BY: JAY BRIJPAUL
“Congratulations on your purchase; here are the keys and remember to change your locks,” said Daniella’s real estate lawyer.” Daniella considered buying a pre-built condominium at first but settled for a resale instead.
Pre-built condominiums can take years to finalize and during that time the buyer can tie-up large deposits with the builder without any interest. In addition, the buyer must continue to rent while waiting. One major difference is that unlike pre-builds, you see exactly what you are buying.
Start by getting a mortgage approval from your financial institution or mortgage broker. A pre-approval would give you an idea what price range you can afford. Along with your down payment, put aside the equivalent of one and a half percent of the purchase price for closing costs. If you are using your RRSP as a down payment, the RRSP must be established ninety days before it can be used. Buyers who are currently renting should ensure that they are not locked into a long-term lease with the landlord. To vacate a rental property, the tenant must give sixty days notice from the end of the term to the landlord.
First, choose the neighbourhood and then the condominiums within your price range. The next step is to visit each building and compare suite sizes and amenities. A modern building, for example, with great amenities, would be more expensive and the maintenance fees would be higher. Always buy what is easy to sell. If the building is run down and the common areas are dirty, then it would be less attractive to buyers and with time, the maintenance fees will climb. An unattractive building with high condominium fees is a recipe for disaster. In Toronto, where real estate values double every ten years, I saw condominiums that sold in 1989 for $134,000 that are now selling for under $50,000 because of that reason.
Once you find the suite you want to buy, do your homework. Look at the view and make sure you like what you see. Suites that overlook garage entrances and garbage pick up areas are not desirable and would be more difficult to sell when you are planning on moving. Take a general tour of the building, the parking spot, and the locker before you proceed. Ask the realtor for a history of the suites that were sold in the building for the past year. With that, you can establish what price to pay before you make an offer.
Offers must be subject to financing, inspection and obtaining a status certificate of the condominium. Financing on condominiums is more complex than freehold properties because it hinges on the structural and financial status of the condominium. Use a home inspector to evaluate the unit and give a general overview of the building as well. The status certificate is like the DNA of the condominium and provides crucial information about the building.
The status certificate has the by-laws and rules of the condominium, for example, if the building is pet free and the buyer has a puppy. It would have the most recent audited financial record of the condominium and a reserve fund study. Reserve fund is money put away for major repairs or replacement of common elements, such as the roof or the elevators. If the reserve fund is low, then the maintenance fees can climb steeply, or every owner must pay their proportionate share of the cost, known as special assessment. The bottom line is to have your real estate lawyer review the status certificate before you purchase.
There are many important variables to consider when purchasing resale condominiums. The best advice is to choose a realtor, lawyer, and mortgage professional who has the experience to guide you through the process. If done right, condominium living can be a rewarding experience for you.