Whether you are buying a pre-construction condo in the downtown Toronto, or anywhere else, either as an investment or for your own living pleasure, you must consider the following:
- Your ability to get financing a few years later to close the deal:
Perhaps you won't need to apply for mortgage until a few years later since the signing of the agreement. Make sure that you are still able to get financing/mortgage when the condo is built and you are about to become a proud owner of your brand new condo.
Although the buyer could be approved for financing at the time when the condominium agreement is signed with the developer, however, when the building would be finished, the same lender could refuse give the financing, stating that the buyer’s financial status has changed and that she no longer qualifies for the mortgage; we have seen numerous cases where buyers, loose entire deposit, in some cases as high as $40,000 because of this.
This can be avoided by either you or your real estate agent or your lawyer could negotiate a clause with the builder that states that if there is a change of life circumstance before closing, such as death, serious injury or loss of employment, you can cancel the contract upon the payment of a set amount or penalty.
- How would the Revenue Canada, CRA, tax you on the sale of your condo:
If you sell your condo before the title passes to you and make a profit, you could be paying capital gain taxes on almost 50% of your profit. Talk to a tax accountant before making any sales or investments. For buyers who have no choice but to sell before closing, there may be a way to fight a reassessment by the Canada Revenue Agency, CRA, if you can demonstrate that at the time you bought, you intended to close the sale, but that circumstances changed at closing, requiring you to sell. Since every individual situation is different, it is best to always seek tax advice from a lawyer or accountant before making any decision to challenge a re-assessment.
- Your right to sell the condo before its completion:
When you sign a pre-construction contract, always make sure you have the right to sell or assign it before closing. If for some reason you can not get financing and you don't have a right to sell, then you end up loosing all or part of your deposit. Sometimes developers assign you this right, but charge you anywhere from $5000, or higher; a good real estate agent should get this done without costing you anything.
- Putting a cap on the development charges and educational levies:
These are the charges that a builder has to pay to the city to create additional services and infrastructure for new residence of the conodminum. Make sure these charges are caped. In downtown Toronto, these charges are expected to doubled within the next two year, costing anywhere from $5000 to $10,000 more than what you were originally told.
Remember, the sales staff at the presentation centres works for developers and builders. It is better to have a professional real estate agent on your side representing you and lawyers and accountants providing legal and tax advice. Understand your rights before you buy any pre-construction condo in the downtown Toronto or anywhere else, to avoid problems later.
I am a real estate agent specialized in the preconstruction condos in the downtown Toronto. To find out more about my professional services to assist you in making an informed decision, please call me at: 647 606 8037
Disclaimers: Please consult lawyers or accountants for legal, or investment, or tax advice. I am a real estate agent, specialized in the downtown Toronto preconstruction condos, and I can only provide the facts about the Toronto real estate.
Comments(3)