Frequently Asked Questions
At Build Insiders we believe consumers should have access to all the information necessary to understand their options and make the best decisions for their purchase.
Here are some frequently asked questions about pre-construction to help you understand the buying process.
GENERAL FAQs
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For all real estate transactions, including pre-construction, you need a licensed Realtor. It’s our job to inform and guide you to the best decision possible - and then handle the non-glamorous paperwork at the end.
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Pre-construction offers purchasers several benefits, including:
• Securing a unit at the current market’s value, which will appreciate well past purchase price at completion
• Extended deposit structures that are more financially manageable than the down payment on a resale property
• A new property greatly delays repairs, and the unit will be covered under the Tarion Warranty program
Each Buyer’s situation is different, and even though Build Insiders is here to sell pre-construction, in some cases resale makes more sense.
If you’re unsure if pre-construction is the right move for you, get in touch with us for a free consultation.
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There’s no simple answer since such a wide variety of pre-construction options are available.
The best option depends on factors like your budget, current market conditions, and what builds are currently selling.
When working with us, we’ll compare developments for you based on a number of factors and break down the financial forecasts to help you make the best decision.
However, choosing a location that is near schools, shops, jobs, and public transit is always a safe bet for investments.
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Unfortunately, yes.
Builders typically first sell the most desirable units internally, then to preferred exclusive agents, and then to regular agents and the public.
Choosing an agent with a good relationship and track record with developers will give you the best chance to buy into a competitive build.
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We have exclusive and early access to a variety of builds and work with the best developers in the province.
However, for some developers (usually smaller developers or boutique projects), it makes more sense for them to sell privately in-house and not cooperate with agents. In these cases we can still help and guide you through the process.
If you want more information about a project that you don’t see in our emails or website – message us for more information, and we’ll do the rest!
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The benefit to you is we can help direct you to the right project.
A sales office sells one product, and it’s their job to sell it to you without helping you figure out if it’s right for you.
The price and outcome of purchasing a unit are the same whether you work with us or directly with a project’s sales rep.
The difference is we’ll take the time to fully walk you through the process, help with financial forecasting, and show you the comparables from other builders to help make sure you’re making the best decision.
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Not a cent!
Our commission is paid by the developer for our service in the transaction.
BUYING PROCESS
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Choosing the right project depends on several factors, including your budget, desired location, unit size, amenities, timeline, and whether you’re an end-user or an investor.
We’ll help you compare projects based on location, build types, developers, amenities, incentives, price-per sqft, finishes, and financial forecasting to make the decision easier.
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If the searching stage of buying goes well, we get to the worksheet!
When we’ve found the right build for you, we’ll submit a worksheet to the builder that includes our top 3-unit preferences, photo IDs, and some information about you.
The builder will review the worksheet and then give us allocations (available units) to choose from.
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Deposit schedules are the breakdown of when you’ll pay portions of the pre-construction deposits.
Unlike resale purchases, deposits are conveniently spread out over the course of the building process.
These deposits are paid with post-dated cheques that we deliver to the builder around the time of signing the purchase agreement.
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Typical deposit structures are usually about 20% for pre-construction units.
Each build is different in the exact deposit schedule, but typically they look something like this:
• $5,000 on signing
• Balance to 5% in 30 days
• 5% in 90 days
• 5% in 180 days
• 5% in 360 days
• 5% at closing
In the past couple of years, there has been a shift in deposit structures, getting as low as 10% as an incentive due to competition between developers; some of those 5%(s) are usually 2.5% in these cases.
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After signing an agreement to purchase a pre-construction unit, we enter what is called a “10-day cooling period”.
During this period, you can back out of the purchase without penalty if you are uncomfortable with your decision or change your mind.
We encourage you to get a lawyer review in this period, as well as secure financing for the unit. Don’t worry; we’ll walk you through it and refer you to the best in those industries.
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Purchase agreements for pre-construction are pretty comprehensive and tend to be well over 100 pages. At Build Insiders we’ve spent countless hours reviewing them for clients, but it’s important to note that we’re not lawyers.
The lawyer will review the entire document and can request wording changes for clarification, cap fees/closing costs, catch any errors, and give you a digestible outline of your agreement.
In our experience, lawyer reviews are worth it, saving our clients tens of thousands of dollars.
FINANCING
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The first step of any real estate purchase is determining what financing you’d be approved for.
The best way to do this is to connect with a Mortgage Broker who will review your financial status and get you a “pre-approval” which is a strong indicator of what banks will be willing to loan you as a mortgage.
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Pre-approvals give two main benefits:
• We’ll know what you can afford which will help us make the best decision when choosing between pre-construction projects
• The mortgage broker will have your information ready to go when it comes time to secure financing for your purchase
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For pre-construction, you are purchasing a unit that will not be built for quite some time, so you won’t actually need a mortgage until the build is completed.
Builders require purchasers to submit a “Mortgage Pre-Approval Letter (MPA)” also known as a “financing letter” usually within 30 days of signing the purchase agreement.
This letter is written by a mortgage broker and shows the builder that you have been approved by a bank to receive financing for the purchase when it is completed.
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Yes!
Mortgage brokers receive their commission from the lender when a buyer gets a mortgage.
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Yes, but it depends on whether you plan to be an end-user or an investor.
For end-users (meaning the buyers themselves or their immediate family members will be the principal residents), builders essentially include the HST in the purchase price.
For investors, the HST rebate portion is excluded from the purchase price and is due at closing; however, investors can apply for the “Ontario New Residential Rental Property Rebate (NRRPR)” for a full rebate of up to $24,000.
AFTER PURCHASING
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At a certain point in the construction process the builder will be ready to place an order for the materials they need for the finishes in each unit, and this is when you’ll be contacted and booked in for a design consult.
For this design consult, you’ll meet with a designer from the builder and review your options for cabinet finishes, countertop options, tiles, paint, flooring, and upgrades to customize your new unit.
If this part of the process sounds more scary than exciting, we’re happy to join clients for this stage and provide extra design consulting!
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A pre-delivery inspection (PDI) occurs when your unit is completed by the builder, but before you officially get your keys.
During this inspection, you are led through the unit by the builder to ensure that everything is completed with no quality issues, as well as an explanation of how to operate the home’s systems.
This can be overwhelming, and small details of incomplete, damaged, missing, or not properly operating things can be overlooked – but at Build Insiders, we’re trained on how to catch all errors.
We’ll then put together a report and ensure the builder fixes uncovered issues before handing over your keys.
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Interim occupancy is the period between when your unit is available to be lived in or rented and before the entire building is registered. During this time, you’ll pay occupancy fees which consist of estimated common expenses and interest calculated on the purchase price. Since the building is not registered yet, you will not have a mortgage during interim occupancy.
Closing is when the building is registered and your unit’s title is transferred to you. This is when you will obtain your mortgage and pay closing costs.
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You can rent out your unit as soon as it’s ready for interim occupancy.
The good news is, (usually) in this period of time monthly payments are lower than mortgage payments at closing.
So for investors, the longer the interim occupancy, the more they can pocket.
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Closing costs are the fees you pay at the end of a real estate transaction, including lawyer fees, land transfer tax, etc.
Closing costs get a little more complicated for pre-construction purchases as more is involved. Typically for pre-construction purchases, buyers should expect to pay:
• Common Expenses / Maintenance Fees / Condo Fees - ($600 - $1,200)
• Reserve Fund - $1,200
• Property Taxes - $5,000
• Misc. Costs (Utility Hookup, Warranty Enrollment, Site Review, Admin, etc.) – ($4,000 - $5,000)
• Park, Community, Art, and Education Levies – ($6,000)
• Development Charges – ($12,000)
• Lawyer Fees – ($1,900)
• Land Transfer Tax - (See Calculator)
For each project, these costs can vary, but overall as a rule of thumb, we recommend clients expect to pay an additional $20,000 at closing.
Incentives from builders are usually tailored around lowering these costs to make their offer more appetizing to buyers.
It’s important to note that these prices will be in the purchase agreement, and this is where the lawyer review can save you lots of money through capping charges.
MISC.
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An assignment is an option for pre-construction buyers to sell their units before the build is complete.
In these transactions, the seller is basically selling their allocation and assigning their purchase agreement to the new buyer, who will pay the sum of all paid deposits (+/-) an agreed-upon appreciation/depreciation from the original purchase price.
Builders will provide guidelines for when and how assignment sales can take place in the purchase agreement.
If you’d like more information on this option or are interested in purchasing an assignment, reach out to us!
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Yes absolutely!
We encourage agents to use Build Insiders as a tool to share information with their clients for the buying process as well as which projects are currently selling.
If you can’t get an allocation or would like help with your transaction; we’re happy to help and make sure you get paid via referral.
HAVE ANOTHER QUESTION? JUST ASK!