The terminology, regulations, process and guarantees are different than what you may experience buying a detached or semi-detached home
Buying a new condo isn’t quite the same as buying a house. The terminology, regulations, process and guarantees are different than what you may experience buying a detached or semi-detached home.
Here are some common pitfalls to watch out for when you buy a new condo:
Overestimating how much living space you’ll get
Some contractors measure units from one exterior wall to another, which doesn’t always reflect the actual usable square footage. Some even include balcony space in the gross square footage. For buyers, however, it’s the net area most buyers care about: the space you can walk through and fill up with furniture. Be sure to ask how the square footage of your unit was calculated in the sales contract so you aren’t surprised when you move in.
“The difference is the walls, and also oftentimes the developers will add the balcony space into the square footage of the unit,” explained Vistacor Realty broker Andrew Mitchell. “Not all developers do, but it does happen.”
Not understanding the fine print
Pre-sales contracts aren’t boilerplate; they vary from project to project. Even if you’ve gone through buying property before, if you aren’t familiar with the ins and outs of co-ownership, it’s a good idea to lean on advice from a professional. Read through carefully, and consider working with an experienced real estate broker or even hiring a real estate lawyer to go through it with you to make sure you understand what you’re signing.
According to Century 21 broker Bahador Abadi, new-condo buyers often need help with the terminology not only in the lengthy pre-sales contracts, but also to understand the rules outlined in co-ownership agreements and other important documents. “It’s one of the biggest investments in your life. Take the time to read the information, and ask questions,” he said.
While most developers will allow buyers to bring in a realtor to help them shop for a unit and understand the contract, some have been known to refuse to pay the commission fees. Buyers who want to use a broker can still do so, however, though they will need to pay for the service themselves. Some brokers may be willing to work on a flat-fee basis or a lower commission rate in this case, Abadi said. (Doesn’t hurt to ask!)
Having a skilled negotiator on your side can help in other ways, too. While most new condo contracts are inflexible in terms of pricing, both Abadi and Mitchell said some aspects, such as upgrades to finishings, can sometimes be negotiated.
Mitchell noted that sometimes developers require buyers to use a specific notary or mortgage lender. In that case, he recommends buyers seek other quotes to make sure the price is competitive — and request price matching of professional fees or lending rate if not.
Not checking credentials
If your builder isn’t accredited with the RBQ, you won’t have the same recourse if the deal goes sour. Talking to a realtor may be helpful here, as those who do a lot of condo sales get to know not only the shiny showrooms, but also the after-sales service reputation and overall quality of a builder’s previous projects.
“We know the reputation of the builders. We know who has built earlier phases of the same project, what the finishing and quality of the product was, and most importantly their after-sales service,” Abadi said. “There are always minor repairs that need to be done.”
Buyers can also check the reputation of their realtor and mortgage broker on the OACIQ’s website to verify that their licences are valid and check their professional records (including any past disciplinary measures).
Assuming your building is covered by the Guarantee Plan for New Buildings
Since 1999, the provincial government has also run a new construction guarantee program through the Régie des Batiments providing automatic coverage up to $300,000 for buyers in most new construction projects. There are some exceptions, however. The Guarantee Plan for New Residential Buildings does not cover new buildings with more than four self-contained units stacked above each other, for example. Make sure you know if you’re covered, and if not, what protections you have as a buyer.
Assuming new construction is problem-free
Take your pre-acceptance inspection seriously, and be picky about any construction defects you spot. If there’s a problem, the Guarantee Plan covers you for partial payments made to contractors and any work completed on your property, even if you haven’t signed to accept the unit or work. If you can’t move in on the date outlined in your contract and you were not reimbursed for the payments you made, you may be able to claim costs for relocation, moving and storage.
Before you move in, you have up to three days following the acceptance of your unit to write your builder about any defects or poor workmanship. Don’t put it off or you risk losing your coverage for the repair. If you’re not confident in your ability to assess the quality of workmanship, you have the right to bring in a home inspector or another person you trust.
Not protecting your deposit
When you put a deposit on a new unit, it is protected under the Real Estate Brokerage Act if held in trust by your realtor’s agency. Yet Abadi said it isn’t uncommon for builders to ask for the money to be deposited with them so they can use it to finance construction. Buyers need to make sure they understand how their deposit will be protected, he said, whether that is through a builder’s insurance program or held in trust by the builder’s notary.
BRIANA TOMKINSON, SPECIAL TO THE MONTREAL GAZETTE Updated: February 11,