VIP BUYING

(June 09, 2015 )

  During the VIP phase you often ·      
 get to choose between The best floor plans a building has to offer at their lowest price·     
 get units that are highly desirable to live in, rent out, or sell·      
 VIP incentives you may get extended deposit structure, capped levies, free upgrades, discounted or even free assignment fees, and more.·       
Assignment rights: Assignments refer to transferring the right to your condo agreement of purchase and sale to another buyer prior to the registration of the building. These rights are often only given out during the VIP phase. §
  NEXT STEP RESERVATION WORKSHEET (client is interested in purchasing a suite in a condo development)·       We as agents get invitation from builders. This is called VIP Broker event. ·       During the VIP Broker even Builder introduces their project and hand out worksheets. ·       VIP Brokers have one week to get a worksheet filled out by interested clients ·        As an interested party, you will indicate which suites/floor plans and on which floors you would be interested in purchasing. ·       There will be a deadline for the worksheets to be handed in. ·       Some developers will timestamp the worksheets as they arrive (first come, first served), while others will hold a completely random "lottery". ·       We inform our clients ahead of time whether it will be a timestamp or lottery system and advice accordingly. If it is a lottery system, it sometimes pays to be more flexible in your choices – if your worksheet is drawn but your suite is already taken, they simply move to the next worksheet. 
 §  SUITE ALLOCATIONS ·       Over the next 24-48 hours, the worksheets are allocated suites. Once you have been allocated a suite, your broker will be notified a time to come in and sign the paperwork and you're in and out within 30 minutes. No lining up, no fuss, no muss. ·       Worksheets can be filled out and faxed or e-mailed, making the process very simple for interested clients. 
§  PAPERWORK PREPARATION & SIGNING ·       Purchaser signs the Agreement of Purchase and Sale·       Developer obligated to deliver current Disclosure Statement to purchaserThe typical developer’s Agreement of Purchase and Sale is very lengthy and extraordinarily complex.  So must be carefully read and understood. Retain a lawyer to review the APS and the Disclosure statement.Disclosure statement is a general description of type and number of units& amenities, proposed Declaration, By Laws, Rules & Insurance Trust  ü The agreement can be terminated by the developer if the agreement includes early termination conditions, included for the benefit of the developer, and any of the conditions are not met. These conditions typically relate to the developer achieving a certain number of unit sales, obtaining planning approval for the project and securing financing approval for both the Vendor and Purchaser. If any of the specified conditions are not met the Developer can terminate the agreement of purchase and sale and the purchaser will be repaid his or her deposit with interest.
 §  TEN DAYS CANCELLATION PERIOD ·       A buyer may terminate an APS with a developer by giving written notice to the developer within 10 days of receiving the disclosure statement or within 10 days of receiving a copy of the APS signed by both buyer and the developer, whichever is later. The buyer can cancel the APS within the ten day rescission period without any explanation or reason. ·       The developer must promptly refund all the money received from the buyer without deduction any charge or penalty. §  DEPOSIT Deposits are typically required to secure, or reserve, a condominium unit in a new development ·       So deposit structure on new condos varies, but usually you can find something like 15% to be paid out in 3 or 4 installments over the course of 6-9 months after initially signing the agreement of purchase and sale.·        Then an additional 5-10% also is usually required at occupancy (not to be confused with condo registration date). ·       All Money received by the developer in regard to the sale of a proposed unit and all interest earned on that money must be held in trust in Ontario. ·        Buyer is entitled to interest on all amounts paid to the developer from the date of payment until the date that the unit is available for occupancy in accordance with APS .  ·       The interest is payable when unit is ready for occupancy.
  §  MORTGAGE  LETTER ·       The developer gets 15-25%, deposit, but they also require mortgage approval for the remaining amount. Here’s an example: say you buy a 1 bedroom and den condo for $300,000. You must pay out 20% in deposits over the next 3 years. 20% of $300,000 is $60,000. That leaves $240,000 in unaccounted for funds for which you need to get a mortgage pre-approval.·       Sometimes buyers have the funds for the deposits, but for various reasons, getting a mortgage approval can be tricky. Use a mortgage broker. Usually developers will have a specific lender they work with and ask purchasers to get preapproved through. And 9 times out of 10 that lender is one of the Big-5 Canadian banks. Their lending standards are often more rigorous than those used by mortgage brokers – who have access to dozens of lenders. Getting a pre-approval from a mortgage broker, if the developer allows it, can be a way around this dilemma for purchasers.
  • Get a co-signer. For a number of reasons, you may not qualify for the mortgage at the time you want to purchase the suite, but perhaps you know that by the time the condo is ready for occupancy a few years down the road, your situation will likely have changed and you will qualify. In the time being, and just to get the qualification, why not get a co-signer to get you over the hump? You can always remove or change the other names on title before final closing. Time to put in the dreaded phone call to mom and dad…or your rich uncle who always liked you best!
  • Letter of Commitment. If you are over-leveraged due to other properties or contracts in your portfolio, sometimes you can’t get a mortgage approval, but if you have a long-standing good relationship with your bank you might be able to get your branch manager or a mortgage manager to write you up a letter of commitment. A letter of commitment is similar to a mortgage approval, but it is less formal and is based more on the ‘good will’ of your relationship with the bank and their intimate knowledge of your personal finances. Sometimes this will satisfy the developer if they see that you are in very good standing with a well-established lender even though you don’t technically qualify for the mortgage using traditional ratios etc.
§  CONSTRUCTION ·       Depending on how early in a project’s sales-cycle you purchased the unit, you may have to wait as long as a year and a half before you hear from the builder again·       Once 50-60 % units sold  §  PICK YOUR FINISHES·       You will be asked to go to the builder’s sales office to pick your finishes. You will only have about an hour to do this so we encourage you to go over your options prior to this day; maybe take an interior designer with you to help you out with your selection.§  PRE-DELIVERY INSPECTION (PDI)·       During the PDI you get the chance to inspect your unit and report any deficiencies. Things to watch out for include faulty plugs, low water pressure, scratches on the floor, etc... You will report any issues and the builder will at the very least remedy the ones that fall under the Tarion New Home Warranty Program
.§  OCCUPANCY ·       At occupancy you receive the key to your unit and start paying interest on the balance owed to the builder, your share of maintenance, as well as annual taxes. Depending on the floor your unit is on, occupancy could take anywhere from three to eight months.§  SECURE A MORTGAGE·       About three to four months before the building registers, you are notified to secure a mortgage either from a financial institution such as the Bank of Montreal or, if the rates have gone up, stick with the offer the builder’s lenders originally gave you.§  FINAL CLOSING·       Residents have moved in, the building has registered, and it’s time for you to officially take title of the property on the closing date. Before celebrating though you will have to pay the closing costs, which include, but are not limited to, the land transfer tax, development charges, and legal fees. And yes, your mortgage kicks in at this stage as well. ·       You can purchase a new condominium from the developer either before or during its construction and well before the condominium corporation is formed.·       A developer may have some unsold units available after the condominium has been completed and registered.·       In some market conditions, a developer may wait to sell a majority (or all) of the units before registering the condominium corporation or starting construction. .WHAT TO WACH·       When looking over the drawings and specifications, ensure that you are aware of the basis of any floor area measurements: do they reflect the actual floor area of the unit or do they include the exterior and interior wall floor space areas as well? ·       You should also be aware of plans to reduce the ceiling height in any locations in the unit to accommodate ductwork and other mechanical and electrical services. This can have an impact on the aesthetics of the unit and affect the eventual location of lighting fixtures and furniture as well as wall decorations and fittings.·        Similarly, be aware of the future location of heating and air-conditioning equipment, ventilators and hot water heaters as this can affect the availability and aesthetics of the space in your unit. ·       Other important issues to consider in the purchase of a new condominium are related to construction quality. Some key questions to consider include: Are there any special provisions to limit noise between units? How the units are heated, cooled and ventilated? How are odours controlled? Is the building energy-efficient? Who operates and maintains the heating and air conditioning systems? What options are available for suite wall and floor finishes, cabinets and fixtures? ·       You should also be aware that the view from your unit might be subject to change if the building is being constructed in a newly developed area or as a part of a larger complex. Be sure to ask about the future construction plans for adjacent open areas as your view may change significantly with the construction of a neighbouring high-rise. ·       When shopping around for a new condominium, it is important to ensure that you are aware of what is and what is not included in the purchase price. For instance, are there amenities such as pools and parking? How is access to such amenities paid for? Are finishes within the units included in the purchase price? Are there other charges over and above the purchase price you should be aware of? Are utilities (gas, electricity and water charges) covered in the monthly condominium fees or not? All such questions must be considered to ensure that you can compare the overall costs associated with different condominiums. ·       Rules and regulations for new condominiums vary from province to province, therefore it is a good idea to check your provincial legislation. New home warranties are often available for newly constructed condominiums—make you knowledgeable about what the warranties cover and for how long. ·       Quite often, there is a lengthy wait before a new condominium project is completed and you can move in. It is always important to evaluate the current state of the construction project. Consider whether or not it seems reasonable that the project will be completed by the date set out in the purchase agreement from the developer before making your moving and financing arrangements.·       Agreements of purchase and sale may contain provisions that allow the developer to extend the dates for making the units available for occupancy. This can be problematic if you have made arrangements to vacate your exisü Selling by assignment is – buyers and sellers alike are dealing with very limited an imperfect information and ‘fair market value’ is a very hard thing to determineü Best time to sell your pre-construction purchased condo is 6-12 months after registration Reasons:1.    1 year is the length of a typical lease. Assuming a 3-6 month occupancy period for most condos, selling 6-12 months after building registration will align perfectly with the end of that lease.2.    6-12 months gives time for the dust to settle in the building (literally), and for the common areas to be completed. Common areas do add value to your property, make no mistake!3.    Allows time for the resale values of a building to get established. Much of this is driven by supply and demand principles – many investors selling at first, and few buyers aware of the building because it’s brand new.4.    To qualify for the HST/GST rebate as an investor, most lawyers will tell you you need a 12 month lease signed.We see this pattern time and time again with new buildings when they first are finished – those who sell first tend to undersell. Those who are patient and wait reap the rewards. You get a letter from the builder telling you the unit is ready for “occupancy.”·       The “occupancy period” or “interim occupancy” occurs when a condo unit meets certain building requirements and can be deemed ready for occupancy. However, at this stage, the entire building will most likely not be fully completed – halls and common areas may not be carpeted or tiled, amenity floors may not be completed, or upper floor units may not be finished.·       At this point you will attend an “Occupancy Closing” where you’ll meet with your lawyer to sign some developer paperwork and receive keys to your unit. However, keep in mind that the Occupancy Closing, IS NOT the actual day of ownership which will not occur until a second closing date called “Registration.” Registration is when the final closing occurs and your unit is officially entered into the Land Registry System in Ontario. At that point, you are able to take out a mortgage on your unit and the balance of your purchase price is paid to the developer.·       Occupancy Closing is also the day where you will be required to provide 4 or 5 post-dated cheques for payment of “Occupancy Fees.” The Occupancy Fee consists of 3 costs that the developer wants to be reimbursed for: 1) your estimated monthly property taxes, 2) your estimated maintenance fees, and 3) interest on the unpaid balance due on your unit.·       The Occupancy Period usually lasts about 3 to 6 months and ends when the building is registered. If you are on a high floor, the occupancy period will usually be shorter since higher units occupy last. If you are on a low floor, your occupancy period may be longer.·       There is nothing you can do about occupancy fees and it is a normal procedure in new construction. It also shouldn’t deter you from wanting to purchase a pre-construction condo. You are not really paying much more than you would be once you take full ownership because you will still have property taxes, common expenses, and interest on a mortgage (unless you pay all cash).Keep in mind that it is in the developer’s best interest to register the building as fast as possible because they do not get payment