The Pre-Construction Condo Gamble
By Michael McCann
Imagine: a 50-something couple, looking to condo living several years down the road, visits a presentation centre and sees glossy floor plans, colour renderings and a list of premium unit upgrades.
“Commit to purchasing before the shovels are in the ground,” the pitch goes, “and get a better price than in four years when it’s built.” But after signing the contract and making the deposit, they find life changes in four years: divorce, death, a new job or adjusted financial realities could force them to sell the unit.
But unloading a pre-construction purchase agreement can be an incredibly frustrating experience.
— You’ll have to pay the developers to reassign the agreement.
— The builder can unilaterally make changes to your agreement, including floor plans, construction materials and adding retail/commercial space.
— With waves of new condominiums saturating the market, selling prices have not reflected the gains that some developers’ agents promised.
— If you default, the developer can resell the unit and sue for any losses.
— If you are able to sell, any profit will be subject to capital gains tax because you never lived in it.
A safer approach is to buy pre-existing. By physically viewing the finished product, you’ll know exactly what you’re getting into. Best of all, you’ll be able to sell the unit whenever you please with minimal hassle.
MICHAEL McCANN IS A TORONTO-BASED REAL ESTATE AGENT FOR ROYAL LEPAGE.