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Buying Pre-Construction Condos

When looking to purchase a condominium, there are essentially two choices – resale or pre-construction. There are advantages and disadvantages to both, however when buying new, there are some details you should be aware of that differ from a typical resale.

Deposit Structure:

Unlike When buying resale where you could have a down payment as low as 5%, buying directly from the builder requires a minimum down payment of typically 20-25%. This may seem like a lot, especially for first time buyers, but this may be an advantage as there will not be additional CMHC loan premium insurance costs and this will reduce your monthly mortgage payment. In addition, the deposit is paid in installments, so it does allow for some time to save. A payment schedule could look like this:

  • $5,000 upon signing the Agreement of Purchase and Sale

  • Balance of 5% in 30 days

  • 5% in 120 days

  • 5% in 350 days

  • 5% at occupancy (see below)

  • TIP: Your Realtor may be able to negotiate a better deposit structure for you.

    10-day Cooling Period

    By-law in Ontario, anyone who buys a new property from a builder has a 10-day cooling off period, during which they can rescind their offer with no penalty. This also allows time to do 2 things: 1) have your Agreement of Purchase and Sale reviewed by a real estate lawyer, and 2) obtain a mortgage approval for your purchase to satisfy the builder’s requirements.

    TIP: Sometimes lenders work with specific builders to offer special rates and incentives.

    Closing Costs

    When you buy pre-construction, there are some additional closing costs that you do not incur when buying resale. Estimates are hard to make because they vary by developer, but averages are outlined below:

  • Development and educational levies ($500-$6000)
  • TARION Warranty enrolment fee ($900-$1200)
  • Utility hook-up fees ($1000-$2000)
  • Misc. fees (law society of Ontario, discharge of builder’s mortgage, etc.) ($200-$500)
  • Assignment fees (if you sell before final closing, or ‘flip’ your unit) ($3000)
  • Occupancy fees (see below)

  • TIP: some of these closing costs can be capped at a maximum figure so it’s important to have Realtor and a lawyer who are experienced in pre-construction condos on your side to help you negotiate these terms with the builder.

    Occupancy Period

    When buying new, there is usually a short period of time between when occupy the condo and when you actually receive title to your condo, known as the occupancy period. During this time, you must pay the developer for the right to occupy the suite. The amount of the occupancy fees is more or less equivalent to interest on the amount outstanding on the purchase price + monthly property taxes + condo fees. You will only pay occupancy fees until your final closing, where you begin paying for your mortgage, but you will never have to pay both at the same time.

    Learn more about Occupancy & Interim Closing

    TIP: to minimize your occupancy fees, buy as high up into the building as possible. Buildings take occupancy from the ground up, therefore the higher your suite is in the building, the shorter your occupancy period will be.

    Final Closing

    Final closing when the building is finally registered and your occupancy period is over. This is when your mortgage payments begin and you officially own your unit. You can choose to put down additional funds on your condo if you want to have more than the typical 20-25% that most builders require.

    TIP: remember that you can shop around for the best mortgage rate right up until final closing, so even if you obtained an approval during your 10-day cooling off period. You can even choose a different lender if you like. That is, your initial pre-approval will satisfy your credit worthiness to the builder, but you can always get another pre-approval from an alternative lender up until you close.

    Ashley Lo | Real Estate Advice, Real Estate Solutions

    Why it’s still a good time to buy

    A couple of weeks ago, I did a home buyer seminar. I got a lot of good feedback so I decided, why not share some of the key points?

  • Interest rates are at historical lows! In the 1980’s, interest rates were at all time highs at about 18%. Now, interest rates are at all time lows! We are seeing interest rates such as 2.99% for a 5 year fixed term! The only caveat is that lending rules are becoming more and more stringent, so if you can approved, go for it!

  • We are not in a bubble! Contrary to what some people may say, we are not in a housing bubble! A bubble is It is characterized by rapid increases in valuations of real property such as housing until they reach unsustainable levels and then decline. We did see this in the late 1980’s when average percentage increase in the years leading up to the peak was 22%! Between 1986 and 1987, there was actually a 36% increase! In the past couple of years, we’ve been seeing increases, on average, at about 6%. (See previous post – The Canadian banking system is unlike the States)

  • The Canadian GDP is correlated with Toronto housing prices. There is a strong correlation between Canadian/Ontario/Toronto GDP and Toronto housing prices. The last time we saw a deviation, it was during the housing bubble in the 1980’s. Currently we are seeing a steady growth in Toronto GDP, which is expected to increase about 13% from 2010 to 2015! This is also in line with Canadian GDP growth.

  • Other factors. What can I say, Toronto is a great city to live in! Due to high immigration, population is expected to grow by 1 million people in the next decade. That’s an increase of 33%! Foreign investors also see the potential. We are seeing investors from all over the globe including China, Iran, India & European countries such as Greece and Italy.

  • There’s no time like the present! If you have any questions, feel free to Contact me.

    Ashley Lo | Real Estate Advice, Real Estate Solutions

    The Canadian banking system is unlike the States

    A lot of people come to me and talk about how they’re worried about the subprime issue in the States and the same thing will happen to us South of the border. However, the fact is that Canada has weathered through the storm extremely well and none of the banks failed or required any sort of bailout, while in the US, about 200 banks have failed since the beginning of the recession in 2008.

    The Canadian banking system is actually much more prudent and resiliant compared to the States. Some differences include:

  • Full recourse mortgages – Canadians are fully responsible for their mortgage so other assets and potentially future wages can go towards paying off the mortgage. In the States, it is much more likely that the home will just be foreclosed.

  • Low deliquency rates – mortgage payments in arrears are about 0.3% in Canada vs. about 3% in the US, which is already down from almost 10% in 2010!

  • Different public policies on lower-income housing – the Canadian government does not have policies to encourage homeownership for lower income and less credit worthy borrowers (subprime) like the States did under the Community Reinvestment Act. Instead, the Canadian government provides funding for public rental housing.

    Other significant differences are illustrated below is an infographic from RateHub.




    Streetcar Developments is proud to present their latest real estate offering on Queen St. W, on the corner of Gladstone and Queen St. The Carnaby’s eclectic, high-energy lifestyle perfectly exemplifies Streetcar’s motto: Rethinking. Urban Living. The loft residence will comprise 20 storeys of one bedroom, one bedroom plus den and two bedroom suites starting in the low $200’s.


    Contact me to gain priority access.

    Understanding Condo Occupancy and Registration

    When buying a pre-construction condo, it can be quite confusing as it is more complicated than a regular resale condominium. There are a couple of different phases that the building must go through before final closing. A ‘condominium’ is not technically formed until it completes and passes all approvals with the Land Registry Office. Only when the building is finally ‘registered’ that the title of your unit will be transferred you.

    Once the interior of the building is complete, a number of inspections and approvals also occur at this time by firstly the municipal council, then the regional planning department, and on to the Minister of Consumer and Commercial Affairs. These checks and balances are in place to ensure that the building upholds what is stipulated in the draft plan and Condominium Declaration. Once all parties agree that all the requirements have been met, the registration is complete.

    When approvals are complete on a municipal level, an ‘occupancy certificate’ is issued. Owners will have a chance to do a PDI (Pre-Delivery Inspection) in the unit and report any deficiencies. Residents will begin occupying the units in phases and depending on your floor, this could take anywhere from 3 months to a year. This is known as ‘interim occupancy’, the period between the occupancy date and when the condominium is registered.

    Since the vendor still owns suites during the occupancy period, you will be required to start paying ‘occupancy fees’ which is the interest on the balance owed to the builder (based on a one-year Bank of Canada mortgage rate), your estimated share of maintenance, as well as annual taxes.

    There are also interim closing costs to consider including outstanding deposit amounts plus adjustments, occupancy fees, any upgrades, and enrollment of your suite to with TARION Warranty. You must have your homeowner’s insurance in place and arrange for your utility hook-ups at this time as well. Since you cannot obtain a mortgage until you receive title and it is difficult to predict the length of the occupancy period, you must ensure that you have enough savings preceeding the ‘final closing’.

    A couple of months before the closing, you will be notified to secure your mortgage as rules and rates may have changed. When the building finally registers, it will take a couple of weeks for a final closing date, in which the balance of your purchase price will be due (where your mortgage kicks in!). Additional closing costs will also include but are not limited to, the land transfer tax, development charges, and legal fees.

    Purchasing a new condominium is very exciting and has many benefits including increased value of your unit even before you take possession! However, it is important to understand the entire process very clearly to ensure a smooth transaction. Make sure you obtain a knowledgeable and trustworthy real estate agent to help guide your through this process.

    Contact me if you have questions regarding real estate!

    Ashley Lo | Real Estate Advice, Real Estate Solutions

    Why you should be a homeowner or landlord

    Are you currently renting? We’ll show you how feasible it is to buy your own home, and why you may be better off purchasing instead!

    Do you currently have some money saved and are looking to invest? We’ll show you why you should become a landlord!

    Real estate is a scary investment! But we’re here to ease your fears. Whether you’re currently looking to purchase your first home or looking to invest, we will be there every step of the way to guide you and answer all of your questions!

    Stay tuned for seminar details!! Contact me for more information or to be notified of upcoming events.

    17 Things to Know About Closing Your House Deal


    Closing day in a house deal is a milestone for both the seller and the buyer. To make it go smoothly, it is very important that both buyer and the seller are properly prepared.

    Here’s a checklist if you are selling:

    1. Make sure you have given your lawyer a copy of any deed, mortgage, survey and current property tax bills. You should have received these from your lawyer when you bought the house.

    2. Do not cancel your household insurance policy until you have heard that the deal has closed. Also, if you are moving out more than 30 days before closing, you need to notify your insurer that the home will be vacant. This way, you will still be covered if anything happens in the home up to the closing date.

    3. You will visit your lawyer a few days before closing to sign the papers. Make sure you give one set of keys to give to your lawyer, which will be passed on to buyer’s lawyer at closing.

    4. If you are a non-resident of Canada, you must obtain a certificate from Canada Revenue Agency regarding any income tax payable, or else the buyer will be holding back 25 per cent of the sale price until you do get it. Non-resident means you have not lived in Canada at least 183 total days in the past year before the closing day. This can take up to two months so let your lawyer know right away so that the proper application can be filed.

    5. Have all your utility meters read on the day of closing. That way you will only be responsible for your share of utilities. Also notify your cable and telephone provider so that your service can be disconnected. If your house is heated with an oil tank, you need to make arrangements to fill the tank on the closing day.

    6. Cancel any pre-authorized or postdated cheques at your bank, to make sure you don’t pay for anything after closing.

    7. As you have to be out of the property when it closes, arrange to move out before 5 p.m.

    Here’s a checklist if you are buying:

    1. Schedule your pre-closing visit shortly before closing, so that you can conduct your final inspection to make sure that the home is in the same condition as when you signed the offer.

    2. Arrange moving time late in the afternoon, as that is likely when the seller will have moved out. If it is a condominium, and you need use of the elevator, contact the management company well in advance of closing to reserve the elevator.

    3. Fire insurance must be arranged for the full replacement cost of the home. If it is a condominium, you need a policy to protect your contents and liability. Do not leave this to the last minute.

    4. If you are arranging a mortgage for less than 20 per cent down, the bank will be deducting certain costs, such as mortgage insurance, appraisal fees and HST. Find out early what all these deductions will be, as you will have to come up with any difference needed to close your deal. Make sure you have provided the lender with all required proof of income, or down payment well in advance so that it does not delay the money.

    5. Your lawyer will be receiving a statement of adjustments just before closing. This could add to your closing costs if the seller has prepaid some expenses, especially property taxes. Find out exactly what this is as it can add up to 0.5 per cent more to what you may owe.

    6. You will need to deliver, at least 2 days before closing, the balance of money needed for your lawyer to close the deal, by certified cheque, money order or bank draft.

    7. Let the lawyer know how you will be taking title to the property. If you take as joint tenants and one of you passes away, the other party immediately becomes the owner. If you take as tenants in common, you can transfer your interest to a beneficiary under your will.

    8. Tell your lawyer to order title insurance for you. This will protect your property against title defects, survey issues, work orders and frauds while you own the property.

    9. Arrange for your cable and telephone providers to install service on the day of closing or immediately after closing.

    10. Contact the utility companies, to make sure they read the meters on closing, so that you are only responsible for charges after you move in.

    Being prepared in advance will ease the stress of closing day and hopefully begin the creation of happy memories for you and your family.

    The Future of Transit

    A lot of people have been asking me what areas will be developing and where there will be transit in the future.

    Here is a summary of a couple of projects going on in Toronto that will be completed in the next couple of years. Something to think about if you’re looking to buy, sell or invest! Feel free to contact me if you have any questions!

    1. Spadina Subway Extention

      As you may know, the TTC will cross municipal boundaries into York Region.

      The Downsview Subway station will be extended past Steeles Ave West, all the way to Vaughan. This is expected to be completed by 2015.

      Below is the planned route map, with service levels expected to be every 4 minutes:

      You can obtain more information here: Spadina Subway Extension Overview

    2. Eglinton – Scarborough Crosstown

      Recently, it was announced that the crosstown light rail transit will now be made underground. As Canada’s most expensive infrastructure project, this will provide an added convenience for those travelling East to West and reduce the strain on the already overflown Highway 401.

      This 25km project will run from Kennedy to Black Creek in only 35 minutes, and is expected to be completed in 2020.

      Below is the route map:

      You can find an interactive route map and obtain more information here: What is the Crosstown?

    3. Air Rail Link

      The Air Rail Link (ARL) is an express rail shuttle service that will run from Union Station to Pearson Airport. It will link to major TTC and Go Transit stations for added convenience.

      Construction has already begun and is expected to be completed for the Pan Am Games in 2015.

      Below is the route map:

    You can obtain more information here: Construction to start in Spring on Airport Rail Link

    Official Site with additional information on other projects in the GTA (York/Peel): Transit Expansion Projects – Air Rail Link (ARL)

    4 Signs Your Home Is Overpriced


    If your house has been sitting on the market for three or more tortuous months, your asking price may be to blame. Here are four tell-tale signs that it’s time to slash that listing price.

    1. No one is stopping by for a  look. Your house has been on the market for a month or  two, and showings have been scarce to none. Wait a second, do you hear that? Ah  yes, it’s the sound of warning bells ringing. If buyers are not even taking the  time to look at your house, it’s pretty sure sign that the price is too high.

      Of course, you may argue that this doesn’t necessarily mean that there’s no interest in your home. While you’ve had no  actual showings, that brochure box by your “For Sale” sign is empty and your  online listing has received hundreds of hits. If that’s the case, this only  proves that there is interest in your home, but something is keeping  buyers from scheduling a showing. What’s holding them back? You got it -your  absurdly high asking price.

    2. You’ve had plenty of showings but no  offers. So, your home has attracted a handful of  showings since it’s been on the market, but you still haven’t gotten an offer.  Of course, the Pepto-Bismol pink shower in the master bathroom or the turquoise  blue carpet in the living room could be to blame.

      Poor  design and color choices can certainly scare away potential buyers. But if your  home is tastefully decorated and updated, it’s more likely that your price needs  to come down. Some experts say if you’ve had 10 showings without an offer, your  home is probably overpriced. (Learn about alternatives to selling in Can’t  Sell Your Home? Rent It.)

    3. Buyers shower your home in  criticism. You’ve had plenty of showings, but your  realtor has noticed that prospective buyers make the same negative comments  about your home time and again. For example, they may continually complain that  your house is plagued with a pungent odor reminiscent of wet dog and rotten  tomatoes. Or perhaps they all point out that the 1970s-themed kitchen, complete  with pea green appliances, is a little outdated.

      Be sure to ask your realtor to notify you of any negative feedback from buyers. While some  of the comments may be difficult to hear, a little constructive criticism may  help you sell your home in the long run. Remember, there’s no room for hurt  feelings in home-selling.

      It may turn out that other homes  in your neighborhood have remodeled, modern kitchens and a more inviting smell.  If this is the case, you’ll either need to freshen up your home, give your  kitchen a makeover or (you guessed it) cut your asking price. After all, if the  price is right, prospective home buyers may decide they can live with a  pea-green dishwasher – or buy a new one.

    4. You have the highest priced home on the  block Let’s say comparable homes in your area are  priced much lower than yours. Houston, we have a problem. If your house is the  most expensive three-bedroom, two-bath, 10-year old home in your zip code, it’s  probably going to be the last one to sell.

      Ask your realtor for regular updates on home prices in your area. He or she can show you the  closing price on homes similar in size and age to yours and notify you when  comparable homes drop their prices. This will help you decide if it’s time for  you to drop you price, as well.

    So, after picking up on some of these warning signs, you  finally give in and drop your price. But you still haven’t received an  offer. What’s the deal? You probably haven’t cut your price enough.

    Realtors say if you’re going to lower your price, don’t do it in small  increments. After all, there’s really no difference between $225,000 and  $224,900. Buyers won’t fall for that. If you’re going to slash your price,  you’ll have to lower it by at least $5,000 for buyers to take  notice.

    Read more:

    Condo buyers can gain the upper hand by seeing through marketing

    Contact me for professional advice and to avoid all of the pains that can come along with a real estate purchase.


    “If you buy this condo, you’ll lead a glamorous life just like the hot model on this slick, glossy billboard.”

    Most shoppers are smart enough to know that’s not necessarily what they’re signing up for when they drop thousands on a condo.

    While many developers continue to use these “heavy on fantasy, light on information” marketing strategies, they’re on their way out, says Matthew Slutsky, condo marketing expert and founder/president of, an online directory of Canadian condo developments.

    “Purchasers aren’t stupid,” he says, speaking of the intended allure of model-esque advertisements and slick showrooms. “Nobody’s going to go to a sales centre without doing their research.”

    That research, if done right, will involve brushing up on the kinds of strategies developers use to help sell the condos – and they involve more than just the billboard. They’re not done maliciously to fool the buyer, Mr. Slutsky says. “It’s just marketing.”

    Here’s how to see through and interpret sales strategies while you’re shopping for that condo:

    Knowledge is power

    If a developer isn’t offering any and all information, they’re likely not worth your time or money, says David Allison, president of Vancouver-based Braun/Allison Inc., which does marketing for residential developments.

    “You need to demand that information. If you’re going to be putting down your life savings and you don’t have all that information, then you’re not making a smart decision.”

    Make sure the developer has an informative website and don’t bend to those who ask you to call them or visit a sales centre for more details. Shoppers could also visit home builders association websites such as the Greater Vancouver Homebuilders Association, which should have information on the developer if they’ve built in the area before, says Carla Bury, director of marketing at Intercorp Inc., a developer in Vancouver.

    Visit an existing development

    If you’re buying before the condo is built, ask whether that same developer has a condo nearby. If so, get a tour, Mr. Allison suggests. It will help you gauge the quality of the building. If the hallways are narrow, you can tell the developer was stretching to make the rooms feel larger in a small unit, he says.

    Thinking of buying a condo?

    It’s also smart to check out a view plan to make sure you’re actually going to see that sunset from your condo, says Ms. Bury, whose company is set to release a book to help condo shoppers make informed decisions when buying their new home. It also doesn’t hurt to talk to a condo owner or two in that building to see whether they got what they signed up for.

    Watch the details in ads

    If it’s really important to you that you can barbecue on your balcony, just like the happy couple in the ad, make sure you actually can after you buy, says Denise Lash, a condominium lawyer at Heenan Blaikie LLP in Toronto.

    “They may show people on the roof so you assume your condo would allow barbecuing, but then you find out it’s only for certain units,” she says. If the ad shows a nice beach scene, check whether that development is actually near the water. After all, she says, “marketing is marketing and no one is legally bound.”

    Look up

    You walk into a model suite and it looks like a spacious cove of wonderful. That’s probably because it doesn’t have a ceiling, Mr. Slutsky says. “It gives a much airier feel to a small suite.” Model suites are often in industrial spaces, making it hard to envision where the ceiling would be. That said, there’s usually a little line on the wall denoting the ceiling height; ask the agent to point it out, he says.

    Furniture size may vary

    Layout plans will often feature furniture – a little window seat here, a breakfast nook there. Ask about the size of the bed drawn into the bedroom. “They may be using a double bed instead of a queen-sized bed,” he says. “You may not even be able to fit a queen-sized bed in the bedroom.” Other pieces of furniture may be smaller, too, even those featured in the model suite. “It’s to make it look bigger. They will put in furniture that will fit with that space.”

    Love the granite countertop? That’ll be extra

    Model suites are often peppered with upgrades that are not included in the price of the condo, whether it be gleaming countertops or slick pot lights in the ceiling. “The standards are often very nice,” Mr. Slutsky says, but it’s key to ask what’s an upgrade and what’s included in the price.

    How big is this big?

    Don’t be fooled by the majesty of the show suite – sometimes they’re bigger than what you’re hoping to buy, Mr. Slutsky says. “Usually the show suite is [the size advertised], but they may be showcasing a larger unit rather than, say, the 500-square-foot unit,” he says. It’s up to you to know whether the model condo you’re walking through is really the model you can afford. Don’t be shy to ask. Ms. Bury from Intercorp suggests walking through two or three different units to get a real feel for the sizes available.

    How many ‘steps’ from the subway is it, anyway?

    A lot of developers describe the proximity of the condo tower to restaurants and attractions with amenity maps. However, they’re not always drawn to scale, Mr. Slutksy says. “Often they’ll make the development look much closer to the amenities than it may actually be,” he says. Gauge the distance for yourself, he says. Take a drive to test it out or, better yet, spend a few days scoping out the neighbourhood to get a feel for where you’d be doing your shopping and restaurant-going.

    Check out the layout

    As in “don’t buy that big leather couch before buying the condo.” It just might not fit. Layouts on a piece of paper can seem a lot more ideal than the layout in real life, Mr. Slutsky says. It’s a conundrum often encountered when purchasing condos before they’re built. “There are a lot of two-bedroom, 520-square-foot units selling, which is very tight,” he says. Try to place yourself there “so you can get a feel for how the unit’s going to work, which way the doors are going to swing.”

    Check the contract

    “People get all carried away with the beautiful marketing and don’t really realize that what they’re buying is defined in the legal documents,” says the lawyer Ms. Lash. The model suite you’re looking at might be 800 square feet, but unless it says it in the legal documents, that may not be the case for yours. “If there’s something important to the purchaser that they have or they need, they should get it in writing,” she says. “If the dimensions of the suite are important or have a certain piece of furniture to get in, they’d better be clear what their specifications are.”

    And a sales strategy that could come back

    When interest rates were higher and the condo market not so red-hot, some developers held contests so shoppers could win their condo suite, Mr. Allison says. He even remembers one developer in Vancouver who gave away a free car with the purchase of a condo. “A lot of those promotional, attention-getting things are out of vogue,” he says. “But who knows what people are going to do when interest rates go up?”