The Ultimate Guide for Buying a Pre-Construction Townhouse in Toronto
Research has shown that in Canada, close to one in three homes purchased are purchased directly from the builder. While you may not have considered purchasing a house, condo, or townhouse in the pre-construction phase, there are many advantages and benefits you can take advantage of if you are purchasing a home during the pre-construction phase. The benefits you can take advantage of range from saving money and ideally seeing a large return on your investment when the time comes to sell your home, the possibilities for customization when buying a pre-construction townhouse, the convenience of having a new home, and more. However, it is important to remember that buying a home during the pre-construction process might not be the right choice for everyone. It is recommended that you take some time to consider the pros and cons of buying a pre-construction townhouse and decide whether or not buying a pre-construction townhouse is the right choice for you before you consider purchasing a townhouse during the pre-construction phase.
Related article: Types of Houses in Canada and How to Get the Best Price for Them
Pros for buying a pre-construction townhouse
If you purchase your townhouse early on during the pre-construction process you might be able to purchase your home with a minimal down payment, while your house’s value will theoretically appreciate over time. If you are buying a home now, you will be able to buy at today’s lower prices and enjoy the benefits of your home’s future value. Moreover, if your financial situation is not presently amazing, you can still purchase a new townhouse, while buying yourself some time, which can help provide you with the opportunity to improve your financial situation before you are financing your home.
Many brand new homes are built in underdeveloped suburbs, which can allow you to avoid high costs and the emotional bidding wars you might experience in expensive urban areas such as Toronto and Vancouver.
Finally, new homes may offer more living space and other amenities compared to older, existing homes.
Other advantages to purchasing a townhouse during the pre-construction phase are the possibilities for customization since your house will be built to your specifications. These customizations have the potential to improve your home’s value while differentiating it from your neighbours’ homes before it is even finished, helping you avoid future costly renovations. What does this mean for you? This means that your house will be painted with your colour palette, built with your desired finishes, appliances, and more. This will save you time and money since all of the work will be done for you. Furthermore, newer houses are typically built with design elements that are popular today, such as open floor plans, larger eat-in-kitchens, walk-in closets, and large master bathrooms.
Additionally, new homes are usually built with the latest technology already installed, such as alarm systems, speaker systems, internet, and cable wiring, saving you time, money, and holes in your walls. Another financial benefit for new homes is that you hopefully will not have to do as much maintenance like you might need to do for an older, existing home since your home will be equipped with brand new appliances, plumbing, heating, air, and electrical systems. Ideally, this will help you to avoid needing to do repairs for a few years. While utilizing new construction materials can help ensure that newly built homes are more energy efficient, potentially lowering your utility bills.
Furthermore, living in a townhouse can be a good compromise for those who want some of the benefits you would enjoy while living in a detached house with some of the benefits of living in a condo. Some of these benefits could include having a yard, driveway, and parking. In some cases, if you are purchasing a pre-construction townhouse in new housing development, you might be able to find some amenities in your new community that you can usually only find living in a condo building or complexes such as a pool or fitness center. You might not be able to find these amenities if you are living a conventional detached home in a conventional neighbourhood.
Furthermore, living in a townhome in a planned community means you might not be responsible for weeding communal areas, shovelling snow or worrying about issues related to exterior maintenance. This is a huge advantage and can allow you to save time, energy, and money since others will be responsible for doing these tasks.
Living in a townhouse means you might have more living space than you might have if you were living in a condo while enjoying some of the benefits of living in a house. Living in a townhome could be great for people who want to still own a house without all of the maintenance and upkeep associated with owning a larger house but do not want to live in a condo or apartment.
This set-up is ideal for people looking to downsize or people who want to buy and live in that is something between a condo or apartment and a house. A townhouse could be great for single people with pets who might not want or need a whole house but who want something bigger than a condo or apartment, a home which provides more privacy than they might enjoy living in a condo or apartment. While there are many pros for buying pre-construction or new construction townhouses, there are some potential cons you need to be aware of. It is important to remember that living in a townhouse might not be for everyone.
Cons for buying a pre-construction townhouse
First, it is important to remember that brand new homes, whether they are single-family detached homes, townhouses or condos might cost significantly more to purchase than older, existing homes. Sometimes purchasing a brand new home can cost up to 20% more than purchasing an older, existing home. Also, all of those fantastic amenities that you saw in the model home have a tendency of adding up. It is important to remember that the upgraded features in brand new homes are significantly marked up to ensure that the builder is turning a profit and they can end up costing you far more than you ever expected. For example, it may cost your builder $5,000 or $6,000 to install granite or marble countertops in the kitchen in a model home, but these counters might end costing you $12,000.
Furthermore, another important consideration is that many neighbourhoods with new construction and new housing developments are frequently farther away from important destinations such as schools, your regular supermarket, shopping centers, and other important destinations than older, existing homes built in older, more established neighbourhoods. If you are going to be one of the first people to move into a new development, you might be living in a construction zone for a long time, until all of the other homes in this development have been completed.
If you are looking for a lovely and charming, townhouse or row house on a tree-lined street in an older, more established neighbourhood with a well-established community of neighbours, you probably will not be getting this for years in a new housing development. Frequently, new homes, typically do not have the architectural detail and charm you will find in many older homes. When the time comes to sell your home, newer properties might not be as appealing for buyers who enjoy customizing and upgrading or renovating their homes to their exact specifications. People who enjoy fixing up homes might not find that buying a brand new townhouse is not a great fit for them.
Newer homes, especially townhouses tend to be built on smaller lots than many older, detached houses. So, if you are looking for a home with a large backyard and space between your home and your next door neighbour’s home, you are not going to find this with a brand new townhouse.
A major con for some buyers is the way that townhouses and row houses are designed. Townhouses and row houses tend to have a smaller horizontal footprint and are built on smaller lots than conventional, detached homes. Townhouses and row houses tend to go back further and are built to be larger vertically, usually with more floors than detached, single-family homes. Given this design, your living space will be spread out across various floors. This means that living in a townhouse or row house might not ideal for those with limited mobility or disabilities which make frequently going up and down stairs challenging. This design and layout may also present problems down the line for older people who may struggle with mobility as they age. Moreover, living in a multi-story townhouse may not be the best choice for people with children or pets if they are worried about them having issues going up and down stairs.
Although, if you have your heart set on living in a townhouse or a row house, you could consider installing an elevator. However, installing an elevator in your home could be extremely expensive, time-consuming and lead to some massive headaches. Another important potential con to consider is the Homeowner Association (HOA)’s rules that exist in housing developments with townhouses.
While some people might enjoy townhouse living and might be willing to abide by the rules set out by the Homeowner’s Association or the community, some people might have issues abiding by the community’s rules. And others might have issues living in such close proximity to others and the lack of privacy you might experience living in a townhouse.
Homeowner Association’s (HOA) Rules
Some common rules in townhouse communities include restrictions for the type, size, and the number of pets that residents are allowed to have. Some developments may restrict the breed(s) of dogs that residents are allowed to have. Furthermore, some communities and Homeowners’ Associations have rules that ensure that homes in the community maintain a certain aesthetic. These rules governing aesthetics you may have living in a given community may regulate what types of plants you are allowed and not allowed to plant outside of your home. While other communities have rules and guidelines related to making changes to your unit. For example, you might need to get permission if you want to add upgrades to your home which impact exterior spaces, i.e. if you were planning on building a deck or patio. While others might regulate what paint colours you use when painting the exterior of your unit.
While buying a home during the pre-construction phase for a project might be an ideal choice you, there are some lifestyle factors you will need to consider before making any decisions. It is important to remember that you are not only buying a house, you are also making an important investment when buying a home and choosing to live in a certain neighbourhood.
There are several steps involved in the process of purchasing a pre-construction townhouse. The steps in this process will vary from agent to agent, broker to broker, and developer to developer. However, the steps described in this post represent the basic components of this process.
Steps for purchasing a pre-construction townhouse in Toronto or the Greater Toronto Area (GTA)
1. Find An Excellent
/Broker To Represent You, The Buyer
Before beginning to looking at pre-construction townhouses, you should find a great agent or broker that you like, who has experience working with people buying pre-construction homes and new construction homes. While the model townhouses in developments are where you can see what the final product might look like, model homes tend to be staffed by real estate agents who have a relationship with the builder or developer.
The real estate agents at these model homes in developments are usually representing the builder or developer, as the seller’s agent and they are duty bound to act in the builder’s best interest, not in your best interests, as the buyer. It is important to remember that the seller’s agent’s primary job is to ensure that the seller is getting the highest price and best deal possible for the homes they are selling. Therefore, it is your own best interest as a buyer that you have your own real estate agent or broker who can best represent your interests, as the buyer.
A real estate agent or broker representing you as the buyer is duty bound to act in your best interest as the buyer. Their job is to help you get the deal possible and make this process as smooth as possible. Your real estate can advise you on how to best structure your offer so it is most appealing to the builder/developer, can recommend other professionals who can help you throughout the purchase process such as lenders, movers, real estate attorneys, home inspectors, etc. and they can help you resolve any problems that might come up during the building process.
They can also advise you on making choices that will impact your home’s resale value, i.e. they can advise on which upgrades can help improve your home’s resale value. Your agent can also help you decide which areas, developments, and new projects might be a good fit for you, as well as for your needs, budget, and more. To quote Patrick Welsh, a real estate agent with Keller Williams, in Houston, Texas, “Your real estate agent’s job is to help you get the most value for your money, with the least hassle and frustration.” Therefore, it is important that you are honest with your real estate or broker about what your budget is, what you want, what you need, and do not be afraid to ask questions, they are your advocates in this process.
However, it is important to note that some developments will have site registration policies which will require your agent to accompany you on your first few visits. Before visiting any possible developments and home sites you are interested in, do not forget to ask your agent to look into the site’s registration policy before you visit. Your agent might be able to register you online or over the phone so you will be able to visit the model home at the site at your convenience, with or without them. Or you can always arrange a time with your agent to go look at a community you are interested in.
2. Investigate the builder’s/developer’s reputation and completion record
Assuming you have a found a project in the pre-construction phase that interests you, it is essential that you investigate the builder’s reputation and completion rate. You can investigate your builder’s reputation by visiting one of their other developments and speaking with homeowners, and searching the internet for reviews, testimonials, and news related to the builder.
It is important to keep in mind that many builders will have happy and unhappy past clients. When researching builders look for trends in reviews and make sure that you cover any concerns you may have in the purchase agreement documents. You can also see if your agent has worked with the builder in the past and/or is aware of their reputation. You can also check out local home builders’ websites, such as the Greater Toronto Area’s Building Industry and Land Development Association (BILD) website.
3. Visit the home site and learn more about your potential new neighbourhood
If you are interested in some projects in the pre-construction phase, you will need to arrange a time to visit these homesites. It is important to visit home sites since visiting project sites will help you get an idea of what living your potential new neighbourhood might be like. These visits are helpful since you can get an idea of how far away your potential new home would be located from schools, shopping centers, etc. During these visits, it is recommended that you inquire about any future plans for commercial expansion in this area, e.g. are there plans in the works to build or expand upon any commercial areas, for more residential development, etc.
4. Visit a model townhouse
On this visit, you will probably see a top of the line model home in a given development. It is important to always remember that model homes are always going to look beautiful. Model homes are meant to look beautiful to impress buyers into buying a home. However, whenever you are looking at model homes you might not realize that all of the features and amenities you fell in love with in the model home, might be upgrades that you will need to pay extra for. Moreover, the fit and finish of a model home do not usually represent what comes standard with a home. It is recommended that you always ask to see basic model homes if they are available, so you can gain insight into what your house might look like without all of these expensive upgrades and help you gain greater insight into what your home might look like.
It is important that you know that model homes usually are a mix of features that come standard with a home and upgrades. When you are touring model homes, you should be sure to find out which features and amenities will come standard with the home and which features or amenities are upgrades that will cost you extra. It is important to know exactly what’s available, what you will be getting, and how much it will cost. It is important to remember that costs when building homes can change. In other words, the quoted price you received at the start of construction, might not necessarily be the same as the price that you will end up paying when you decide to move forward with purchasing a pre-construction home. Feel free to ask your agent to get you a list of standard features and if available, a list of common upgrades and their associated costs.
This is not to say that upgrades are not worth the additional cost, this is to remind you that they will cost you extra and you will be paying for them. Also, you should ask to see samples of the builder’s finishing touches, such as lighting and plumbing features. It is important to remember that upgrades in your future home are an investment because they can help add to your home’s resale value when you are ready to sell your home. However, whatever upgrades you are adding need to be worth it. Finally, it is important to remember that builders and developers’ make a profit with upgrades for pre-construction homes. However, luckily for you, there might be a little room for bargaining for the sale price for a new townhouse, you should always try to negotiate the price for any upgrades you wish to add. The more upgrades you are adding to your home, the more leverage you will have when haggling over the price for your home.
5. Get Creative During the Negotiation Process
Assuming you have found a home, you love, now it’s time for some fun with negotiating. While negotiating may feel scary or daunting, take a deep breath, and remember that it is in your best interest as the buyer to negotiate over the price for your new home. This is the time to negotiate and enlist your real estate or broker’s help when negotiating over the price for your new home.
Also, it is important to keep in mind that builders and developers do not enjoy lowering their prices since they are reluctant to set a precedent for negotiating prices with buyers because future buyers might expect the same discounts. While it may be possible to negotiate a bit with the base price for your home, you can also be creative with your negotiations and ask for discounts for other things.
If you are not sure where to start with negotiating with your builder, you can always consider asking the builder or developer to pay closing costs or perform upgrades at no additional cost. However, it is important to remember that builders are frequently more likely to negotiate on the “back end” since paying closing costs or giving you a more favourable deal on upgrades are a more subtle way they can sweeten the deal for buyers. If you are considering a potential offer, you can always ask your agent to research a builder or developer’s negotiating style for prior sales in the community and for other developments they have built to determine if there is any particularly effective way to approach their offer and negotiations with them. Doing your research about a particular builder’s negotiating style will help you to feel more prepared, confident, and relaxed when negotiating and making the incredibly important financial decision when buying a home.
6. Get Everything In Writing
Before you do anything, DO NOT sign anything until everything has been negotiated, agreed upon, and written into the contract. Again, DO NOT sign anything until it has been written into the contract. If you are purchasing a home during the pre-construction or construction phase and it has not been completed, it is essential to SPELL OUT EVERYTHING that you want and address any concerns that you may have in the contract. You can specify in the contract, how the home will be finished, what will happen if there are construction delays, what happens in the rare case that the project is cancelled, and the deadlines for decisions and the payments that you will be making throughout this process. You should also have the builder or developer include in the purchase agreement, how much your Homeowners Associations fees and other fees will be.
If there is no legally mandated cooling off period in your province for new construction when purchasing directly from the builder or developer, ask for a cooling off period. A right of rescission is important in that it allows you to withdraw from a deal before the cooling off period has ended for any reason and have any and all of the money that you might have paid returned to you.
It is essential that you remember that verbal conversations are not legally binding, so that is everything that is important to you, every little detail needs to be put in writing and signed by all involved parties. While this may seem excessive, this is for your own benefit. This is why you should have an attorney you trust who has experience working with people looking to invest in pre-construction helping you with this project. Finally, it is important to remember that builders frequently use customized purchase agreement documents instead of standard purchase agreement forms that might be commonly used in your area. Ask your agent to get a copy of the builder’s purchase agreement documents for you to review in advance of signing any contracts.
7. Get a written guarantee and find out what is and what is not covered by the warranty
Since you are purchasing a home that has not been completed yet, you will need to figure out what guarantees will you have that your home will be ready on time? Your purchase agreement documents should specify a completion date for your home. However, it is important to remember that many builders will add provisions to the purchase agreement documents that make your home’s completion date dependent on receiving permit approvals from a municipality or building materials from suppliers. Furthermore, you might be responsible for paying additional fees if you are unable to close on time because your lender is not ready. Ask your agent to explain what happens in the event of a delay on the builder’s side or the buyer’s side. This is especially important since there more often than not, there are frequently delays with residential and commercial construction projects. Your agent should also negotiate a guarantee in case of the rare occurrence that the project gets cancelled.
Before you sign any Agreement and Purchase of Sale (APS) agreements, you should find out what is covered and what is not covered under the warranty for your new home. Many new homes will come with a warranty from the builder. However, it is important to remember that not all warranties are the same or created equally. Provinces in Canada such as Quebec, British Columbia, and Ontario, all have legally mandated warranty coverage for new houses. However, in other Canadian provinces, builders may try to convince buyers to opt out of signing up for warranty coverage by telling buyers that they are saving buyers from registration fees, do not fall for this and opt for the warranty. You will need to find out what is and is not covered under the warranty and how long the warranty lasts.
Keep in mind that many builders will use a third-party warranty company. In some cases, the manufacturers of certain products, such as windows, may have a separate guarantee or warranty, than the one from your builder. Your builder might refer to all issues with these components of the house to the manufacturer instead of handling these issues directly if they are covered by a separate warranty or guarantee. Your builder should be able to provide details on which part of the home is covered by which policy/policies. You should definitely ask your agent to obtain warranty information early in the process so your offer documents will be prepared to address your concerns that you may have up-front before signing any purchase documents.
8. Sign the Agreement of Purchase and Sale (APS) Documents
At this point, you are ready to make the leap to sign the papers to purchase your future home! When the day to sign the APS documents arrives, you will need to arrive prepared for your appointment with a valid government-issued photo ID e.g. your driver’s license or your passport and your chequebook, since you will not be able to sign the papers to purchase your home without your chequebook and an ID. Make sure that your ID(s) are valid, i.e. not expired when it comes to signing these papers since you do not want the fact that your ID may have expired preventing you from being able to sign the APS documents to purchase your home. At this time, your real estate agent will walk you through the signing process and answer any other questions you might have.
It is important to remember that your new home’s purchase agreement is a legally binding document, it spells out the conditions of the sale for the home and each side’s obligations in this process. This document tends to be written in legalese and full of fine print, it is recommended that you have an attorney you trust go over these APS documents with you. You should have an attorney to help you since if you are signing an APS without understanding all of the terms and conditions that come with it, you might be stuck agreeing to substitutions, inclusions or exclusions you do not want. Either before signing the APS or whenever you are signing the APS, you need to figure out any milestone payments you might be responsible for. In other words, will you be expected to pay at certain stages of construction or will be paying the full price the day you receive the keys?
9. Keeping It Cool: The Legally Mandated Cooling Off Period
If you are lucky, your APS documents will have a legally mandated cooling off period, which will allow you to back out of a deal before this period ends and receive a refund for any money you have paid. During this period, if you have not already done this, you should have a lawyer with experience working in pre-construction review this agreement, secure pre-approval from a lender or a commitment letter from your financial institution and complete other important tasks related to the purchase process. During this period, you are 100% protected and your home is on hold under your name for however many calendar days this cooling off period lasts.
10. If You Have Not Already Done So, Find a Lender and Get Pre-Approved for a Loan
If you have not already done so if you will need to secure a mortgage to purchase your home, and in order to do this you will need to secure pre-approval from a financial institution or a commitment letter in order to proceed with the purchase of your home. It is important to note that since your home is not officially registered yet, you cannot officially register for a mortgage. It is recommended that you shop around for lenders and find the lender/financial institution who can give you the best rate, they do not need to be the builder’s lender. Your builder might pressure you to go with their lender but go with the lender whose loan, interest rates, etc. are more favourable for you.
11. Your Builder/Developer Cashes Your First Check
If you are satisfied with the purchase agreement after the cooling off period, this contract for the purchase of your future home can be finalized and your first deposit check will be cashed one day after the cooling off period following the date you signed the contract has passed. Congratulations, you are one step closer to being a homeowner! Now your deposit checks should be processed accordingly. Do make sure that you have sufficient funds in your account on the specified dates that were provided to you in the sales agreement. You should make sure to have sufficient funds in your account on the dates that your checks are cashed so you can avoid paying expensive fees if the funds in your account are not sufficient to cover this. You will receive a receipt each time one of your checks have been cashed.
12. Begin working with the builder/developer to customize your home
While your new house is being built, you will be in contact with someone in your builder/developer’s office about customizing and designing your home. You will be working with them as you are picking colours, finishes, and upgrades for your home. This is when you will be working with the developer to turn your house into your dream home.
13. Home Inspection
Before closing on your home, you should have your home inspected. The first inspection is mandatory for all new homes under warranty and will take place with your builder shortly before the house is delivered to you. This is the time where you will be making sure that the builder is living up to the promises set out in the purchase agreement. If there are any deficiencies in your home or things that need to be fixed, you will need to write them down on a list and have the builder sign off on this list. If these problems are not written down and signed off by the builder, the builder is not obligated to fix the problem(s).
You should have your home inspected a second time, but after you have bought it. The second inspection should happen about a month before your home warranty is due to expire. Your house should have gone through all four seasons to ensure that enough time has passed for any major defects from settling or cracks to appear.
It is important to remember that there are different deadlines for warranty claims, so you should mark your calendars with these deadlines and get in any warranty claims at least five days before the warranty deadline hits. As a new homeowner, it is your responsibility to ensure that the warranty remains valid. For example, if you have to change your furnace filter or clean your gutters if you claim any heating deficiencies or water penetration into your basement. The builder should leave you with copies for the manufacturer’s warranties’ on the components and products used to build your house.
14. Moving In: Interim and Final Occupancy
There are two important dates and stages during the closing process. They are the Interim Occupancy stage and the Final Closing stage, you will be meeting with your lawyer during these final closing stages.
You will first meet with your lawyer when the developer contacts you to inform you that your home is ready for Interim Occupancy. You should be prepared at this time to make any outstanding deposits and payments related to occupancy. It is important to note that during the Interim Occupancy period you still do not own your house. Your mortgage or final payments to purchase your home will not occur until the Final Registration date, i.e. the date when you have registered your mortgage. It is recommended that you contact your lender approximately one year prior to your anticipated occupancy date to have your mortgage letter updated so you can avoid paying increased interest rates.
However, it is important to remember that during the interim occupancy stage, you will be making interim occupancy fee payments which are not going to be applied to your mortgage or your home.
The second time you will be meeting with your lawyer during this process will be shortly after the final closing date so you can sign all of the documents to officially transfer ownership of your house to you. At this point, your ownership of your home will be registered, your mortgage will begin and your lawyer will explain all of the outstanding costs you will be responsible for paying in order to finalize this purchase. Once you have signed all of these documents and paid all of the outstanding fees, congratulations, you are officially a homeowner!
Related article: How to choose the right mortgage broker in Toronto?
Questions you need to ask when looking at pre-construction townhouses
Before deciding to purchase a townhouse or move into a planned townhouse community, there are a series of questions that you should ask. Finding out the answers to this series of questions will help you to decide whether or not living in a certain townhome community is the right choice for you and your family.
What are the townhouse association rules?
Before deciding on whether or not townhouse living is right for you, you need to figure out what the association’s rules are, whether or not you are willing to abide by these rules. In other words, are you are ok with restrictions about things such as pets, the types of plants you are allowed to plant outside your unit and rules regulating any exterior changes or upgrades you wish to add to your unit?
You should ask to review a copy of the Homeowners Association’s covenants, conditions, restrictions, and bylaws, so you can understand all of the rules and ascertain if living in this community is the best choice for you. You should ideally have your attorney also review these documents.
How much are the monthly and yearly HOA fees and assessments? Are the following items included?
- Grounds maintenance
- Exterior maintenance for townhouses
- Sewer services
- Master insurance
- Road maintenance
- Snow Plowing
- Trash pick-up
- Pool/fitness center and other amenities
- Security, if you are in a gated community
You should find out what things from this list are included in your monthly and yearly HOA fees and any special assessments. You should inquire as to whether or not any major renovations or expansions are planned.
Is there any additional work planned for the community (for example: building any additional townhomes, adding any new amenities, changes to the common areas, etc.)?
This is especially important since finding out the answer to this question can help you to figure out what if any phases of the community have been completed. And if any planned phases for the community have not been completed, how long additional work may take and whether or not any additional work is planned for the community.
How much money does the association managing the complex have in reserve in their capital fund?
If you are looking into moving a development with townhouses, it is recommended that you find out how much money the association which manages the complex has in its capital reserve fund. The funds in the association’s capital reserve fund usually are used to cover any additional expenses which arise. Generally, this capital reserve fund should contain at least 10 percent of the townhouse association’s annual revenue budget. This information is important since if the association does not have sufficient funds in its capital reserve funds this means that you might be at an increased risk for paying a special assessment (additional fees that the association will charge owners to cover the costs of any capital improvements).
Who fixes what?
It is important that you find out which repairs and possible maintenance issues you will be responsible for and which items the association will be responsible for fixing.
If you are living in a complex of townhouses, who manages the complex?
If you are looking into moving into a townhouse complex, you should find out whether or not there is a professional management company responsible for managing the complex. Having a professional management company charged with managing the complex might cost you more money up front, but in the long-term, it might save you money. This is important since companies or people charged with managing a large number of complexes might have greater negotiating power for maintenance services such as lawn care.
How many units are currently for sale in the complex and are any units in foreclosure?
- Is the association involved in any legal disputes? (This is an important question since it can signal trouble within the association and possible future costs you might be responsible for paying, such as attorneys’ fees.)
- What are the community’s common areas? What are the rules and hours regulating their use?
- What does the parking situation look like? Where would your parking space(s) be? What is the deal with guest parking?
You will need to speak with your lender to figure out which type of loan will be the best for you to purchase a home within a given community. Your lender will have specific questions about the complex, how many units are occupied by owners, what percentage of association fees, are delinquent, etc.
Finally, if there are already people living in the complex, you should definitely speak with them. When you speak with them, ask them what they like the most and the least about living there, get their opinions about maintenance quality and the association. You can also find out whether or not there are community activities they can recommend that you can participate in.
These conversations can be incredibly illuminating and helpful as you make your decision to buy a townhouse in a certain community. While finding the answers to these questions before deciding to purchase a home, can you help you to avoid some headaches down the road and aid your decision-making process? While you should try to find the answers to these questions, there are some additional things you will need to keep in mind.
Related article: Pros and Cons of Buying Homes in Downtown Toronto
Things to think about
Whenever making an important decision such as buying a home, especially a new home during the pre-construction phase, there are some things you should keep in mind, such as taxes, length for completion, your objectives for buying a pre-construction townhouse, and more.
First, Tax Considerations
It is important you know that unlike resale homes, the GST/HST, the Goods and Services Tax (GST)/the Harmonized Sales Tax (HST) is applied to the price of a new home in Canada. This tax can significantly increase the overall cost of a new home since it is approximately 5% of the purchase price. Although you might be able to receive a 2-3% rebate for the money you paid for the GST/HST.
Second, are you prepared for the possibility that your home might be completed one or more years after purchasing it during the pre-construction phase? Are you prepared for the fact that the anticipated date of completion for your home vs. the actual date when you can move into your home might be months or years after the promised delivery date for your home? There are always delays with construction so it is important that you can be patient and flexible given that is more than likely that construction will be delayed.
Other things you should consider are: if you are prepared for the likelihood that your money might be tied up for a while, it might be possibly tied up for years? Will you be able to qualify for a mortgage once your home is completed? What might interest rates be doing years from now? What is your objective in purchasing a house in pre-construction? Are you planning to live in this house or will this be a house that you are renting? If you plan on renting out this home once it has been finished, you will need to consider factors like how many other investors there might be in your development? Are you prepared to wait for your builder to fix any deficiencies for you or your tenant?
Privacy Concerns, and the “Party Wall”
Another important thing to consider is how townhouses or row houses are typically designed. Townhouses and row houses typically share a common wall with their neighbours’ dwellings, but they do not share ceilings or floors with their neighbours like people living in condos or apartments do. Instead of having side yards, people living in townhouses or row houses typically have what is commonly known as a “party wall.”
A party wall is a shared wall that runs the length of the home, between units. And people living in townhouses or row houses usually share a stretch of a rooftop with adjacent townhouses or row houses. This means that you will enjoy more privacy than if you were living in an apartment or condo but you will not have as much privacy or space as someone living in a detached home.
If you do not mind living in close proximity to your neighbours’ homes this might not bother you. But, if you want more privacy and space between your homes, you might want to look into purchasing a detached house. Also, another thing to consider is what you might want to do with your house in the future? Another important consideration when looking to buy a townhouse is your neighbour’s easement rights.
People who own townhouses or row houses are bound to some basic agreements that owners of detached homes are not usually bound to. For example, if a person owns a unit in the middle of a row of townhouses or row houses, they are not allowed to raze their house and rebuild a smaller or bigger house that is more suited to their preferences. This is not allowed because the owners of the adjacent townhouses or row houses have easement rights. This means that they do not own their neighbour’s half of a party wall, but they do have certain rights. This right includes preventing demolition which could damage the structural integrity of their own portion of the party wall. The same rule usually also applies to other things such as fences or driveways.
If you are hoping to eventually do major construction on your home in the future to expand it, or change its form or shape, buying a townhouse might not be right for you since your neighbours’ easement rights might prevent you from doing certain things to your home. However, this might not be the case if you are living in a detached home, where if you wanted to demolish your home and build a completely new home, more to your liking, you might not face as many obstacles to making this happen. Whereas living in a townhouse means you are more restricted with what you can do to customize your home and/or property because of your neighbours’ easement rights. This means that a townhouse or row house might be a better choice for those who are ok with the possibility that they may not be able to do significant renovations or work on their house or their property once they have bought it.
Moreover, townhouse owners, unlike condo owners, whose property maintenance fees are usually covered by homeowner’s association or coop fees, townhouse owners are usually responsible for the upkeep and maintenance related to their home’s exterior. In this sense, living in a townhouse combines some of the benefits and things you might experience living in a condo or apartment with living in a detached home.
While buying a pre-construction townhouse might be the right choice for some people, it is not the right choice for everyone. There are inherent risks you face whenever you are buying real estate during the pre-construction phase. Making the decision to buy a pre-construction townhouse is definitely not for those who are risk-averse, need their home to be finished on time, need to move into their new home quickly or want a quick return on their investment. Construction takes time and you might not get an immediate return on your investment. However, if you do your research, negotiate well, are patient and are prepared for all the possible trials and tribulations that are part of buying a new home during the pre-construction phase, with some luck, your investment has the potential to turn out well for you. In order for you to reap the rewards of your investment, you will need to do your due diligence and seriously consider whether or not buying a townhouse in the pre-construction phase is the right choice for you.
Photo by Terrah Holly on Unsplash
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