Pre-Construction Condos vs. Resale Condos: 6 Things to Know
Posted by Justin Havre Real Estate Team on Wednesday, August 14th, 2024 at 9:40am.
When deciding between purchasing a pre-construction condo or a resale unit, the choice isn't always clear-cut. Pre-construction condos promise modern designs and the allure of brand-new amenities, but they come with uncertainties. On the other hand, resale condos provide the certainty of a completed unit and the opportunity to assess real-world appreciation and depreciation. Below, we’ll explore the key factors to consider when choosing between pre-construction and resale condos.
Summary of Pre-construction Condos vs. Resale Condos
| Pre-construction Condo | Resale Condo | |
|---|---|---|
| Availability | Purchased before completion from a builder or developer | Purchased after completion from a current owner |
| Price | Often lower the earlier the project is in development; typically appreciates between purchase and completion | Based on current market value |
| Customization | Buyer may have customization options | Sold as-is |
| Inspection | No physical inspection possible; purchased based on floorplans and renderings | Can inspect the unit and building condition |
| Timeline | Can take years between purchase and occupancy | Immediate occupancy usually possible |
| Risks | Construction delays, project cancellation, design changes, long timeline | Surprise defects not caught during inspection, possible higher maintenance costs, possible special assessments |
Defining Pre-Construction & Resale Condos
What Does Preconstruction Mean?
A pre-construction condo is a condominium unit that is being sold before the building or development has been fully constructed. Buyers typically purchase these units directly from the builder or developer based on floor plans, architectural renderings, and developer-provided information.
Pre-construction condos are often sold at a lower price compared to units in completed buildings, offering potential savings to early buyers. However, there may be risks involved, such as construction delays or changes in the final design.
What Does Resale Mean?
A resale condo is a condominium unit that has already been constructed and previously owned or occupied by someone else. When a condo is sold as a resale, it means that the current owner is selling the unit, typically through a real estate transaction.
Unlike pre-construction condos, resale condos allow buyers to see the actual finished unit, its condition, and the surrounding amenities before purchasing. The price of a resale condo is usually based on current market conditions, the unit's condition, and its location.
Timing and Availability
Resale condos offer immediate occupancy, while pre-construction condos come with a longer wait time, often taking years to complete. Often, a condo building project won’t break ground until 50% or more of the units are sold.
Delays are common with pre-construction condos, and in rare cases, the project may be cancelled entirely. This can impact your timeline for moving in or renting out and potentially affect your overall investment strategy. Buyers who want to move in right away may want to go with a resale condo, while those open to waiting longer might consider the pre-construction route.
While resale properties are readily available in established neighbourhoods, pre-construction condos are usually in up-and-coming areas.
Customization & Upgrades
Customization and upgrades in pre-construction condos give buyers the flexibility to tailor their living space to their preferences. Pre-construction condos offer customization options for finishes and layouts, allowing buyers to create a home that reflects their style without living through an extensive remodel.
Resale condos may come with outdated features that require renovations. They also may have limited customization possibilities, meaning buyers will need to invest additional time and money to update the space to their liking. While you can renovate a condo in many ways, some features, such as structural walls and the location of plumbing fixtures, may be difficult or impossible to change in a resale condo.
Financial Considerations
With resale properties, buyers typically need to come up with the full down payment and mortgage upfront. Pre-construction deals allow for deposit payments during the construction phase, deferring the bulk of the financial commitment until final closing.
Additionally, pre-construction condos may appreciate in value before completion. On the other hand, mortgage rates have a greater risk of changing between purchase and closing due to the extended timeframe. Changes in your financial situation during the interim may also affect your ability to purchase a pre-construction condo.
When buying a resale condo, the age of the building can be a significant factor in your financial planning. Condo buildings deteriorate over time, necessitating higher condo fees for maintenance. In addition, at a certain point of deterioration, a special assessment may be levied on all current condo owners for large-scale repair work such as envelope updates. If you’re buying a resale condo, be sure to look into how its condo association manages finances and what their reserve funds look like.
By estimating rental income and factoring in market trends, buyers can assess the return on investment for both types of properties. Overall, the lower initial costs and payment flexibility associated with pre-construction condos make them a compelling option.
Developer Reputation & Track Record
When purchasing a condo, buyers should consider the developer's reputation and track record, and research their background thoroughly. Evaluating past projects, customer reviews, and industry awards can provide valuable insights into the developer's credibility. Developers with a history of successful and high-quality projects are more likely to deliver on their promises.
Just as when you’re purchasing a new construction house vs. a resale house, evaluating the builder should be a top priority. By choosing a reputable developer with a strong track record, you can mitigate potential risks associated with pre-construction properties. Confidence in the developer's abilities can give buyers peace of mind throughout the construction process and increase the likelihood of a successful investment.
Potential Risks and Rewards
Pre-construction condos offer the potential for higher appreciation over time, as they are purchased at current prices for future gains. However, they come with risks, such as project delays or cancellations. On the other hand, resale properties provide immediate occupancy and rental income opportunities, but they may have higher purchase prices due to market appreciation.
While pre-construction condos allow for customization of finishes and layouts, resale condos come as-is with limited customization options. Additionally, pre-construction condos may involve additional costs like development charges.
When deciding between pre-construction and resale properties, it's important to take into account factors like investment timeline, risk tolerance, and financial goals.
Pre-Construction vs. Resale: The Bottom Line
Choosing between a pre-construction condo and a resale unit ultimately depends on personal circumstances, financial goals, and risk tolerance. For buyers who value modern designs, customization options, and the potential for future appreciation, a pre-construction condo might be the right fit. However, for certainty and immediate occupancy, and the ability to assess the property firsthand, a resale condo could be the better choice. By considering long-term objectives, buyers can make an informed decision that aligns with their lifestyle and investment goals.
