Realtor or No Realtor? Your Guide to Buying Pre-Construction Property in Ontario

Remember those days when we were kids and we were forced to wear our older siblings’ or cousins’ hand-me-downs every time? The worn-out clothes, the faded colours - we felt this to be a tiny injustice. We would always plead with our parents for something new, something shiny, and something that was truly ours.

This same longing for the new and untouched has seemed to follow us into adulthood, especially when we start shopping for our first home. We desire our first home to be one that’s never been lived in before with new walls, new floors and new everything. And pre-construction properties offer us a chance to do just that.

How Do Pre-Construction Houses Differ from Resale Houses?

When buying a home, you usually come across two main options: pre-construction homes and resale homes. Pre-construction homes are properties that are currently under construction or still in their planning stages and are sold before they are completed. This means you get the chance to own a brand-new, sparkling home that no one has ever lived in. On the other hand, existing homes are properties that have been previously lived in and are ready for immediate move-in.

One major difference between these properties is their payment structure. With pre-construction homes, you often have the chance to make payments in stages throughout the construction process. But in existing homes, you have to pay the full purchase price upfront.

Also, buying a pre-construction property is sometimes easier on the wallet than purchasing an existing home. This is because pre-construction builders sometimes offer incentives such as lower prices or upgrades to attract homebuyers before the home is completed.

There's another thing buyers often think is different while buying a pre-construction home but is actually not. Homebuyers believe that you need a Realtor only when buying an existing home, not for a pre-construction home. But in reality, you definitely need a Realtor to guide you and protect your interests even when buying a presale home.

In What Ways Can a Realtor Support You When Buying a Pre-Construction Property?

A Realtor can help you with buying a pre-construction home in many of the same ways as buying an existing home. They can help you find the right pre-construction project, advise you on the fair market value, and negotiate on your behalf to earn you the best deal. However, buying a pre-construction home involves many other unique strings that the Realtor can help you handle too -

1. Picking the Right Builder to Work With

Choosing the right project with a reputable builder can mean the difference between a dream home and a nightmare. Reputable pre-construction project builders are committed to quality construction, on-time delivery, and excellent customer service. On the other hand, a builder with a poor reputation might cut corners, cause delays, or deliver a home with countless defects.

This is why you need a Realtor who has a deep insight into the local housing market and the builders operating in it. Real estate agents can provide you with invaluable information about which builders have a strong reputation in the market.

Also, your Realtor can help you steer clear of pre-construction properties with bad history builders. They can share about builders who have faced legal issues, financial difficulties, or complaints from previous homebuyers. This firsthand knowledge when buying a pre-sale home can save you from potential headaches and financial losses.

2. Protect Yourself from Unexpected Costs

A Realtor who has experience working with developers in the past can shield you from surprise costs. These real estate experts understand the complex language used in contracts of pre-construction projects and can help you decipher what everything means. They can identify areas where you might be paying more than necessary for the material or labour of the project.

Additionally, Realtors can especially shield you from one sneaky clause when buying a pre-construction home: the “cost escalation clause.” According to this cause, the builder of the pre-sale home can charge you more at the end of the construction process than what was originally agreed upon.

Why? Because pre-construction builders have to protect themselves from unexpected price increases in materials or labour. For instance - if the cost of lumber suddenly goes up during the construction, the builder can pass those extra costs on to you and the other homeowners. This can lead to a much higher price tag for the pre-construction property than you anticipated. Your Realtor can help you spot this clause in the contract and negotiate to remove it or at least limit its impact.

3. Helps Safeguard Your Investment

You’ll have to be smart while choosing the design and upgrades of the pre-sale property you’re buying to retain its value over time. You’ll have to choose styles that seem appealing to you now and also to potential buyers down the line. Again, this is where your Realtor can be your valuable ally when buying the pre-construction home.

Realtors have a finger on the pulse of the housing market and they know which home designs and upgrades have a lasting appeal. They know about the top features that homebuyers look for in properties now and will still look for 5 to 10 years later. Hence, by investing in features that constantly resonate with buyers, you stand a chance to protect your new home’s value.

4. Keeps You Informed and Stress-Free During the Construction Phase

Most people refrain from buying pre-construction properties because they worry they have to be on pins and needles during the construction phase. You’ll have to constantly reach out to the builder regarding updates and how soon you can move in. However, when you work with a Realtor, you can shift this task from your plate to theirs.

A Realtor can help you keep close tabs on the property construction timeline, getting you regular updates from the builder. This means you won’t be left in the dark about when different stages of the construction are completed.

Also, when unexpected problems pop up during the construction phase, your Realtor can step in as your go-between with the builder. They’ll communicate your concerns to the builder, work together to find immediate solutions, and make sure your interests are protected.

Do Realtors Charge Less for Pre-Sale Homes?

When it comes to Realtor commissions, it doesn’t matter whether you’re buying pre-construction properties or a resale property. The commission that you have to pay to the Realtor in Ontario in both cases is generally the same.

In Ontario, the typical commission rate for real estate agents is around 5% to 6% of the home’s sale price. This commission is usually split between the buyer’s agent and the seller’s agent with each receiving around 2.5% to 3% of the value of the pre-construction home.

However, keep in mind that as a buyer of the pre-sale home, you’re not responsible for paying the Realtor commissions directly; the builder is. For new construction homes, builders typically allocate a portion of their budget to cover Realtor commissions. Most builders include about 6% of the home’s price in their closing costs for this purpose.

Thus, hiring a Realtor when buying a pre-construction home won’t be an extra expense for you. In fact, choosing to self-represent while buying the pre-sale home might not save you money as the commission is already factored in the home’s price. So, go ahead and choose a top-rated Realtor to successfully buy a pre-construction property in Ontario!