There are many different types of properties available today, and if you’re planning to buy one soon, you need to understand how each of these types differs. Buying a home is an expensive investment, and finding out that your purchase didn’t turn out as you expected can not only turn to disappointment, but can also jeopardise your financial well-being. To help you determine if a pre-construction home is right for you, we list the benefits and disadvantages of this property type purchase, along with some tips on how to get the best deal.

What Is a Pre-Construction Home?

As the name suggests, a pre-construction home is a type of property you buy before the structure is completely constructed. Buying this kind of property allows you to choose from different types of homes, such as:

• Detached houses
• High-rise condos
• Low-rise condos
• Semi-detached houses
• Townhouses

In most pre-construction property purchases, you won’t have a chance to see the unit before you purchase. For instance, buying a pre-construction condo means not seeing the building or the unit layout before making your deposit and paying your down payment. However, you will have the opportunity to review 3D computer renderings or artistic drawings that help you visualise what the unit will look like once complete. In this respect,

For houses, on the other hand, you’ll have the opportunity to visit a model home located on or near the lot of the future development. The model home is usually complete with furniture, amenities and decorations, and helps give you a more realistic look at what you are buying.

Buying Pre-Construction Is Different to Buying Resale

Like buying other property types, you’ll have to follow a process when buying a pre-construction home. For starters, start to research the neighbourhood. You want to be sure the community fits the needs of you and your family. For instance, if you have a dog are there parks or off-leash areas nearby where you could take your fur-baby for a walk? If you have children are there schools or daycare facilities in the area. When buying a pre-construction home, you aren’t just purchasing a structure but buying into a community — be sure that community is comfortable, accessible and meets your needs and desires.

Next, you’ll need to discover whether or not the new-build is in-line with the rest of the community. Buying a home that is over- or under-built for an area can be a risk, unless you or your real estate agent uncover future development plans that can support the risk.

You should also investigate the builder or developer. What is their level of experience with these types of builds? Do they have a positive reputation in the industry? Are prior home buyers happy with their products?

Finally, you’ll want to investigate the purchase price. While pre-construction homes are often sold by real estate agents inside a show home, these agents work for the developer, not you. As a result, it’s a good idea to hire your own experienced agent and to seek out the help of a real estate lawyer. Have these property specialists help you determine whether or not the builder’s asking price and contract are fair and reflect the area’s current market value.

Pros of Pre-Construction Homes for Sale

If you’re still on the fence about whether or not a pre-construction house is right for you, consider these advantages of a new-build.

Highly Customisable

Buying pre-construction property allows you to customise your home’s design. This means that you get to select features, colours and amenities that fit your lifestyle and needs. You can also pick your home’s flooring materials, electric appliances, and kitchen counters when you choose to buy pre-construction homes.

Buying new development homes won’t provide this flexibility because the property is already complete upon turnover.

No Bidding Wars

A pre-construction, purchase happens on a first-come, first-served basis, so sellers cannot position multiple buyers to compete against each other which helps raise the purchase price. With a pre-construction home, the price listed is the price you pay.

Value Goes Up

An advantage with pre-construction homes is that the value of the property can increases during construction, which means your home’s market value grows but your purchase price (and required mortgage) stays the same.

Flexible Paying Schemes

Buying a pre-construction home gives you more time to save money because rather than having to make a lump-sum deposit or down payment, you can pay the developer through a series of instalments.

New-Home Insurance

Even though your house may be brand new, things can and will go wrong. Foundations settle; walls shift and, as a result, floors can crack and drywall can break. The advantage of a new-build home is that in many provinces across Canada this damage is covered under new-home insurance.

In Ontario, the coverage is offered by Tarion, the industry association tasked with enforcing build standards and the repair of damage should problems arise.

Cons of Pre-Construction Homes for Sale

Pre-construction homes also have several drawbacks. Before buying one, it’s vital that you understand what these are, so you can manage your expectations and find ways to reduce potential risks.

Construction Delays

Generally, a pre-construction home takes about three months to one year to complete the build. This timeline still doesn’t include construction delays caused by unpredictable weather conditions, equipment failures, and labour shortages. If you’re looking forward to living in a brand new house soon, buying a pre-construction home might not be the best option.

Payment of GST / HST

Pre-construction homes are subject to Harmonized Sales Tax or HST, which increasing the money required from you to buy the home. The good news is most buyers can qualify for an HST rebate if the new-home is considered a new-build. To be sure, remember to ask the builder or ask your real estate agent to confirm the details.

Additional Fees

When you buy a pre-construction condo, expect to pay an additional “occupancy fee” during registration. This fee isn’t covered by your mortgage payments, which means that you have to spend more to cover this expense.

Buying a pre-construction home will also require you to pay more money for upgrades. The more upgrades you want your pre-construction condo to have, the more money you’ll have to spend.

New-Home Insurance

Not all damage is covered by Tarion’s warranty, so buyers need to do their due diligence. Get your lawyer to read the contract and find out what is covered and what is not. For instance, most builders and Tarion’s warranty won’t cover the repair of nail pops — when nails pop out of a finished wall due to settling and shifting — or minor cracks in concrete. Be sure you know what is covered and have a contingency fund set aside to pay for what is not.

Read More:

• What Closing Costs Should You Factor In When Purchasing A Pre-construction Condo?

Is Buying a Pre-Construction Home a Good Idea?

Investing money into a home that doesn’t exist yet sounds risky. In fact, many people will disregard the idea of buying pre-construction homes because they don’t get to see the property before making a financial commitment. However, for those that do decide to buy a pre-construction house the rewards can be great. Quite often, the other buyers are similar to you — similar point in their lives and similar backgrounds, making the new complex an easy place for you to meet new friends and create a community. New build homes are also built based on the most up-to-date standards and using the most current (and desirable) features, making a new build a very attractive housing option for those that want a move-in ready home that’s ready to meet their needs.

The real key to determining whether or not buying a pre-construction home is a good idea is to take the time to understand the process and to work with professionals who know and understand the process. With in-depth knowledge and professional expertise backing you up, buying a pre-construction home or condo will become one of the best investments you’ll make in your life!