What is Pre-Construction?
Pre-construction condos are units purchased before the building is completed, sometimes before construction even begins. You're essentially buying based on floor plans, renderings, and the developer's reputation. If you're weighing your options, our pre-construction vs resale comparison can help you decide.
The Pre-Construction Process
Phase 1: VIP/Platinum Access
- Real estate agents and their clients get first access
- Best selection of units
- Often better pricing and incentives
- Typically a 2-4 week window
Phase 2: General Public Sales
- Remaining units open to everyone
- May have limited selection
- Prices may have increased from VIP phase
Phase 3: Occupancy
- Building is substantially complete
- You move in and start paying occupancy fees
- You don't own the unit yet
Phase 4: Final Closing
- Building is registered as a condo
- Title transfers to you
- Mortgage payments begin
Advantages of Buying Pre-Construction
Financial Benefits
- Lower initial investment (deposit vs. full down payment)
- Potential for appreciation before closing
- New building warranty coverage
- HST rebate eligibility (for primary residence)
- Ability to customize finishes in some cases
Lifestyle Benefits
- Brand new unit with modern finishes
- Latest building codes and energy efficiency
- New amenities and common areas
- Choosing your preferred floor and view
Risks and Considerations
Potential Challenges
- Delays in construction (months or years)
- Final product may differ from renderings
- Developer could go bankrupt
- Market conditions may change
- Assignment restrictions
Financial Risks
- Tying up deposit money for years
- Interest rate changes before closing
- Property values could decrease
- Unexpected closing cost increases (watch for hidden fees)
Understanding the Deposit Structure
Typical deposit schedule:
- $5,000-$10,000 on signing
- Balance to 5% in 30 days
- Additional 5% at 90 days
- Additional 5% at 180 days
- Final 5% at occupancy
Total deposits usually range from 15-20% of purchase price.
Due Diligence for Pre-Construction
Research the Developer
- Track record of past projects
- Tarion warranty history
- Financial stability
- Reviews from previous buyers
- On-time delivery history
Review Documents Carefully
- Agreement of Purchase and Sale
- Disclosure statement
- Condo declaration (draft)
- Description of finishes
- Tarion Statement of Critical Dates
Understand What's Included
- Standard finishes vs. upgrades
- Parking (included or extra cost?)
- Locker (included or extra cost?)
- Appliances
- HVAC and water heater
Assignment Sales
An assignment is when you sell your right to purchase before closing:
Why Assign?
- Changed circumstances
- Take profits before closing
- Avoid final closing costs
Assignment Considerations
- Developer must approve
- Assignment fees typically apply
- Original buyer may remain liable
- Tax implications on profit
Closing Costs for Pre-Construction
Budget for these additional costs:
- Development charges (if applicable)
- Levies (education, parks)
- Utility connection fees
- Common element contribution
- Legal fees
- Land transfer tax
- HST (if not included or no rebate)
Tips for Pre-Construction Buyers
- Buy from reputable developers - Track record matters
- Get a real estate lawyer - Review all documents before signing
- Understand the timeline - Be prepared for delays
- Budget conservatively - Closing costs add up
- Consider location carefully - The neighbourhood should be established or clearly improving. Explore Toronto, Vancouver, or Calgary markets
- Don't over-leverage - Interest rates and market conditions can change