Pre-con condominium (townhouse) purchasing has many advantages, including the opportunity to have a sufficient preparation period and to budget for the purchase of a condo, as well as the ability to acquire a high-return investment property at the lowest possible price, in the desired location and at the desired move-in time, even with a small budget. We will explain the pre-sale process and our MyBestHome customer service in order, so we hope this will help you understand and prepare for the entire process from selecting a pre-sale condominium, to signing the contract, moving in, registering, and subsequent management, without any difficulties.
1. Considerations when selecting a pre-con condo
The purpose of purchasing a condo or townhouse can vary, including relocation, personal or children’s residence, proximity to children’s university, proximity to work, transfer to children in the future, pure investment, Assignment profit, rental income, etc. However, the number of condos that meet your requirements may be limited.
The target area for purchasing a property can vary depending on whether you plan to live there with your family or for investment purposes.
The actual occupancy of the condo is generally delayed by 6 months to 1 year from the originally scheduled occupancy date announced during the first sale. It is recommended that you plan accordingly.
The value of the condo after occupancy may vary depending on the construction company, the quality and durability of the construction materials, and especially the risk of construction cancellation, which has become a problem these days. It is recommended that you choose a construction company with a good reputation that can prepare for potential risks.
After purchasing a property, you usually move in and register it within 3-5 years. In order to register the property, you need to predict the financial situation and cash flow, and if necessary, obtain a mortgage (bank loan). It is recommended that you research the estimated mortgage amount in advance and select a condo within your budget. My Best Home has a network of experienced bank representatives and mortgage specialists to prepare for mortgage approval conditions and resolve potential problems in order to help you with the closing registration process.
When signing a contract to purchase a property, it is generally necessary to submit a pre-approval document for the mortgage within a certain period of time (10-30 days after signing the contract). However, it is not easy for individuals to obtain this document from the bank they are dealing with. My Best Home can issue the necessary pre-approval document through a certified bank or financial institution to ensure that the contract is not cancelled due to a failure to submit this document.
Before moving in, you usually have to pay a total of 20% (usually in 5 installments of 4%, with 35% for foreigners) of the contract amount as a deposit and interim payment (some condos may require a total of 10-15% for interim payments). It is important to plan the interim payment schedule in consideration of your cash flow, and the total amount and payment period of the interim payment may also affect the convenience of budgeting and investment return rate.
Whether it was for residential purposes or investment purposes, there may be situations where you need to resell the pre-sale rights before registering the property for various reasons. It is advisable to thoroughly consider in advance whether it is possible to sell the pre-sale rights, when it becomes possible, and how much the cost of purchase would be, in case such a situation arises.
Please review and respond to many important details such as how much the management fees will be after moving in the future, what incentives can be received from the construction company during the pre-sale, whether the development charge that must be paid at the time of registration is capped and protected, and if so, how much is it? What are the condo facilities (amenities) and are they well-planned for convenient use without inconvenience? Please carefully review and respond to all of these important matters.
2. At the time of the pre-con contract
Sale application (worksheet) to the developer. The most common pre-sale method is a first-come, first-served basis. Even if it is not a first-come, first-served basis, time is the most important factor in obtaining a pre-sale. (If the pre-sale application is delayed, the desired unit may be sold out, the pre-sale price may increase, or the incentives and pre-sale conditions may change.)
To apply for pre-sale quickly, it is recommended that you contact the developer in advance to review and discuss the “selection of pre-sale condo” mentioned above so that you can handle it promptly.
Desired unit model (1st, 2nd, 3rd choice), floor range, ID copy (driver’s license, passport or PR card if there is no driver’s license), residential address, email address, phone number, SIN (Social Insurance Number, not required for foreigners), workplace and position.
ID (driver’s license, passport, or PR card if there is no driver’s license) and personal cheques for 5 or more.
3. From the pre-con contract to prior to move-in
From the time of the contract for sale is signed until the move-in date, it usually takes about 3 to 5 years depending on the size of the project. (In general, the actual move-in date is usually slightly later than the expected move-in date at the time of the sale.) The most important thing during this period is to secure the budget well in advance in accordance with the schedule for withdrawing the interim payment, and to handle the desired mortgage well in advance in order to ensure a smooth closing at the time of registration after moving in.
Below, we will explain in order the things that will happen after the contract is signed, and our customer service at My Best Home, so please understand and prepare without trial and error.
We will explain and review the contents of the contract item by item, and if necessary, we will request a review from a lawyer.
Usually, when signing a contract for sale, you must submit pre-approval documents for a mortgage within a certain period of time after the contract is signed (10-30 days after the contract is signed). However, it is not easy for individuals to obtain these documents from their bank. At My Best Home, we work with banks and financial institutions recognized by the construction company to issue pre-approval documents responsibly within the designated period of time, so that the contract is not cancelled or other problems do not arise due to the failure to issue the pre-approval documents.
You need to predict and prepare for your household economy and cash flow at the time of registration, which is 3-5 years after moving in. At My Best Home, we help you prepare the mortgage approval conditions in advance through our professional network with experienced bank representatives and mortgage experts, and we also help solve any problems to ensure that there are no problems with the closing at the time of registration after moving in.
You need to appoint a lawyer for future move-in, registration, or sale, and notify the construction company. It is also recommended that you ask for advice and consultation about the future procedures. At My Best Home, we assist you in appointing a competent lawyer upon your request.
After a certain period of time from the contract, you will be contacted to select the finishing materials, colors, upgrades, etc. for the unit you will be moving into. You can either go and make the selection in person by specifying a date, or you can make the selection by email. At My Best Home, we assist you in selecting the latest trends and colors that can help preserve and enhance the real estate value of your home, and we accompany you if you wish to make the selection in person. If you cannot attend, we can act as your proxy upon your request.
About a month before the confirmed move-in date, an inspection of the completed individual unit’s interior construction status will be conducted with the construction company’s inspector. Any issues identified during the inspection will be rectified before move-in.
4. Assignment (pre-registration sale, assignment)
In such cases, it is advisable to sell (resell) the pre-sale unit to a third party before moving in or registering.
5. From move-in to registration
Closing in pre-sale real estate happens twice, unlike in regular real estate transactions. These are the Occupancy Closing and the Final Closing.
Occupancy Closing begins once the interior of each floor has been completed, and all utilities such as air conditioning, water, and elevators are fully operational, even if the overall construction has not been finished. The interior is completed in the order of the lowest to the highest floors, and once the highest floor’s Occupancy Closing is completed, the Final Closing is done for the entire building. This process usually takes 6 months to 1 year, from the Occupancy Closing of the lowest floor to the Final Closing.
The initial Occupancy Date given during the contract signing is not the final date, but a Tentative Occupancy Date that may change later. After being notified of 1-2 revised Occupancy Dates, the Confirmed Occupancy Date will be given 3-6 months before the Final Closing. It is common for occupancy to be delayed by 6 months to 1 year from the initially planned Occupancy Date. Those who purchased the property for investment purposes will not face significant problems, but those who purchased it for residential purposes, especially those who sold their previous home and need to move, should anticipate changes in the Occupancy Date and proceed with selling and moving procedures only after the Confirmed Occupancy Date is given.
During the period from Occupancy to Final Closing, the Occupancy Fee, which is the interest on the remaining 80% of the payment and property taxes and condominium management fees calculated monthly, must be paid. The remaining 80% of the payment is paid in full during the Final Closing, and the property’s ownership is transferred. Before the Final Closing date, a Void Cheque or 12 Post-Dated Cheques are submitted to the lawyer, and the keys are given.
In general, only the buyer or their immediate family members are allowed to reside in the property from Occupancy until the Final Closing, and renting to others is not allowed. However, depending on the construction company, there are cases where renting to others is allowed, and some construction companies even offer incentives for renting during this period.
Once Occupancy begins, mortgage approval can be requested, based on the prior consultation and preparation for a mortgage application. If no progress has been made regarding mortgage application by this time or if any issues arise, My Best Home will assist in arranging the best possible mortgage plan to ensure a smooth Final Closing.
After the occupancy of the top floor is complete, within a certain period of time, the final closing notice will be sent, and at that time, the remaining balance will be paid to the lawyer and the registration will be completed. Before that, mortgage approval and mortgage transfer must be completed, and not only the remaining balance but also the closing costs required for registration, including land transfer tax, development charge, utility connection costs, various adjustments (as stated in the contract), lawyer fees, and others, are added together and charged, so you should prepare in advance.
If the unit is for investment purposes and not for personal or immediate family residence, the HST rebate benefit (usually $24,000-$30,000) that was already applied will be put on hold, so you need to be extra mindful of your closing budget to spend more for that portion of the closing. The amount of HST rebate that was spent more can be refunded by attaching the rental contract within a certain period of time (usually 3 months), except for certain costs.
6. After registration
When occupancy or registration begins, many units become available for rent. Because many units become available at once, the initial rent tends to be weak, but over time it becomes stronger and after one year, it stabilizes.
Therefore, you do not need to worry too much about the initial weak rent. Having good tenants is the most important factor for renting. My Best Home will do our best to find and manage good tenants with our experience and customer network.
If you decide to sell after a certain period of rent, or have to sell unexpectedly, My Best Home will help you sell at the best conditions with professional compensation and home staging.
The duration of residency varies depending on each household’s circumstances, but statistically, after 10 years, the increase in condo value significantly decreases. Depending on individual household situations, people may move out. However, if you are thinking about investment, we recommend that you plan your move while living in the condo so that you can move to a new condo before the building becomes too old.
If you need to sell quickly, we recommend that you live in the condo for at least one year before selling unless there is a clear reason for selling, such as a job relocation to another city. This is because there may be a possibility of disadvantage in terms of taxes related to capital gains.