Buying pre-construction, or sometimes referred to as pre-sale, is purchasing a home before the home is completed. Buying pre-construction can be a common thing seen specifically within condominium developments where individuals reserve a unit until the completion of the building. When you decide to purchase pre-construction that property or unit is not transferred to you immediately, but rather you are given a unit assignment. This unit assignment is a hold on a specific unit until the build is completed and then the unit is officially transferred over.

Is buying a pre-construction right for you?  In this article, we’re going to explore the pros and cons of buying a pre-construction to help you make the most informed choice for you.

Pros of Pre-Construction

Better price: Buying a pre-sale may come with a cheaper price tag. Many people who are looking at buying, especially those just getting into the market, are drawn to the potential savings. Pre-construction developments may come with early bird pricing’ or ‘VIP pricing’, therefore there is an option to get a better rate on the property now compared to once it’s complete. Pre-sale could be a good option for someone who is keen on purchasing a brand new home. Important to note, the reason you can get a better deal on a pre-sale home is because there is still a risk that the development may not get completed – but we’ll get to that later!

Warranty available: One of the unique things about purchasing a pre-construction is that your home will come with a warranty. Dependent on the developer, pre-sale home warranties can range from 2,5, or 10 years. This protection typically covers things like appliances, structure, quality, and craftsmanship of the building. Many people get a great sense of relief and security from having a home warranty like this.

More time to save: opting for a pre-sale home can provide more flexibility and time to save for the home itself. Pre-constructions can take months or years to complete (generally it’s the latter), which gives you more financial wiggle-room. Purchasing a pre-construction home lets you lock in your purchase without having to shell out all the cash right away since you don’t have to start paying a mortgage until completion. Depending on your budget/financial situation, this may be a great option for some.

Lock in a great deal and build your equity: As real estate is known to appreciate in value, there is a great chance that, depending on how long the build takes, you may be living in a home for a much greater market value than at what you purchased it for. Therefore, building equity, locking in a great price for what you’re getting, and potentially making money.

Avoid the chaos of the real estate market: When you choose a pre-sale home you get the added benefit of leaving the real estate market hunger games behind. Purchasing pre-construction tends to be a lot less cut-throat and you, typically, deal with one sales representative and face less bidding wars as there are generally several units up for pre-sale in a building.

Customizable: Many people love making their house a home and what easier way to do that then to customize your place. One of the great things about purchasing pre-construction is that you have a lot more options when it comes to customizing your place. And it can all be done prior to you moving in. This can also save you future money of not having to do the renos or updates yourself.

Cons of Pre-Construction

Sales Tax: Depending which province you’re purchasing in, there is a sales tax required on pre-sale buys. Either the Harmonized Sales Tax (HST) or the Goods and Services Tax (GST). There is a housing rebate in which you may be eligible to recover part of the taxes you paid on the purchase.

Risk of incompletion or delays: As briefly mentioned above, there is a risk when it comes to purchasing a pre-construction that the build may not get finished or face lengthy delays. Completion dates for new condos are kind of like a moving target – there is always a date in mind, but it always tends to be moving. A contractor will give their best estimate of when you can expect the project to complete, but there are always several factors outside of their control that can push the completion date by months or even years.

Potential of not making a profit: There is a gamble with purchasing a pre-sale that you will not make a profit between the purchase and the completion of your build. As the real estate market fluctuates you have to be willing to ride the wave, whatever that may look like. You should be able to navigate this potential financial risk if opting to buy pre-construction.

Subject to change: It is important to know that during the construction of the build that there may be slight alterations and variances to the original floorplan that you saw when you purchased the property. There is generally a portion of the contract you sign that allows for a certain level of layout change throughout the building process. These changes are not huge but a change, nonetheless.

Buying sight unseen: For many it may be hard to visualize what the completed project will look like. When you’re mostly working with floorplans it can be hard to imagine yourself living in that space.

Living in a construction zone: There is, often times, an opportunity for you to move into your completed unit before the entire building is complete. While it is very exciting to be moving into your new home, it does come with the potential for a lot dust and noise vibration, as well as things like the amenities not being ready for use, and a lot more traffic coming in and out of the building as construction workers wrap up.

If you do decide to opt for pre-construction, it is wise to get a real estate agent who specializes in these types of sales. Since these sales have different qualities and nuances compared to a traditional sale, it is extremely beneficial to have a trusted professional who can help you navigate the waters.