Buying a pre-construction home, as the name indicates, means purchasing the home before it’s actually built. Whether you buy pre-construction or resale can depend on a number of factors you should taken into consideration before signing on the dotted line. Let’s take a look at a few pros and cons of purchasing a pre-construction home.
The pros of buying pre-construction:
You’ll have more time to save
One of the biggest appeals is the time you’ll get to save towards your new home. Builders often allow buyers leeway to make a series of small payments that ultimately add up to a 20% downpayment.
Control over design
With a pre-construction home, you get lots of say in design elements like appliances, flooring, paint colour and other finishings.
New and never lived in
Your home will be brand spanking new and never lived in. Resale homes often come with maintenance costs that you likely won’t have to worry about for at least a couple of years like broken furnaces, appliance repairs and so on.
The cons of buying pre-construction:
Unlike resale, HST is applied to all pre-construction homes. This additional cost generally isn’t included in the list price so you can expect to pay more than what you see initially.
You’re buying before you see
Despite digital renderings, you’re ultimately buying a home before you see the final product, which may be a deal-breaker for some.
No guarantees on completion date
It isn’t uncommon for the completion date of pre-construction developments to be pushed back, sometimes for months. You could be left waiting for quite some time before you can actually move in.
Not a liquid investment
A huge fault of pre-construction homes, especially for those looking to invest in rental properties, is that it ties up your assets. With a resale property, you purchase it and can usually rent it right away depending on the condition. But with a pre-construction property, your investment is tied up without any return for the length of time it takes the property to be built. That can be upwards of two years sometimes.
Hard to decipher future returns
Because the neighbourhood you’re buying in isn’t necessarily developed, it’s difficult to predict where the area is going and how it may grow. With a resale property, you can plan your future returns on based on the trends available and ultimately make a more informed decision.
Whether you decide to purchase a pre-construction home or a resale home will ultimately be dependent on a number of factors — both come with their pros and cons. Your budget, comfort level with risk and long-term goals are all things to consider. It’s always a good idea to talk your options over with a real estate agent to make the best decision possible.