Step#1
Identify you goal
Whether you are looking to purchase a rental income property or a property to live in, It is important to know your budget and timeline. Is your goal to earn a strong ROI, generate rental income, and diversify your investment portfolio? Or, are you a first-time home buyer looking to get into the market? Knowing what you want within your budget can help you select the right property.
Investing in pre-construction condominiums is one of the safe ways to grow your money. When you invest in a pre-construction condominium unit, your investment increases in value from the first day you purchase the condo unit until you decide to sell it.
Pre-construction condos tend to be cheaper because there is a risk that the project will be delayed or even called off, but this is not always the case nowadays, especially in certain high-demand areas. You have more time to save up for your condo. You pay the builder a series of payments as a deposit.
Pre-construction projects have deferred deposit schedules, allowing you to make smaller installments over the course of construction. Instead of paying a 20-25% lump sum deposit, when you buy from a builder you can make 5% payments over a 3-4 year period.
Step#2
Make a down payment and select the right builder
You can spread the down payment over a long period, thus easing any financial obligations.
Here is an example of a typical deposit structure:
First installment: 5% in 30 days
Second installment: 5% in 90 days
Third installment: 5% in 180 days
Final installment: 5% upon occupancy
There are over 5,000 licensed new home builders in Ontario. Ensuring you are buying from a reputable builder is critical. Remember, you are making one of the largest investments of your life. Look for builders with a proven track record with the highest standards of excellence.
Some of the brokerages have exclusive Platinum/VIP Access to many hot new projects. It means if you have a Realtor that works with that brokerage you can access that new project before anyone else, so you might get a rare investment opportunity.
The Ontario Builder Directory (OBD) is an online resource that can help you confirm if your builder is licensed to build new homes in Ontario.
1. Ground report
You can do a quick Internet search by keywords in the company name since customer forums, blogs, news reports, property sites, etc, typically have a lot of information. However, it is still a good idea to go in for field research. Talk to customers who bought units in old projects as well as local brokers. The current market price of the past projects in comparison to peers in the same locality is also an indicator of the builder’s standing.
2. Track record
It is safer to buy from an experienced builder with a good delivery record since he is likely to have a more professional approach, with systems and processes up and running. Besides, you can check his track record and find out how well the past projects have been executed. Remember, lack of transparency is a good enough reason to not buy.
Step#3
Purchase agreement
Your purchase agreement is one of the most important documents in your new home buying process.
This purchase agreement is a legal and binding contract between you and the vendor, so it is important that you have a lawyer review it, before you sign.
Your lawyer can also help you understand the Tarion Addendum attached to your purchase agreement, which includes closing dates and potential delays, closing fees, and other possible costs. Your lawyer can also explain when your Agreement may be terminated and, if that happens, how your deposit will be protected under the Addendum.
Under the Ontario new home warranty and protection plan, all new homes have a warranty for, among other things, workmanship, materials, Ontario Building Code violations, water penetration and defects in your home’s structure and systems. The warranty coverage is broken into one-year, two-year, and seven-year warranties and it is important to understand what types of defects and conditions are covered during each warranty period.
Extensions – Make sure that your offer limits extensions to the provisions of Tarion and you don’t have any clauses where the vendor can try and get around Tarion and you understand the extension terms and rights.
Driveways – Sometimes the offer specifies that the vendor is including the driveway in the price and on closing there appears a charge for the driveway. You should be very careful about it.
General Stuff – Make sure you understand in some offers the vendor may not have municipal approval and changes can happen. For example your lot could be eliminated and you might be required to accept a different new lot. Your evaluation could be reserved, you may lose your walk out in the back or you may have to pay for a walk out if you are required to have one duo to engineer changes.
Legal Fees and Disbursements – First of all you are going to pay the fee, Whatever the amount you agreed to. Then there is a list of disbursements. Disbursements are the fees expected by your lawyer on your behalf necessary to search and close the transaction.
Condos- If you are purchasing a condo, make sure you check to see if you own your parking and storage locker or are your rights limited to exclusive use?
Title – This is one of those areas where your lawyer is essential. You need to look out for clauses that say you have to accept the builders undertaking to give you a deed if one is not available on closing. You have to check to see what restrictions will run with the deed and how they will affect you.
Step#4
Predelivery inspection, closing
Before you take possession, you will have an opportunity to walk through your new home with your builder to make sure that nothing is missing, damaged, or incomplete.
Review Tarion’s PDI Checklist before your walk-through, so you’ll know what to look for. The PDI Checklist is a general guide so you should add your own checkpoints based on your property and its unique details.
If you are purchasing a new condo, you have an initial 10 days under the Condominium Act to cancel a sales agreement. During this time, make sure to review your purchase agreement and the disclosure statement.
you might move into a new condo before the condo project is completed and registered. This is called interim occupancy. Make sure to ask your real estate lawyer about the following:
- Condominium ownership
- Monthly payment of interim occupancy fees
- Duration of interim occupancy
- Other rights and responsibilities during the interim occupancy period.
Following these tips will help take some of the worry out of the purchase of your new home or condo. Please share this with family and friends who are in the market to buy a new home in Ontario.
The moment the developer registers the building, the unit officially transfers to your ownership. This is called the final closing. At this time the remaining balance must be paid in full to the developer in order to retain your condo.
This is the final time you meet with your lawyer to sign the necessary paperwork required to transfer the ownership to your name. At this moment your mortgage payments will begin and you will be responsible to pay the final closing costs.