Toronto Builder Specials

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Recently I have been sending out more and more Builder opportunities through e-mail, especially for downtown Toronto condos. This has generated a number of questions that have been e-mailed to me enquiring about why builders do what they do or why a sudden special will come about.
Also many folks have wanted to know what an assignment agreement is.
Often people buy a unit 2-4 years prior to it being built.

The Toronto builder requires a series of deposits usually over a six month period totalling 20% to hold the unit until the closing of the transaction. This allows the builder to get his financing with the bank, he also is generally required to have 65% of his units sold ore the Canadian banks will forward the financing on the project so he can “break ground” .

Prior to closing a person may decide the unit no longer suits them for one reason or another such as they have married and started a family or they have moved to Vancouver. Other buyers are investors and have no plan to close the transaction. They plan to sell their contract prior to closing and take a profit.

The document used to do this transfer is called an Assignment Agreement. The original purchaser sells their contract, not the unit. The new buyer steps into the shoes of the original buyer and takes over all the terms of the original contract. The full details on this can be found at http://www.torontoshome.com/investor/condo assignment.

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So once a builder has sold approximately 65% of his units with substantial deposits the bank then starts to forward him monies in stages in order for the builder to build. Occasionally builders will get down to their last few units close to the 65% sold and they will then turn to large Real Estate Agencies such as ours at Royal Le Page Signature that do tremendous volume and they will send us a builder special.

These builder specials will be for a specific group of units and you can have your pick. Recent offerings have been lower deposits anywhere from 5-15% down or they have thrown in parking, lockers, cash back on closing, store gift certificates and even the right to a free assignment which the builder usually charges anywhere from $3000.-$5000.for.

So we may get an e-mail notice that there are six units available with special terms. Once they are sold things will bounce back to the usual terms as the builder is now able to draw down his cash. There have also been times when a builder has two towers to build and he will want to build them both together to save on costs and will wish to suddenly sell out the second tower quickly in order to get started.
Folks will sometime assume if there is a special that there is something wrong. The market is about to crash or the bottom is falling out of the condo market. There couldn’t be anything farther from the truth. Land for condo buildings is purchased years in advance and plans are in the works anywhere from 5-10 years with many stages in the planning process from initial conception to working through all the channels at Toronto City Hall in order to get to final approvals. The financial numbers on these projects have been well vetted years in advance.

Also currently most of the supply of units being built is being eaten up by the market. We often find in the resale market that there is little to show to our prospective buyers. Suburban condos tend to move at a much slower rate than downtown Toronto however. Downtown Toronto is about affordability and lifestyle.

Very often the first units to sell are the smallest. They are often picked up by local Toronto investors who want to rent them out. The investors tend to purchase without lockers or parking looking to maximize their profitability by keeping their purchase price down and their maintenance fees at the lowest level. This is why quite often you will see a price on the builders sign that says starting price $199,000. and up… only to discover when you go in there are non available. They were snapped up, sometimes in 2’s and 3’s.

Builders are happy to accommodate bulk buying as it gets them closer to the bank commitment level and they can get their building on the road.

Occasionally you will see a development that is built and their will be a sudden special on their last few projects. It is in the builders best interests to get those units sold. He needs to get occupancy to the capacity required for registering the Condo corporation before he can close his units and draw down his profits, thus allowing him to move on to the next project. Some people think they must have bad floor plans and there is no doubt that this does occasionally happen so you do have to go look see and make a judgement call.

It is in the builders best interests to have registration take place as quickly as possible as he can only start his closings after the registration is handled prior to that the buyers are tenants and they pay occupancy fees which cover the costs of the interest they would pay on their mortgage but they are not paying down any principal at this point. This happens after the close.

Hopefully this answers many of the questions about dealing with a Toronto Builder and how Toronto Builder Special Offers come about.If you are looking to take advantage of builder specials, let us know on our site at www.torontoshome.com/builderspecialoffers where you can leave your name and e-mail address for us to send you any offers that may come our way.