In this article, we look at the difference between a Pre-construction and a Resale condo - analysing the pros and cons of each.
Pre-construction condos are condo units generally sold by developers directly to a buyer before the build is complete and has been registered. (Pre-construction Condos, n.d.)
Resale condos are units that are sold by current owners to the new owners.
Choosing between one or the other depends on a variety of factors that you need to consider before making your decision. Here are some of those factors to help you see the benefits and downsides of both:
Pre-Construction condos- Benefits
There are many benefits when buying a pre-construction condo that provides you with some really good incentives:
- 10-day cooling period – allows any purchaser of a pre-construction condo to withdraw their decision to purchase within a 10-day period upon signing the agreement of purchase and sale. This provides the buyer with a full refund of their deposit. (Home Construction Regulatory Authority, n.d.)
- No bidding wars – You purchase the condo on a first-come, first serve basis at the price set by the builder. But builders get to decide on how and when they will release certain units before it becomes available to everyone.
- Upgrades - You may also have the option to customize/upgrade your unit’s features (i.e., kitchen counter-top, cabinet features, sink layout, light fixtures, etc.).
- Warranties – In Ontario, you are covered under a Tarion Warranty that insures your home after you take possession; this is divided into a 1-year, 2-year and 7-year coverage that protects you against specific items. To learn more, please visit Tarion’s website (Tarion, 2024): https://www.tarion.com/post-possession-coverage
- 30 year loans - On August 1st, 2024, the federal government announced a 30-year amortization for a first-time homebuyer purchasing a new constructed unit - to help with lowering their monthly mortgage payments (Canada, 2024).
Pre-Construction condos– Downsides
Aside from the benefits of buying a new construction, you should also be aware of the potential downsides that come with buying new:
- Size – You’ll find that more recently built condos are smaller than in the past. According to MPAC, between the mid-90’s and early 2020, the average condo had shrunk 35% moving from 1,100 sq ft to just 700 sq. ft. (Mitchell, 2022)
- Quality – Be careful when selecting your builder. It’s important to get referrals, to look at their reviews & past project completions. Did they receive any awards or recognitions?
- Delays and potential cancellations – There are often delays in the construction of condo projects. In some cases, projects can be cancelled due to a failure of selling enough condo units; inability to secure financing for the project; or delays in obtaining the required building or planning approvals. (Pre-construction Condos, n.d.)
- Price– material costs, development costs, land value & labor costs have all gone up significantly over the past few years. This has added to the overall expense for developers to build condo units, and therefore it is generally more expensive to purchase pre-constructions compared to older condos.
- Closing costs - There are a list of additional fees prior to and at final closing; the most common are as follows (read the fine print & discuss with your agent & lawyer):
- Interim occupancy fees
- Utility meter installations
- Legal fees
- Land transfer taxes
- Electronic land registration usage
- Development fees
- Tarion Warranty enrollment fees
(Pre-construction Condos, n.d.), (Fleur, n.d.)
Resale condos – Benefits
When buying resale homes, you generally have a better sense of what you buy – in terms of cost, time-to-close, and quality. These are some of those benefits:
- See and feel – since you can physically see & walk through the unit, you can more clearly picture yourself living in it while getting a better sense of the layout.
- Closing date – This is the date that is set in your agreement of purchase and sale, which cannot be changed (unless agreed to in writing from both parties) and so this allows you to properly plan and schedule your moving date & renovation projects.
- No surprises – You can have your property inspected as part of your agreement of purchase and sale. This way the property gets to be thoroughly inspected by a professional, which can reduce your chances of any unexpected surprises.
- Value - You generally have more space compared to the newer condos, which gets you a better price per square footage.
Resale condos - Disadvantages
- The homes will be older, and so this could mean some renovations are required – to upgrade or make repairs.
- Depending on the age of the home, you may need to make significant repairs or replace any non-working appliances and/or HVAC systems. (i.e., Water heater tank, Air-conditioning unit, furnace, etc.)
- The older condos generally have a higher maintenance fee given the wear and tear over-time. This naturally increases the operating costs to maintain & repair the condo building & amenities.
There are a lot of things to consider when deciding between a newly built condo and a resale condo. It’s not a question of which is better, but rather what your personal circumstances are given your finances, time & preferences.
If you need any guidance on navigating through these questions, or if you want to discuss more about topics like these, you can always contact me at vince@vinceleerealty.com and I’d be happy to assist you.
Works Cited
Canada, D. o. (2024, July 29). Government announces 30 year amortizations... Retrieved from Canada: https://www.canada.ca/en/department-finance/news/2024/07/government-announces-30-year-amortizations-for-insured-mortgages-to-put-homeownership-in-reach-for-millennials-and-gen-z.html#
Fleur, A. l. (n.d.). 5 Things to know about closing costs when investing in a Pre-construction condo. Retrieved from True condos: https://truecondos.com/5-things-to-know-about-closing-costs-when-investing-in-a-pre-construction-condo/
Home Construction Regulatory Authority. (n.d.). Retrieved from What to know before buying a pre-construction condominium: https://www.hcraontario.ca/new-home-buyer/before-buying-a-preconstruction-condo/
Mitchell, D. (2022, October 23). Economy. Retrieved from Global News: https://globalnews.ca/news/9217886/ontario-condo-size-smaller/
Pre-construction Condos. (n.d.). Retrieved from Condominium Authority of Ontario: https://www.condoauthorityontario.ca/before-you-buy-or-rent-a-condo/buying-a-condo/pre-construction-condos/
Tarion. (2024, August 25). Coverage & coverage limits after you move in. Retrieved from Tarion: https://www.tarion.com/post-possession-coverage