meeting at the Sales Centre with our clients and register them, but in this case the salespeople said it was fine if my client wanted to drop by on her own. That gave her a chance to see the unit when I wasn’t available last week; I went back with her today.
Here are the questions I asked the salespeople:
How many units have been sold? At 70% sold, the builder will take steps to register the condominium corporation. Until that happens (registration can take several months), once your unit is ready for occupancy, even if it isn’t registered, you’ll have to pay interim occupancy fees or risk losing your deposit. If the project doesn’t sell well, the builder may have to rent units out; it’s good to know if the people around you are renting or owning because it does change the dynamics.
What are interim occupancy fees going to be? These are what the buyer is required to pay once the unit is ready for occupancy but while the builder is waiting for the condo corporation to be registered. They include condo fees, the land portion of the property taxes, and a proportionate amount for common spaces. They will also include interest on your mortgage if you are not a cash buyer, but not principal amounts. In our case, the salesperson said he would check with their accountant and get back to us.
How much will condo fees be? The builder should be able to tell you what the condo fees will be, at least initially. Bear in mind that these fees probably don’t include a portion for a reserve fund for future repairs and will likely go up once the condo is registered and the condo board is in place. Based on square footage, this builder told us to expect to pay $ 209/month.
How much deposit insurance does the builder carry? The Tarion warranty which covers new builds only covers $ 20K of deposits. If your builder goes bankrupt, where does that leave you? Ask if the builder carries insurance for deposits over $ 20K. This builder doesn’t ask for more than $ 15K in deposits so my client is covered.
What will the taxes be? The builder should be able to give you an approximate value. (They are going to run around $ 2,300/ year for this unit.)
How long to occupancy after signing? In the case of my client, the salesperson said occupancy would be sixteen weeks from acceptance, but also agreed to see if he could expedite that time frame. Note that acceptance doesn’t come until the ten day cooling off period for your lawyer to review the contract is over (you have ten days to back out of the contract and get your deposit back) and that ten day period begins on signing. I asked him if the builder expected to run late, and if so what kind of notice my client would receive. He told me they’ve never had a delayed occupancy in thirty-four years. Great answer!
Does the builder reserve the right to change specifications? Often the builder’s contract allows them to change specifications unilaterally and sometimes without any notice. I was concerned about things like ceiling height being dropped to accommodate ductwork, but here the space has already been roughed in and drywalled — we went over to take a look. Ask anyway — nothing worse than finding out what you ended up with isn’t what you thought you were getting.
Is there any leased equipment? The costs of leased equipment are passed onto owners. In our case, when I asked, I found out the furnace was owned but the tankless hot water system is leased although the buyer can purchase it outright at an additional cost. My client was happy to find out there was a tankless HWT as it will keep down hydro costs, but you need to know what that buy-out cost is, and what the rental is, so you can make an informed decision. The tank rental will cost my client $ 38/month.
What are utilities costs likely to be? The salesperson was able to answer this based on other buildings they’ve built: including the HWT rental, it works out to about $ 250/month.
Where is the A/C located? I asked where the HVAC system was going to be located. In a flat roof building it can be right up on the roof, and that can be noisy. Here, because it’s a pitched roof, the A/C unit is actually located right on the unit’s balcony. Knowing that, I wanted to know how big it would be and where it would be positioned, so that I’d know how much space my client would have left to enjoy on the balcony. (The answer was that the balcony is 10 x 6′ and the A/C is about 18″ x 18″– we were able to see exactly where it will be hooked up.)
What kind of heating is it? In our case, it is forced air gas, and the furnace is right in the unit, which is great. But you need to know if it’s that or baseboard, because baseboard will be a lot more expensive.
What are the basic finishes? You need to know what’s included in the base price and what is considered an upgrade. In our case, there were a lot of inclusions already in the base package: stainless steel appliances, granite counters, engineered hardwood floors and ceramic tile.
Are there incentives? Ask! Even though the basic package included a lot of higher end finishes, I was able to negotiate a $ 5,000 decor package for my client. That will allow my client to put in an extended kitchen counter, among other things, where she can have seating.
Will there be nearby construction? Right now the unit has lots of light. We wanted to know what kind of construction will be taking place nearby that might affect that, as well as noise. (There will be some, but it shouldn’t affect the light — there are two new buildings going up on the same lot being developed by the same builder.) This is a big one: make sure you know what development will be taking place and how it might affect your unit.
What kinds of noise remediation is being done? I wanted to know what steps were being taken to mitigate noise from other units. For example, this unit is right next to an elevator. It turns out there will be a closet in the unit between the elevator and the unit that will act as a buffer. We were satisfied after talking to the salesperson that other steps have been taken to reduce noise from the upper level, but were also aware that there could be some noise from the upstairs unit given the hardwood flooring.
How accessible is the unit? I wanted to know if the building was wheelchair accessible; it does have an elevator. The person living in the unit is elderly; I wanted to know what would happen if she lost mobility. The living space is open but doors are standard sizes. It turns out there is an accessibility package if my client wishes to pay for the upgrade.
Are there any amenities? In our case, there are none. But you pay higher condo fees for these, so you need to find out.
Can you have a walk-through? We requested a walk-through of the unit, even though it isn’t completed and the salesperson agreed. This meant booking a time when the workers were finished. When we took a look at the actual unit, we discovered there was a weird closet in one bedroom. Seeing it let us go back to the original plans to find out why it was located where it was, and move it if we chose to.
What are the demographics of other buyers? As noted, the person who will be living in this unit is elderly. We asked about the age of the other buyers, and were satisfied there will be a good mix of ages, but there are at least a few other buyers around her age so she won’t be all alone.
What can these units be rented for? This unit could end up as an investment property down the line, so we asked and found out the builder had rented units in the past for $ 1300-1350. That information helped my buyer see the unit as a potential investment in the future once her relative no longer needs it.
In this case, the salespeople were honest and forthcoming and a real pleasure to deal with. A big shout-out to Valecraft: Jeff and Steph gave us enough information for my client to make an informed decision, without any pressure. Much appreciated!