Unveiling the Dark Side of Pre-Development Condo Purchases
In this blog post, I aim to shed light on the lesser-known drawbacks of investing in pre-development condominiums. Drawing from my extensive experience as both a realtor and a multiple-time purchaser of such properties, I'll illuminate key reasons why I've sworn off pre-development purchases for good. While my focus is on condominiums, many of these insights are applicable to freehold purchases as well.
Developer’s Dictation:
When diving into a pre-development purchase, buyers often find themselves at the mercy of developers. Unlike in resale transactions, negotiation room is virtually non-existent, with developers dictating terms heavily skewed in their favour. The bespoke contracts, crafted by high-paid lawyers, serve as a testament to this power dynamic. In contrast, resale purchases typically entail a collaborative negotiation process, fostering win-win outcomes for both parties.
Tempting Incentives:
To entice buyers and realtors alike, developers resort to a myriad of incentives. These can range from deposit structures to extravagant gifts like luxury cars, all aimed at masking inflated purchase prices and drumming up sales. However, the allure of incentives often obscures crucial aspects of the deal. As the quantity and quality of incentives rise, so does the need for vigilant scrutiny on the part of buyers and agents.
Market Uncertainties:
One of the most glaring risks associated with pre-development purchases lies in the unpredictability of future market conditions. The market landscape at the time of purchase may starkly differ from that upon closing, presenting a gamut of challenges. From lower appraisals necessitating larger down payments to soaring occupancy fees, buyers may find themselves grappling with unanticipated financial burdens. Moreover, diminished saleability in a downturned market can spell trouble for those considering assignment of their units. In contrast, the relatively shorter closing periods in resale transactions afford buyers a more nuanced understanding of the prevailing market dynamics, empowering them to make informed decisions.
While pre-development condominiums may hold allure for some, it's imperative to acknowledge the inherent risks that accompany such investments. By unveiling the hidden pitfalls, which I find are not talked about often enough, my aim is to equip prospective buyers with the knowledge needed to navigate the real estate landscape with confidence and prudence. There is lots of opportunity with Pre construction investing, as long as the market continues to increase in price point. Don’t buy on hype alone.
-Tyler Palubiski
