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Working with the right team to make your pre-construction investment a success

by Corben Grant on 26 May 2022

The world of pre-construction real estate is an exciting one, but buying pre-construction can be a very different process compared to resale. With new regulations coming into play and recent stories of would-be buyers being burned, some investors may be wary of whether or not they should dive in. Don’t fret – there are tons of opportunities in pre-con and the horror stories are by far the outliers. If you want to make the most of opportunities in pre-construction, it’s important that you work with the right people to make sure your purchase goes over without a hitch and that your investment performs to your expectations.

To help explore why investors need to work with the right people, we spoke to Aleksandra Nowak and Tony Sbrocchi from The Condo House, a Toronto-based sales team specializing in pre-construction condominiums. Nowak and Sbrocchi have years of experience working with builders as on-site agents, providing them with valuable and unique insights into a side of the pre-construction world that can sometimes be hard to understand.

When working with agents who understand both sides of pre-construction, it can make the entire process much smoother and ensure the buyer gets the best deal possible. For example, builders may allow their own agents to have exclusive access to information on a new unit or first access to assignments. By working with these agents, buyers get a service they can’t find anywhere else.

“What working with builders affords us is that we have a lot of information ahead of time on projects that we're launching that other agents just don't have,” explained Sbrocchi. “We get the first preview of things like pricing, floor plans, and marketing materials. We aren’t always allowed to directly share the information we’re given, but it does at least give us an idea of what's coming and to give clients an idea if something fits within what they're looking for. When the worksheets do start coming in, we're the ones that actually sit down with some of the other team members and allocate units. If we have our own clients, we have priority over most other agents, if it's our own site.”>

For buyers, working with agents who have builder experience can also provide valuable insights into how things work on the other side of the table. According to Sbrocchi, there are many things about the pre-construction process that buyers don’t tend to fully understand.

“We can offer a much better understanding every step of the way. A big question people have is why the builders require the deposits they require. We get a lot of people that ask us, why can't we do 5% down? Why can’t we do 10% down? There are even a lot of agents out there who don't understand the purpose of these deposits. It may seem like a placeholder, but it's much more than that for the builder and that's why, up to a certain point, you'll never get a break on deposits. We also get the inside info if the builder is going to decide to change things up, if they're going to do a second phase, or increase prices soon. So, we can always advise our clients from the inside.”

Beyond just helping buyers understand the pre-construction process, a builder’s agent can also help buyers avoid costly mistakes that can be easy to make. The pair briefly enumerated a list of common mistakes that can come back to hurt a buyer. These include things like not asking for cap amendments on development charges, not negotiating a long enough notice period to secure a mortgage, and not knowing your rights in regards to when a builder can request more money for a unit. Overall, the pair emphasize that now more than ever is a time that buyers need the right help to navigate the pre-construction space. With changing market conditions and a range of new regulations coming into place, it takes an experienced agent to navigate the buying process and find the best investment opportunities.

“It’s more crucial now than ever for buyers to be aware of these things because, quite honestly, builders don't mind having to breach you and take your unit to make that money back,” explained Sbrocchi, adding that even in disputes between buyers and builders, courts often side with the builders. “I think we're going to see a lot of turmoil over the next six months in response to changing conditions. Current conditions are definitely something that even builders are leery of right now.

Another thing causing turmoil in the world of pre-construction is new and upcoming regulations like a ban on foreign buyers and rules about HST on assignments. Currently, many in the industry are still unsure exactly how to interpret the vague messages coming from the government. Even industry experts are confused and are taking note that the average buyer doesn’t stand a chance of understanding how these rules affect them.

“It took a whole week for a whole bunch of lawyers and accountants to figure the HST issue out because the budget and the CRA were just so ambiguous,” said Sbrocchi. “I spent a week chasing down a whole bunch of people to figure out what the hell was going on and I only just got the answer.”

Despite the changing environment in pre-con, Sbrocchi and Nowak insist there are still lots of opportunities to be had, provided you make the right moves.

“There are still opportunities for investors who have the right guidance and who make smart purchases,” said Sbrocchi. “I think the next six to eight months are going to be less about what you buy and more about where you buy it. It comes down to just making sure you're buying into the right location. We’re going to see a lot of location-driven sales because at the end of the day there are always certain locations that rarely see much of a decline, and if they do it's for a very short period of time.”

Pre-construction is a unique segment of real estate and it requires a unique skill set to succeed. At The Condo House, you have the opportunity to work with experienced agents who have the insider knowledge to make your pre-construction investment go smoothly. For more information, visit https://www.thecondohouse.ca/ for information on the hottest new projects and listings and to get in touch to find out how they can help you achieve your investment goals.



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