When purchasing a home, outside of existing properties such as resale homes and condominiums, there are also preconstruction homes. Offering a unique opportunity for investment in today’s marketplace, these are properties that have not been built yet and are typically being sold by the builder as part of either a multi-residential project or as a smaller selection of homes.
A pre construction home or condominium, often referred to as a “new-build”, is defined as a property or building unit which is purchased directly from the builder prior to its construction. There are also instances where pre-construction homes and condominiums might be purchased from an original buyer, who has not yet moved into the property, in which case this would be classified as a sale via assignment.
In a 2023 survey by Tarion, results revealed that 58% of respondents prefer newly built homes because they are energy-efficient, offering just one reason behind the consistent interest in buying pre-construction.
Whether you’re an investor looking for potentially significant returns, or a home owner seeking out a blank canvas to transform into your ideal living space, there are several factors to consider when buying preconstruction. To help you navigate the ins and outs of buying pre construction, you should always seek out the guidance of an industry professional. At Royal LePage Your Community Realty, our award-winning sales representatives are ready to help YOU get started!
In the meantime, check out our quick-list of 10 factors to consider when buying pre construction.
When it comes to real estate, you’ve heard it before, but it’s all about location, location, location. Aside from the obvious benefits to finding the perfect location for your family’s needs, you will also want to consider the location from an objective standpoint, for the purpose of investment and future return on investment. What are the current trends in the neighborhood - has there been a lot of recent developments or proposed developments?
So what exactly constitutes a “good location” when considering the purchase of a pre construction home?
These 5 top factors of location are a great starting point:
In the same vein as location, when exploring a pre construction investment, almost as important as the property itself is the surrounding community. Delving deeper than just the geographic location itself and the property values there, when we talk about community and lifestyle, we are looking more at the local quality of life.
Depending on your personal wants and needs as a purchaser, or investment aims as an investor, the community a development is being built in represents one of the few physical aspects you can get a sense of right away in a pre construction purchase. While your property or unit will not be completed at your time of purchase, you can get a feel for the existing area and lifestyle. This is especially important for families hoping to ensure their future neighborhood offers all the necessary vital services, recreation, schooling and more.
The best way to get a true feel for a community and its lifestyle is by spending time in the area and engaging with existing residents.
What is the vibe of the local community? Is there a great food and retail scene? Are there good schools in the district? How close to the property are emergency services and medical offices? What about community ties? Are there many other young families in the neighbourhood?
These are just a few of the questions and considerations to factor in as you explore and get a feel for your prospective new neighbourhood.
When considering a pre-construction property, it’s vital to do your due diligence in researching the builder behind the development. A well-reputed builder will have experience, past projects and no shortage of reviews and testimonials available. While every development project is different, it is important to take note of any common themes amongst builder reviews and in past projects, both positive and negative: were there frequent construction delays? Was the builder communicative and fair with purchasers? Have past purchasers reported any structural issues in the time since moving in? Has the builder been certified or awarded for design, high-efficiency properties, or any other positive points of note?
Timing is everything, right? Unfortunately, when it comes to pre construction developments, you’ll have to go in with the understanding that you are investing in a purchase where construction delays and other possible issues can and, frankly, often do arise. This isn’t to say that any delays won’t be short-lived and manageable, but they are common in this type of real estate transaction.
The best thing you can do as a purchaser is to be as clear as possible on the project timeline - and then add some room for potential delays. This timeframe will obviously impact you as you make your own financial and living arrangements, and you will want to allow some room for the unexpected and prepare yourself accordingly as you make this major commitment and investment.
When it comes to any contract, it’s all in the details. From the major and standard documents in packages like your Agreement of Purchase and Sale, there is always fine print to consider carefully and through the lens of your legal representative.
It’s also important to take particular note of where the contract stipulates what the process is as far as potential delays.
The best protection you can have as a purchaser when it comes to contracts is a great real estate lawyer. If you’re not sure where to source great legal representation, this is yet another area where your Your Community Realty representative can connect you with our wide network of top-tier resources to ensure your real estate goals are met.
One of the major appeals in purchasing pre construction is the option for upgrades and customization options with the property or unit. This is where, via both upgrades at cost and standard customization packages, purchasers can put their mark on their future home and investment and make it their own.
Ask about the upgrade options and what comes standard and what the costs would be for “extras” beyond the packages offered to purchasers as included in their agreement.
Upgrades and custom details can refer to anything from aesthetic details to structural changes, where possible and the costs for anything above and beyond what the builder is offering as standard can be considerable. From additional potlights to flooring, appliance packages and more, these can end up being big-ticket items which will require purchasers to ensure they’ve set aside enough funds to cover those costs.
When it comes to financing, this is obviously a major consideration for purchasers, who will need to ensure their finances are in order as far as mortgage pre-approvals and their ability to cover the deposit payment schedule.
The real estate market is always unpredictable, but it is possible to consider recent trends and general conditions as well as future market forecasts, in order to gauge the potential return on your investment. The right seasoned professional real estate agent will be able to help you review and consider all the applicable market factors that can possibly influence your future returns.
When it comes to risk over reward, this one is entirely dependent on each purchasers’ unique set of goals in their investment.
Before making a commitment of this magnitude, purchasers and investors will want to consult with their financial advisors, as well as consider their personal goals in this purchase. As with anything, there will always be risks associated - however, if you are comfortable with the risks and confident in your ability to fulfill the financial obligations on your end, real estate remains as one of the best investments you can make for their long term appreciation.
The legal aspects of buying a pre-construction home come down to the agreements and contractual obligations between yourself and the builder, as well as yourself and your financial lender. Having the right legal representation and financial counsel will ensure you are well informed of the terms, conditions, obligations and fine print that will constitute the purchase of the pre-construction property, from start to finish.
Ultimately, while buying a pre construction home can certainly come with a wealth of benefits like modern amenities, value appreciation and the option to customize the space - there are also downsides to consider. Potential issues like delays in construction, unpredictable markets and the inability to see the final product at the time of purchase.
Working with the right real estate agent will allow you to consider and navigate all the ins and outs of the preconsctruction process, before committing yourself and your finances to any final decisions. Contact our award-winning team today and let us help you find your dream home!
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