A reader of this blog (not my client) recently emailed me asking for my advice/help after they got the shock of a lifetime when seeing their statement of adjustments on their new condo that they were about to close on. The person in question bought a large unit at Festival Tower a couple years ago when they were offering their 5% deposit program. The price of the unit including some minor upgrades was ~$840K. Imagine how you would feel if your lawyer told you you had to come up with $74K for closing costs (not a cent of which would go towards equity in the unit). The costs that the buyer had to pay on closing included:

• HST of $39K
• Land Transfer taxes of $19K (after the first time buyer rebates were applied)
• Tarion enrollment fee $1250+HST
• Legal fees – for interim closing and for final closing $1300+HST
• Property taxes pre-paid by developer $750
• Development Charges $2900+HST
• Occupancy fee not already paid for $2500
• 3 months common element fees for reserve fund $1800
• Water and gas hook up fees $1000
• Nickel and dime admin fees $550
• Nickel and dime disbursement fees, mortgage registration etc. $1200

Now obviously the BIG expense here is the HST. He purchased the unit shortly after the HST came into effect but shortly before developers universally started to include the HST in the cost of the unit. (If you bought a new condo post June 2009, you better check and see in your contract if HST was included.) Development fees, Tarion enrollment fees, and water/gas hook up fees are all examples of costs that buyers incur when buying pre-construction instead of going resale. This buyer was NOT an investor so this is HST money that he will never get back (see my previous post on the HST debate/question).

The buyer told me he was not expecting these closing costs and had to scramble to get the $74K in funds together just to close on this property and not be in default of his contract. Ouch. How can this happen?

This story once again illustrates what I have been preaching for nearly 4 years on this blog:

1. Never buy a pre-construction condo without using a Realtor who is experienced and competent in handling pre-construction sales and working with developers. Ask them what they can do to minimize or eliminate hidden closing costs.
2. ALWAYS get your contract reviewed by a lawyer who is experienced in dealing with pre-construction condos and dealing with developers. Ask them what closing costs you will incur (according to what the contract says) on closing day. Go into your purchase with your eyes wide open.

Questions or comments? Do you have a story of how you were surprised when you saw your statement of adjustments? I’d love to hear about it. Contact me here.

U Condominiums by Pemberton at Bay and St Mary’s is one of the projects that probably wishes they had a time machine and could launch their sales just a couple months earlier than they did. They started selling in the fall of last year, just weeks before the stock market crashed and there was a fundamental shift in the Toronto real estate market.

That being said, they are doing pretty well in terms of sales and definitely better than other projects that launched in the second half of 2008. 212 out of 366 units have been sold in the first tower to be released. That’s just under 60% sold. TD bank has told them they need to acheive 70% to secure their financing. That works out to roughly another 45 units to go. Don’t expect to see the second tower released any time soon. I wouldn’t be surprised if they don’t even release it at all in 2009.

Many of the prime units at U are now gone, and prices certainly have increased since the initial launch back in the fall, but there are many units still available. Prices for most are in the mid $600s per square foot. This number may seem high, but it is really not out of line with what is available and selling in the area. My own feeling is that over the long term, the Yorkville area centred at Bay and Bloor will remain one of the preeminent neighbourhoods in Toronto. 

For more information on U Condos, please contact me.

Links

Recent Globe and Mail article on U Condominiums

Developer’s official site

Mike B writes,

 If I were to buy a unit at [X Development] and the project does end up being canceled, would I get my deposit money back?

Certainly a timely question in this market. A lot of would-be buyers of new condominiums are now considering the very real possibility that they have bought, or will buy into a development at the pre-construction stage that will not actually get built. Then what happens? 

The biggest question in buyers minds is, as Mike pointed out is what happens to your very hard earned deposit money? Rest assured, your money is protected by law. Deposits on new developments are held in trust, usually by the developer’s law firm. Technically the developer cannot even touch this money. It is set aside until final closing. 

The moral here is if you are buying into a new development, or for that matter, any deposit you ever put down on a the purchase of real estate should always be held IN TRUST.

Some people get caught up into various scams with new developments where some or all of your money is not held in trust, and many of these people have gotten burned. Jarvis Street Mansions is a recent example of this in Toronto. 

Educate yourself! Protect yourself! And by all means, make sure you are professionally represented when you buy a condo in this city.

Got a question that you want answered? Email me.

If you are looking for a condo on the east side of downtown, The Modern on Richmond is offering a great promotion right now – 5% deposit & $10,000 price discount. Before I provide the details, please read this caveat on 5% deposit programs and contact me if you would like more information.

Beware of 5% deposit programs at new developments. Usually they are so full of stipulations and conditions that they are not worthwhile for most buyers. If you do see a project that you are interested in buying into offering a 5% deposit program, always ask yourself this question:

If every other builder in town is requiring 15-20% deposit, how can this one be asking for only 5%?

There is usually a ‘catch’. Most of them are not really 5% deposits. They often fall under these two scenarios:

1. Put 5% down up front, then get a line of credit (must qualify for it) through the developer’s lender of choice for the additional 10%. Then you pay interest only on the 10% from now until final closing (2-4 years later). You have to then determine who is going to pay off the line of credit and when? Sometimes the developer will pay it off at final closing, sometimes not. It gets complicated. Make sure you understand all the terms before entering into this type of scenario.
2. Put 5% down up front, then pay out the remaining 5-10% slowly over time in increments or you must pay an additional 5-10% at occupancy. 

In either case, it’s not really a 5% deposit, but these are options that sometimes work for some buyers. 

Refreshingly, the promotion that the Modern is currently running from now until the end of this month is not one of these 5% programs with conditions attached. As far as I can tell, this is a TRUE 5% deposit program. The program is being offered on all suites, and you do not have to be a first time buyer to qualify. $2000 is due at the time of signing, the balance of 2.5% is due in 30 days, and an additional 2.5% is due in 60 days. No additional deposit is required at occupancy. The only ‘condition’ is that the buyer has to qualify for standard CMHC insurance (which is required on the purchase of any real estate with less than 20% down).

Prices at The Modern in the low to mid $400s per square foot. See the price sheet below for details and for floor plans visit the developer’s site.

If you are interested in purchasing a unit at The Modern, or if you would like more information, please contact me.

Links:

• The Modern on Richmond official website
• Current Price List for The Modern on Richmond

Thinking of buying a new condo directly from a builder? Read this first.

Bauhaus Condos at King and Sherbourne. VIP sales are happening now. Suites starting from the low $200s. Modern architectural tower integrated into historical 19th century building in the heart of the Design District / Furniture District, and steps to the St Lawrence Market.  Contact me for your chance to purchase a suite before the launch to the general public.

For more information on Bauhaus, including floor plans, current availability, and pricing, please contact me.

Thinking of buying a new condo directly from a builder? Read this first.

From the developer’s marketing materials:

Building Features

18 storey luxury building with 147 suites rising out of a stunning re-constructed 3 storey Heritage building, Architectural design by award winning Prish Jain of TACT Design Inc, Interior design by award winning Mike Niven Interior Design Inc, Dramatic floor to ceiling double glazed windows, Automated vehicle lift to parking garage, Private rooftop patios for Penthouse suites*, Gas line connection for BBQ optional on select suites***, Fully secured access with Executive Concierge, Parking and storage lockers available* ***, Visitor bicycle parking, All new construction protected under the Tarion Warranty Corporation, Private residents lounge with fully integrated fireplace, Designer decorated hotel-style guest suite, Executive style meeting room

Suite Features

9’ ceilings in principal rooms (8’ ceilings on floors 5,6,8 and 9)*, Smooth finish white painted ceilings and columns, Solid core entry door with chrome hardware and security viewer, Elegant pre-engineered hardwood flooring throughout suite**, Custom designed contemporary style flat slab or glass doors or sliders*, Contemporary profile painted wood baseboards, Choice of designer series paint**, Ceiling light outlet in dining room

Green Building Features

Suites individually metered for energy consumption, LEED® registered building, Multi-sorter recyclable waste system, Low maintenance Green Roof, Master on-off switch conveniently located near entry door in all suites, Motion controlled lights in all stairwells, Low VOC paints, Dual flush toilets, Low flow faucets and showerheads, Energy Star® washer and dryer, Fully integrated whisper quiet dishwasher with delay start green feature, Environmentally friendly flooring (carpet, hardwood, tile), High efficiency, low emission thermal double glazed windows, Auto share program located in the building, Visitor bicycle parking, Individual bicycle parking, Timer and photo cell on all exterior lighting, Compact florescent light bulbs in all suites and common areas, High efficiency hot water gas boiler system, Environmentally friendly high quality clay brick for exterior, Parking exhaust controlled by CO and NO monitors, Exceeds City of Toronto GREEN building standards, In suite heat pump units allowing for independent control of heating and/or cooling year-round.

Deposit Structure: 

• $2000 with offer, Balance of 5% in 30 days, 5% in 90 days, 5% in 180 days, 5% at occupancy

Parking:  $30,000 (select suites only) 

Lockers:  $3,500

Occupancy: December 2011

Maintenance Fees: $0.49 per square foot + Hydro

Taxes: Estimated at 1% of the purchase price

Coming soon to Adelaide and George St: Post House Condominium by Alterra Group. The name “Post House” comes from the sites’ proximity to Toronto’s first post office. This boutique building will rise 16 storeys above this historic and rapidly changing neighbourhood that is becoming one of the hottest areas to live in the downtown core with several other new or recent projects launching in the area including The Modern, Kormann House, VU, and Rezen just to name a few.

The neighbourhood has become very attractive with the furniture district along King Street East, The St Lawrence Market, and several great restaurants and pubs all within a 5 minute walk. Also nearby are the recently renovated buildings of George Brown College and it’s well-known culinary school.

For more information on Post House and your opportunity to purchase before the public at an upcoming VIP release, please contact me.

Thinking of buying a new condo directly from a builder? Read this first.

Empire Communities was having a Celebrity Look-Alike contest to promote Fly Condos and the winners were just announced today. Congrats to Tommy Matejka for looking like Jude Law and getting $75,000 off the purchase price of a suite at Fly if he decides to buy one. His mom must be so proud

They also released some more information on Fly Condos. Check it out below. Sounds like an exciting project.  Please contact me if you would like more information or if you have any questions.

Fly Condos is Empire Communities’ brand new condominium community coming soon to 352 Front Street West. This unique residential enclave will be situated between Blue Jays Way and Spadina in downtown Toronto. The 24-storey building will be crafted from glass and metal panels, with a unique interplay of distinctive and dramatic glass balconies on its western façade. The result of this design by Graziani + Corazza Architects will be an iconic addition to Toronto’s skyline that will complement this historic neighbourhood with its superb lines and intimate scale.

Fly combines all the essential elements: the right location,architecture, ambiance and amenities to nurture a lifestyle totally in sync with the times. Savvy Toronto urbanites will appreciate that it is possible for a whole community to be totally cool.

Fly will back onto Clarence Square – an urban park that is a true natural gem. Fly will also offer a landscaped promenade that connects to Clarence Square. Plus, the on-the-move crowd will enjoy living close to delectable restaurants, sizzling nightlife, renowned sports venues, and within walking distance to Toronto’s theatre and financial districts.
Residents of Fly Condos will live like stars in a building that features interiors and amenities by trend-setting Munge Leung Design Associates. These include the stunning white lobby with two-storey opaque green cut-glass columns, grey-veined marble floor and wall tile, white sculptural seating by Zaha Hadid, a modern chrome concierge desk, and white and gold metal origami-like birds throughout.

Residents will be able to host get-togethers in the stylish party venue with a chef’s kitchen complete with five appliances and access to the outdoor rooftop terrace with its private cabanas and barbecue station. The fitness centre is designed by George Chaker (founder of Diesel Fitness and Level V) and will feature the latest in workout equipment, a Yoga and Pilates studio, spinning area, sauna and more, all with a walkout to a private Zen courtyard ideal for meditation and seasonal yoga sessions. Overnight visitors can make use of a hotel-chic guest suite, and 24-hour concierge service will provide pure convenience.

Suites will feature ceilings that soar up to 10 feet in height at the Penthouse levels, which enhance the spacious feel of these well-thought-out designs. Each suite will also have a balcony or terrace extending the owners’ living space to the outdoors; custom-designed contemporary kitchens with sleek stainless-steel appliances and granite countertops; engineered hardwood flooring; rich ceramics and glazed porcelain tiles; plus striking views through expansive windows.

Fly Condos will offer studios, one-bedroom, one-bedroom plus den, two-bedroom, two-bedroom-plus-den, three-bedroom, and two-storey lofts with street entry. Sizes range from 480 to over 1,500 sq. ft., and prices begin from the mid-$200′s to just under $1 million. Occupancy is slated for Spring 2012.

However, what do you do when you can get the funds for the deposits, but you run into trouble when it comes to securing mortgage preapprovals? This can occur for a number of reasons including:

• Income too low. The number one factor in getting mortgage approvals is your income. Lenders need to see you have enough coming in on a regular basis to ‘pay the bills.’
• Over leveraged. Many investors have several properties and/or contracts in their portfolio at any given time and this can stretch you thin, making the ratios that banks often use for pre approvals look out of wack.
• Self Employed or not enough employment history. Perhaps you are a new grad fresh out of school and your income is low now, but will increase substantially over the next 1-3 years. Or if you are self-employed, lenders often apply even more stringent qualifications before approving you.

So what are your options for getting pre approved? How can you overcome this hurdle and get the condo that you have been dreaming about or that is such a great investment opportunity? Here are a few ways to get around the roadblock

• Use a mortgage broker. Usually developers will have a specific lender they work with and ask purchasers to get preapproved through. And 9 times out of 10 that lender is one of the Big-5 Canadian banks. Their lending standards are often more rigorous than those used by mortgage brokers – who have access to dozens of lenders. Getting a pre-approval from a mortgage broker, if the developer allows it, can be a way around this dilemma for purchasers.
• Get a co-signer. For a number of reasons, you may not qualify for the mortgage at the time you want to purchase the suite, but perhaps you know that by the time the condo is ready for occupancy a few years down the road, your situation will likely have changed and you will qualify. In the time being, and just to get the qualification, why not get a co-signer to get you over the hump? You can always remove or change the other names on title before final closing. Time to put in the dreaded phone call to mom and dad…or your rich uncle who always liked you best!
• Negotiate. Depending on the particular developer, the stage of the marketing life cycle of the project, and the relationship that your real estate agent has with the developer, you may be able to simply remove the condition for mortgage pre-approval from the agreement, or make alternative arrangements that satisfy both parties.
• Letter of Commitment. If you are over-leveraged due to other properties or contracts in your portfolio, sometimes you can’t get a mortgage approval, but if you have a long-standing good relationship with your bank you might be able to get your branch manager or a mortgage manager to write you up a letter of commitment. A letter of commitment is similar to a mortgage approval, but it is less formal and is based more on the ‘good will’ of your relationship with the bank and their intimate knowledge of your personal finances. Sometimes this will satisfy the developer if they see that you are in very good standing with a well established lender even though you don’t technically qualify for the mortgage using traditional ratios etc.

So there you have it. Some suggestions for obtaining mortgage approval when difficulties arise when buying a new construction condo in Toronto.

If you have any questions about mortgage financing for new condos in Toronto, feel free to contact me any time.

Normally when you buy a pre-construction condo you have to put down a series of deposits to secure your suite with the developer. How much you pay and when you pay varies. Factors affecting the deposit structure include:

• The developer’s bank – what they require. Developers need to get mortgages too! The banks require them usually to get a 15% down payment as a minimum from purchasers.
• When you buy – when you purchase in the condo’s marketing life cycle. The earlier you buy, the less flexibility there generally is in the deposit structure. When a project has reached their benchmark amount of units sold to get their financing approvals and permits to begin construction, sometimes they ease up on the deposit structure and this is often a good time for purchasers to jump in again.
• The developer’s preferences and promotions. Some developers require more as a rule of thumb, some require less. Some offer promotions with flexible payment schemes, others do not.
• Who you are. Yes, developers have been known to practice deposit structure discrimination – that is, changing the deposit structure requirements based on who the purchaser is. Usually though this ‘discrimination’ is simply tied to whether or not the purchaser is a Canadian resident (often non-residents must pay significantly higher deposit amounts).

So deposit structure on new condos varies, but usually you can find something like 15% to be paid out in 3 or 4 installments over the course of 6-9 months after initially signing the agreement of purchase and sale. Then an additional 5-10% also is usually required at occupancy (not to be confused with condo registration date).

So you have manged to scrape together the money you need for your deposits and you are ready to go ahead with your purchase. Are you finished? By no means. The developer will gladly take your 15-25%, but they also require mortgage approval for the remaining amount. Here’s an example: say you buy a 1 bedroom and den condo for $300,000. You must pay out 20% in deposits over the next 3 years. 20% of $300,000 is $60,000. That leaves $240,000 in unaccounted for funds for which you need to get a mortgage pre-approval.

Sometimes buyers have the funds for the deposits, but for various reasons, getting a mortgage approval can be tricky. If you fit into this category, tune in the blog tomorrow for some tips on how to get around this dilemma.

If you have any questions about deposit structures and mortage approvals, feel free to drop me an email any time.

Fly Condos – a new condo development by Empire Communities located at Spadina and Front St is trying something new. In an effort to promote the project, the developer is holding a Celebrity Look Alike Contest with the winner getting $75,000 off of the purchase of a suite at Fly Condos. Very interesting tactic and obviously aimed at building some buzz and creating some hype for the project, especially amongst the under-30 crowd who they are very clearly marketing their project to.

The downtown Toronto Condo market is red hot and developers are constantly trying to attract investors and first time buyers alike to choose their project over the many others available in the city. There are so many new condo projects launching every month all over the city of Toronto that developers are now getting very creative in their marketing and promotion schemes in advance of launching their sites. Fly Condos Celebrity Look Alike Contest is just one more example of this creative, non-traditional real estate marketing.

So if you reckon you look a little like Brad Pitt or Angelina Jolie, why not enter the contest and find out? Presumbaly the winner of the contest will be the person most closely resembling their chosen celebrity as voted by visitors to the Fly Condos Contest website.

If you are thinking about purchasing a unit at Fly Condos but you don’t want to wait until the sales office opens to the public, or you just aren’t interested in waiting to see if you really do look like Brad Pitt, please contact me for VIP sales before the public.