There are a myriad of complexities that potential purchasers can encounter when entering into new condo deals. Based on the current state of the lending market, buyers are wise to be concerned about the implications for the financing of their prospective project. Consider that most condo projects require that at least 60% or more of the units be ‘pre-sold’ in order to guarantee financing. Without demonstrated buyer interest, projects will fail to qualify for financing and the project will fold.
Market uncertainty, however, offers possible opportunities. Consumers are encouraged by the developers through a variety of means to buy into construction projects early. Typically these inducements will be in the form of lower ‘first-in’ pricing or extras in the way of free or reduced upgrades and the like. This is because those first entrants will ultimately face the greatest risk – the risk that not enough units will be sold and that the project will be dropped. They will also wait the longest to have somewhere to live while their money is tied up in the project.
Until the developer can guarantee its financing, it will be trying to attract as many buyers as possible. This means that pre-construction projects, those that are at the greatest risk for financing issues, offer the some of the best bargaining opportunities.
Consumers must ensure that all dealings with the builder are in writing. It will simply not be good enough to rely on the verbal assurances of the sales staff. This is where the benefit of the 10-day rescission period will come in; make sure that you take your agreement and any amendments to your lawyer for review before the rescission period expires.
Once you have your negotiated agreement, remember that buying new construction can be fraught with issues and delays. One doesn’t have to be facing a failed project to be disgruntled with buying new. As one example, the frustrated buyers of the 11 Christie Street Condo project are so incensed, one purchaser has started an online forum.
Rachel Loizos is an associate lawyer at Sotos LLP in Toronto. She practices in the areas of real estate, corporate and commercial law, estate planning and administration.
April 2, 2009Condos |