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The Money Matters: Counting the costs of a new homes purchase.

By REW Editor 2022-10-23

Success in the kitchen is generally the result of following a trusted recipe. In much the same way, a successful and stress-free pre-sale purchase happens when you know what to expect - and what will be expected of you. So, let’s have a look at all the ingredients you’ll need to be rewarded with something a little, well, different (and totally delicious).

 

Something for every taste.

The good news is that in the current market there’s an incredible amount of great new developments on the boil – over 700 currently on the market in BC, 208 of which are in Vancouver (there are 131 listed developments in Edmonton and 189 in Calgary). These developments offer a complete range of home types and price points so there really is something out there for everyone. In Vancouver you can get anything from a 1 bed condo for $500k, or a premium townhome for $3 million. And if pricey Vancity is not where you want to be, in Edmonton and Calgary you can nab a condo for as little as $165k. For a complete list of all developments in um, development, have squizz over here.

 

Builders deposit – the onions and garlic of pre-sale purchases.

The first cash you’ll spend once you’ve found a new home is the deposit to the builder. The deposit is typically based on the purchase price of the property, before any upgrades or custom options. It generally forms 20% of the sale price and you pay it in installments over the course of construction. The general rule of thumb is as follows:

 

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7 days to measure the temperature.

One of the great things about these purchases is that you have a week to get cold feet and get your money back. This is known as the rescission or cooling off period. In BC, it’s 7 days, and in Alberta it’s 10 days. In this time you have the right to withdraw from your purchase agreement with no questions asked and a money-back guarantee. It’s good to really use this time to do your due diligence and soul searching, because once it passes you will lose any funds you’ve put down if you want to back out.

 

Your deposit is in safe hands.

The deposit that you pay to the builder gets put in a trust account which is managed by a lawyer. The developer can’t access your deposit until the construction is complete. This means that you are protected from a developer declaring bankruptcy or cancelling the project. If this happens you will get your full deposit back, no questions asked.

made of it

 

good news everyone

 

In the interim though.

The gap between construction being complete and the title deed being transferred into your name can take anywhere from 3 months to 2 years. This period is known as interim occupancy, when you move in and pay a stipend to the builder. The stipend is calculated as 80% of your mortgage, plus condo fees and maintenance costs. During this time, the condo does not yet belong to you, so be aware that you can’t rent it out or make alterations without express permission of the builder.

 

Closing Costs - the bitter rind.

When registration has gone through you’ll be responsible for some closing costs to get your name etched in gold on that title deed.

The builder will charge:

  • development levies.
  • environmental fees.
  • utility connection fees.

These fees can really rack up, so it’s wise to read your sale contract carefully to see what you’re in for and make sure that a cap on these amounts is included in the agreement.

Along with those you’ll pay:

  • 5% GST/HST which all presale condos are subject to and is not included in purchase price.
  • 2 months condo fees which you contribute towards the Condo Reserve fund.
  • Moving costs, which can be lots or little. Depending really on how much Le Creuset you have.

 

stacking

 

But wait, there’s more.

Once the home is yours, don’t forget that paying condo or maintenance fees will be an ongoing part of your agreement for as long as you own the property. Oh and of course you’ll pay utility fees and home insurance and your mortgage. Good news though: part of the deal is a 2-5-10 warranty on the building, so at least you don’t have to foot the bill if things start breaking. You can read more about all that over here.

 

(And more.)

Ooh, and one more thing: you can expect the maintenance fees to increase around 10-20% after two years of ownership. This is because they are estimated years in advance of the condo being built, and also because for the first two years the builder is responsible for shortfalls.

 

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You might feel somewhat overwhelmed after reading that, but when all is said and done, this still remains (if you can afford it) a great investment. Truly. So many perks to buying new development. Being the first owner, getting to customise your space, locking in a price years before you start paying a mortgage on it. You can read more about all those great reasons, and more, here. Sure, it takes a long time to get from buying presale to firing up that snazzy gas cooker, but you will savour it all the more once the wait is over.