Archive for the 'Buyers Tips' Category

5 Things to Know About Occupancy Fees

Published at December 10, 2008 in Buyers Tips. 1 Comment

occupancy fees - buying a condo in Toronto

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. Continue reading ‘5 Things to Know About Occupancy Fees’

Why Use a Buyer’s Agent?

Published at October 29, 2008 in Buyers Tips. 0 Comments

Thousands of people visit my website every week, most looking for information about new condo developments in downtown Toronto. Many are now returning visitors or subscribers who keep checking back for the latest info on the hottest new developments in the city. Thank you to everyone for visiting and I hope you find what you are looking for and that you find my website informative and useful.

A common question I get asked is,

I am thinking about buying a new condo in Toronto. Should I use an agent?

My answer is always YES! Hiring an Exclusive Buyer’s Agent should be the first thing you do when you decide you are going to purchase a new condominium from a builder.

With this in mind I’ve added a page to the website called simply called “Buying a New Condo” which explains the key reasons why you should always hire an Exclusive Buyer’s Agent when purchasing a condo at a new development. Check it out and let me know if you have any questions. I always appreciate my reader’s feedback.

Where is the Toronto Condo Market Heading?

Published at October 8, 2008 in Buyers Tips. 4 Comments

I attended a very informative and interesting seminar last night at the Market Wharf sales office. The event was put on by Context (the developer behind Market Wharf, Spire, Radio City) and was billed as a ‘Buying a Condo Seminar’. It was open to anyone who is on Context’s marketing email list. Normally I avoid events like these like the plague because they are blatant bait-and-switch sales events designed to lure uneducated consumers into buying a condo at a development they know nothing about. However, this one offered something different and I’m glad I attended.

Continue reading ‘Where is the Toronto Condo Market Heading?’

Toronto Resale Market Slows; New Developments to Follow?

Published at August 22, 2008 in Buyers Tips, Investment, New Developments, News, Opinion and Resale Condos. 0 Comments

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.

Mortgage Approvals for Pre-Construction Condos: Part 2

Published at August 19, 2008 in Buyers Tips, New Developments and Pre-Construction Condos. 0 Comments

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.

Deposit Structure and Mortgage Approval for Pre-Construction Condos

Published at August 18, 2008 in Buyers Tips, New Developments and Pre-Construction Condos. 1 Comment

Not a very sexy post title I know, but just because you are buying a pre-construction condo in Toronto doesn’t mean that you can avoid the world of traditional mortgages.

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.