Pre-construction condo pricing - what is it?
If you're in the market for a condo, you have the choice between buying a pre-construction condo or a unit on the resale market. Pre-construction condos can be purchased by individual buyers during the project development or construction phase because developers sometimes need to raise money during this time and competitive prices are often available.
While pre-construction condos offer numerous benefits over existing buildings, navigating pricing structures and customization options can be a difficult task.
Pre-construction pricing is often based on a tier structure, with vastly different prices available within each building and between buildings in the same neighborhood. From the size and exclusivity of the building through to customization, amenities, and location, let's take a look at condo pricing structures and what they mean for your budget.
Buying a pre-construction condo is a major financial investment, so you need to make the right decision from the outset. Before you start, it's important to be realistic about the costs involved, with a 20 percent deposit typically required, substantial closing fees likely, and monthly maintenance fees payable in addition to your mortgage. Making a budget and getting mortgage pre-approval is critical before you start hunting for the perfect condo.
Condo prices and options
Pre-construction condos are available in most price ranges, with couples, families, and retirees able to find neighborhoods and condo communities that meet their needs. Like all real estate decisions, timing is everything, with buyers needing to analyze each development cycle while keeping an eye on wider market conditions. While you want to buy somewhere in a popular location, it's important to avoid areas with oversupply issues if you want to build equity or generate rental income.
Plans purchased early in the condo development cycle often come with better prices and selection options, with popular floors and suites often selling out during the initial phase. While you can mitigate your risk by waiting until units are completed and checking their construction quality, you may lose access to the best deals or miss out on a unit altogether.
Whether you decide to jump in or wait patiently, it's important that you can meet your financial obligations before and after purchase. A typical deposit structure for a pre-construction condo includes $3,000-$5,000 with the offer, and 5 percent installments within 30, 90, and 180 days. All of the deposit will be required by the time of occupancy.
Deposit structures are often more flexible closer to completion, with the building having already been financed by this stage. A short cooling off period is often available for pre-construction condos, with buyers able to rethink their purchase after the deposit has been paid.
Closing costs will be due before you move in, including legal fees, taxes, insurance, home inspection fees, utility hookup fees, and assignment fees. Occupancy fees may also need to be paid if the developer lets you move into your unit before the rest of the building has been completed. Development fees and municipal levies also need to be paid when a new building is developed, with these fees differing widely between cities and regions.