Condo confidential: The pros and cons of resale
By Camilla Cornell
When Barry Choi and Carla Salvosa of Toronto were in the market for their first home four years ago, they briefly considered buying a house, rather than a condo. But condos were more budget-friendly and neither wanted to take on the upkeep associated with a house. So they targeted their hunt toward a two-bedroom, two-bathroom unit in the North York area.
“We really enjoy the condo lifestyle. It’s nice having amenities and it’s really nice having a garbage chute,” says Choi, a personal finance and travel expert. As Choi points out, though, purchasing a condo is completely different than opting for a more traditional house. Here’s what to take into account when embarking on the condo buying process.
Pre-construction or resale?
The advantage of buying a pre-construction condo goes beyond the “shiny and new factor,” says Nikki Mayers, a real estate expert with Sutton Group-West Coast Realty in North Vancouver. “They come with a home warranty and often you can customize some of the finishes.” She adds, “in a rising market, you could potentially build equity during the construction period.”
Salvosa and Choi understood the lure of a brand-new unit, but ultimately decided that wasn’t for them. “We wanted a place right away,” says Choi. In a hot housing market like Toronto’s, he believed there wasn’t much of a deal in buying pre-construction, as “builders are already factoring in appreciation.” Buying a resale condo eliminated the risk of construction delays and offered the couple a chance to see exactly what they were getting, both in their own unit and in the common areas. Finally, says Choi, with the cost of land in the city rising, “older units tend to be more spacious.”
The builder’s rep
When seeking out a condo building, it helps to work with a real estate agent who knows the market where you’re planning to buy. Choi’s agent was a seasoned pro who suggested avoiding certain buildings because of the builder’s reputation for using cheap finishes that quickly showed their age.
If anything, the builder’s rep is even more important when buying pre-construction condo units, as a host of high-profile condo cancellations in several Canadian cities has shown. Although buyers got their deposit back (without interest), they were frequently priced out of the market in the interim. “Look for a builder that has been around for a long time and has a good track record,” suggests Choi.
All condo owners pay a non-negotiable maintenance fee that typically covers a contribution toward the building’s upkeep and maintenance, and sometimes utilities. “Condo fees cover different things in different buildings,” says Choi. It’s important to know exactly what’s included. “Some condos even have separate fees for parking and some include internet access in their fees,” he says.
But keep in mind that maintenance fees can rise at any time. “It’s common for builders to underestimate maintenance fees in order to attract buyers to a new building,” he points out. Those fees often rise quickly over the first few years. “When we bought into our building, it was seven years old,” says Choi. “So the fees were pretty stable.”
What’s in reserve?
A portion of the monthly condo fee goes to a reserve fund to ensure the condo corporation has money enough to cover major repairs. A healthy reserve fund ensures you won’t have to dip into your own pocket to cover upcoming expenses, such as a new roof or windows. The condo’s ‘status certificate’ details what’s in the reserve fund, as well as any expected upcoming expenses. “Our lawyer looked the status certificate over and it made sense,” says Choi. “We felt good knowing the building’s finances were in good shape.”