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5 Things Every Buyer Should Know about Model Suites

The model suite is built and designed to entice the senses and ignite the imagination. Developers know that they only have a few seconds to grab a potential buyer’s attention and make them feel like they want to move into the condo immediately. In order to achieve this result, developers have long been using several ‘tricks of the trade’ to make their model suites appear as appealing as possible. Here are 5 things every buyer should know about model suites before walking into any condo sales centre:

1. Ceiling Height. Often model suites are in loft or commercial space where the ceiling heights are far higher than what you will actually receive. Side note, The Berczy’s model suite has 8′ ceilings whereas the suites will have a minimum of 9′ ceilings – first time I’ve actually seen this!
2. Doors. Many model suites don’t have doors between rooms, this creates the illusion of more space.
3. Upgrades. Every model suite has some sort of upgrade. Counter tops, appliances, hardwood in the bedrooms, the type of hardwood used, bathroom tiles used, etc. Ask yourself why is this? It can only mean that the standard finishes will not effectively ’sell’ the building which means you will likely be paying more for your unit than you originally planned to! Quick tip: if a sales person can’t tell you exactly what is an upgrade and what isn’t an upgrade in the model suite – RUN the other way!
4. Custom wood work. I’m seeing this more and more in model suites – custom mill work on walls, built-in storage, built-in desks, etc. This is a design trend that developers are adopting in their model suites but remember, when you move it it’s nothing but concrete and drywall painted in “Egg Shell White”!
5. Furniture and Lighting. The furniture and light fixtures being used in most sales centres are top of the line, high-end pieces.  The average person would be shocked to hear how much money was spent on the furniture and lighting in a typical model suite. Look past the $10,000 couch and $2,500 chandelier and see if you still fall in love with the unit itself before signing on the dotted line.

If you are thinking about buying a pre-construction condo, educate yourself first and never register with a developer without representation. Questions or comments? Contact me.

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Why No One is Buying Your Assignment

Around this time last year I predicted 2009 was going to be the year of the assignment. I was wrong. While assignments did begin to take a greater role in the overall Toronto condo market, they still have not gone ‘mainstream’. Quite frankly, this method of buying and selling real estate will probably never go mainstream, however, in 2010 it looks like assignments will be seen as a “Third Way” of buying condos in Toronto (the traditional two ways being pre-sale or resale).

People contact me just about every day and ask me about assignments - I want to buy an assignment! I want to sell my condo by assignment! The truth is, most people have no idea what is involved when buying and selling an assignment. When the Average Joe learns just a fraction of what there is to know about assignments, 95% of the time Average Joe ends up returning to the comparatively simple world of pre-sales and resales.

So for all the sellers of assignments, as well as those who may be thinking about buying a condo by assignment, I’d like to introduce to the the top-5 reasons why many assignment listings never sell:

1. No Market Exposure. You are not allowed to advertise assignments on the MLS. Many assignment listings don’t sell because no one knows about them!
2. Lawyers. Most lawyers hate assignment deals. They often look for reasons to kill the deal – and with assignments, you don’t have to look to hard.
3. Price. This is probably the #1 reason why many assignment listings don’t sell. You can’t price an assignment like a resale property. Investors buy assignments and investors don’t pay current market value for property!
4. Closing Day Too Far Away. Buying a pre-sale condo then trying to flip it a month later is a fool’s game. The unit must be at or very close to occupancy so that market value can be accurately predicted and the investor can safely determine if they are getting a deal.
5. Closing Costs. Did you get your closing costs capped by the developer when you first bought your condo? If not, there is no way to tell exactly what they might be. Buyers of assignments need some degree of certainty as to what closing costs they will incur, otherwise they will move on.

Bottom line, assignments are not for everyone, but for the right buyer and seller, working with a good Realtor and co-operative lawyers, they can be a fantastic way to transact in real estate. Questions about assignments? Contact me.

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Buyers: Avoid Bidding Wars in the Assignment Market

Buyers looking to avoid multiple offer situations should consider the assignment market. With several condo buildings coming on-line in the downtown core this winter and spring, many sellers will be looking to sell before registration. Buying by assignment gives you the opportunity to avoid the bidding wars that are rampant in the resale market.

Nearly all listings on the resale market downtown priced under $350K are generating multiple offers. The lower the price, the more activity on the listing, the more showings, the more offers. Every day I have buyers calling me and emailing me who are looking to buy a condo downtown for under $250K. The market is hot, everyone wants a piece of it, and suddenly anyone with a few extra dollars in the bank considers themselves a real estate investor.

My advice is to consider buying an assignment at a building that is about to take occupancy or is in the occupancy period but not yet registered. For example, my colleague has a Junior 1 bedroom suite (525 sq ft) at West Harbour City with an asking price of $249,000. Occupancy is slated for March. A great starter condo or investment unit in what will likely be an excellent building. If this unit were on the resale market, it would likely be priced at something more like $269,000. Assignments like this give buyers the chance to save a little money and a little sanity.

Make sure you are working with a Realtor and a lawyer who understands assignments! Most do not and will only cause severe frustration for you. Questions? Contact me today.

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10 Days is a Long Time To Think

When you buy a new condo in Ontario, you have 10 days after you receive your copy of the executed agreement of purchase and sale and the condominium documents to rescind on your agreement if you choose to do so. This can be for any reason whatsoever, technically you do not even have to provide a reason. You are released from your obligations and your deposit cheque(s) are returned to you.

I think this law is valuable and necessary and that it does what it is supposed to do – protect buyers from doing something they will regret. Unfortunately, some people are thinkers, and thinkers often think too much.  A lot what-ifs and worst-case scenarios can play out in your mind over the course of 10-days and the initial joy and excitement of buying a condo can be replaced by anxiety and fear over future events that may or not occur.

Typical rescission rates for most new condos is about 20%. That means out of every 5 purchasers, 1 will change their mind during the 10 days and will return their unit. By contrast, conditional deals in the resale market go firm about 95% of the time.

In my own experience, buyers who rescind on their agreements tend to do so because of one reason: risk. They just don’t have the stomach for the risk involved in buying pre-construction – and there is a lot of it! This has led me to believe that some people just should not buy a pre-construction condo. They are not cut out for it, and they would be far better off looking at lower risk investment opportunities in the resale market.

Buying a pre-construction condo is a high-risk, high-reward scenario. If you tend to be a risk-averse person, understand the inherent risk involved and use the 10-day cooling off period to carefully consider whether you are comfortable proceeding.  Questions or comments? Contact me.

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Prepare to be Disappointed

I would love to paint a picture for my readers and clients that buying a new, pre-construction condo at a VIP sales event is a simple and straight-forward process where if you have money and are ready to spend it, you get exactly what you want when you want it. Unfortunately this is not always the case.

This past weekend I attended yet another one of these VIP broker-type sales events at one of the highest-profile condo projects downtown in the King and Spadina neighbourhood. Condos at this project are selling in the $800-1000 per square foot range. These are not low end condos.

My client wanted to buy a 1 bedroom unit for something around $500K. We lined up early, we knew exactly what we wanted, we even had our deposit cheque ready to be handed over. When the doors finally opened, we were told that there were no 1 bedrooms available (even though it was advertised that there would be). In fact, there were no units available unless we wanted to spend at least $750K.

Of course, I knew this would likely be the case beforehand and had prepared my client for this reality. But most people attending these “VIP sales events” have no clue what they are walking into.

My best advice to buyers is “prepare to be disappointed”. Even though you may know exactly what you want to buy and have the financial means to do so, you may go home empty handed. It’s the nature of these sales events. They are built around hype and anticipation. Once you are through the doors they know that given the chance, most people will buy just about anything

Questions or comments? Feel free to contact me or leave a comment below.

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Protect Yourself: Never ‘Register’ With a Developer

When you enter into a new condo sales office, the first thing the pretty girl behind the desk will say to you is “Have you been here before? / Can I get you to sign in? / Have you registered with us yet?”.  Hmmm…you’ve got to ask yourself why they are so quick and in-your-face to get your personal information when you’ve only just walked through the doors. The reason is simple but most people are shocked to hear it.

When you sign-in/register with a developer, you are giving up your right to be independently represented on any future purchase at that condo development. You are effectively saying, I am not working with an Agent, and I give up my right to have an agent represent me in the future.

NEVER REGISTER OR SIGN-IN WITH A DEVELOPER!

Even if you have absolutely no intention of working with a Realtor, or if you think you have absolutely no intention of actually purchasing a suite at the development whose sales office you are entering, don’t give up your right to be represented! Remember that the sales people in the sales offices are working exclusively for the developer – they have ZERO obligation to you and your interests.

Remember, it costs you nothing to be represented by an exclusive buyer’s agent. The developer pays the fee on your behalf! Be smart, protect yourself and always leave yourself the option to be represented.

So what should you do?

1. Never give up your personal information on a sign-in or ‘registration’ forms. Tell them you are working with a Realtor/you have an agent.
2. If they press you to fill out the form anyway, put down your agent’s name and contact info. Better yet, give them your agent’s business card with your name on the back of it. (If you don’t have an agent, feel free to use my name and contact info.)
3. If they give you a hard time, or refuse your agent’s name as registration, you’ve got to ask yourself if this is a developer you want to buy from.

If you are thinking about buying a new condo, click here to hire me as your exclusive buyer’s agent.

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5 Things to Know About Occupancy Fees

I have a client who is in the middle of purchasing a new condo and we are currently in our 10-day rescission period. I am helping my client do their due diligence in reviewing their contract with a lawyer, making sure the financing is in place for the deposits as well as the mortgage, answering any questions that come up, and generally making sure they are totally comfortable before moving forward and finalizing the purchase.

In the course of our due diligence, this particular client had some concerns about occupancy fees or ‘phantom rent’ as it is also known. (more…)

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Toronto Resale Market Slows; New Developments to Follow?

Interesting article in today’s Globe and Mail about more anecdotal and factual evidence that the Toronto resale market is slowing down.

Agents are starting to see conditional offers more and more, negotiations are actually taking place, and sellers who price their property too high are getting a rude wake-up call to the new realities of the marketplace.

Gone are the heady days of 2007 when a seller could simply list their property at seemingly any price and they would usually be rewarded with an offer.

So what about the market for new condos? What is the market like today and what will it look like heading into the final quarter of 2008 and into 2009? I spend most of my time helping buyers enter into the pre-construction condo market in Toronto.

A new report from Urbanation, a research firm run by the folks behind Market Vision-a brokerage specializing and new developments-seems to suggest that new condos will be following the trend currently happening in the resale market.

“We’re expecting a slowdown in 2009,” said Jane Renwick, editor and vice-president of Urbanation, a condominium market research company.

“So we would say that we were at 22,000 [condo] sales at the end of 2007. We’re predicting 16,000 sales to round out this year. And we’re expecting sales to dip beyond that in 2009.”

Urbanation released a report yesterday about the Toronto condo market’s second quarter of 2008.

Following record condo sales in 2007, she said, the market is now back to 2005 and 2006 levels.

Anecdotal evidence, evidence on the ground from my own experiences and the experiences of my colleagues who also specialize in new condo developments, suggests that the market is currently still hot. People are still lining up for condos (overnight in many cases), and prices are still rising. However, there is a sentiment that slow times are ahead and smart buyers are proceeding with caution, not just jumping into any development that comes along. If you are looking to flip a condo and make a quick profit overnight, it is probably not the best time to buy.

If you ever have any questions about new condos or Toronto Real Estate, please give me a call or send me an email.

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Mortgage Approvals for Pre-Construction Condos: Part 2

As I talked about in my previous post, understanding deposit structures and mortgage approvals is essential to purchasing a new condo from a developer in Toronto.

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.

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The Met at Yonge and Carlton: Registration Date is Here

Good news for buyers and sellers at The Met at Yonge and Carlton: Phase 1 has finally registered! What this means is that the occupancy period is over and unit owners will be receiving their deeds for their units. You are officially owners! You can now sell your suites however you like. The ban on advertising your unit for sale on MLS is now lifted. The builder, Edilcan, is now totally out of the picture and you are free to market your condo at The Met however you like.

No more messy assignment agreements or trying to find a buyer on classified ad sites like Craigslist. The full power of the MLS is a very good thing for sellers and also for buyers who have been waiting to purchase a condo at The Met but perhaps they have not even known which suites were available for sale.

There are some great units already on the open market at The Met right now. Contact me for the up to the minute list of condos currently available at The Met.

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