Pre-Construction Condos 101: A Beginner’s Guide

Buying a home is one of the biggest decisions you’ll ever make, if not the biggest one! For many, pre-construction condos are what they finally choose. And like any other thing in this world, purchasing a condo before it’s built has its benefits and possible downsides. But how does it actually work?

What is a Pre-Construction Condo?

Technically, a pre-construction condo is a unit you buy that, in most cases, doesn’t really exist—just floor plans, blueprints, and architectural renderings! Yes, it’s essentially a product of imagination. But don’t worry; it will allow you as a buyer to secure a property at a potentially lower price and with customization options.

How Does Buying Pre-Construction Condos Work?

Like baking a cake, there is a recipe for buying a pre-construction condo. It includes several steps:

• Developer Announces the Project: Details on location, amenities, floor plans, and pricing released. Early buyers explore options.
  VIP/Platinum Sales Begin: Early access to the best units at lower prices. Desirable layouts and locations secured.
  Buyer Selects a Unit and Signs the Purchase Agreement: Agreement outlines terms, pricing, and deposit schedule.
  10-Day Cooling-Off Period: Buyers have 10 days to review the contract, consult a lawyer, and cancel without penalty.
  Deposit Paid in Stages: Installments: 5% at signing, 5% in 6 months, 5% in a year, and 5% later.
  Developer Sells Enough Units to Start Construction: Developer must sell a certain percentage to secure financing and avoid delays.
  Construction Phase (2–4 Years): Construction takes 2 to 4 years, depending on project size and complexity.
  Interim Occupancy: Buyers move in but don’t own the unit. Pay occupancy fees instead of a mortgage.
  Final Closing & Ownership Transfer: Ownership transferred after registration, the mortgage begins, and closing costs are paid.

Timeline

Back to our cake-baking example, the process of buying a pre-construction condo takes time – several years, to be exact. There are different steps, like approvals, sales, the main construction phase, and legal steps for registration. Let’s review these phases.

• Land Acquisition & Planning (6–18 months): Land purchase, permits, design, city planning, financing.
• VIP/Platinum Sales Launch (2–6 months): Early access to the best units at lower prices.
  Public Sales Launch (1–3 months): Remaining units released to the public at higher prices.
• Sales Completion & Financing Approval (3–12 months): Developer sells a set percentage to secure financing.
• Construction Phase (2–4 years): Construction begins after financing, timeline depends on project size.
• Interim Occupancy (3–6 months): Buyers move in, pay occupancy fees, no mortgage yet.
• Final Closing (1–3 months after interim occupancy): Condo registered, ownership transferred, mortgage begins, closing costs paid.

Who Is a Pre-Construction Condo For?

This type of real estate property is a practical choice for: 

• First-Time Homebuyers: Easier market entry with staggered deposits and locked-in prices.
• Real Estate Investors:  Long-term appreciation, potential for profit or rental income.
  Downsizers: Low-maintenance living, modern amenities, fresh start.
• Young Professionals: Urban location, easy access to work, entertainment, transit, and flexible timelines.
  Parents Buying for Kids: Future home for children, university housing, or career stepping stone.
• Buyers Priced Out of the Resale Market: Smaller deposits, extended payment plans make homeownership more achievable.
  Buy-and-Hold Buyers: Purchase with no immediate plans, anticipating future appreciation and profit.

Benefits of Buying a Pre-Construction Condo

Buying a pre-construction condo comes with some great perks:

• Lower Purchase Price: Pre-construction condos priced lower than resale, securing today’s price before appreciation.
• Flexible Deposit Structure: Deposits over time, easing financial strain.
• Time to Save & Plan: 3–5 year timeline to save for mortgage and closing costs.
• Customization Options: Choice of finishes, upgrades, and layouts for a personalized space.
• First Access Incentives: Early buyers (VIP/Platinum) get best pricing, floor plans, and promotions.
• Brand-New Unit: Modern designs, energy-efficient appliances, no previous owners.
• Potential for Appreciation: Lock in price early, potential for equity growth before move-in.
• Tarion Warranty Coverage: Tarion Warranty protection for up to 7 years against construction defects.

Risks of Buying a Pre-Construction Condo

Pre-construction condos come with plenty of perks, but there are some risks to keep in mind before jumping in.

• Construction Delays: Delays due to permits, labour shortages, or material issues. Buyers may wait longer than expected.
• Price Fluctuations: Market changes during construction. If the market drops, condo value may be lower at closing.
• Developer Cancellation: If pre-sale targets or financing fail, the project may be canceled. Refunds occur, but time and appreciation are lost.
• Occupancy Fees: During interim occupancy, buyers pay fees instead of a mortgage. No equity built.
• High Closing Costs: Development charges, utility hookup fees, and HST can add thousands to the final price.
• Limited Control: The final unit may differ from the floor plan. Limited recourse for layout, view, or material changes.
• Mortgage Qualification Risk: Requalification required at closing, with potential difficulty securing financing if interest rates rise.
• Lack of Immediate Use: Pre-construction condos aren’t available for immediate use or rental income. Investors must wait years.

Bottom Line

The real estate industry offers plenty of options to homebuyers and investors, each with its unique pros and cons. Pre-construction condos are no exception. The best course of action? Assess your financial situation, research the developer’s track record, and consult with real estate professionals before making a final decision.

And if you need tailored guidance, don’t hesitate to contact us. We’ll be happy to help.