FIRST TIME CONDO BUYERS GUIDE 2021
Greater Toronto Area Condominium Market
Buying your First Condo?
Here’s what you can expect from Start to Finish
when Buying a Condominium Property in the GTA!
So you’re ready to leave your parents’ nest and venture into unknown territory?
You’re ready to live and fend for yourself in your very first condo in the GTA?
Sounds exciting, and it is!
Looking to buy your first condo can be very fun!
Let’s explore the most common areas First Time Condo Buyers need help to:
avoid mistakes
buy at the best price
get the right condo suite for their goals.
STEP 1: Start with a Condo Needs and Wants List
People generally build a "Condo Wants and Needs List” before searching for condos.
As you look for a condo, you learn about the real estate market. The more you look, the more you know what you want and what you don’t want.
Your wants and needs list should be based on your local market options, so in our case, specific to GTA Condos. You can generalize to areas like Toronto, Mississauga, or Durham, or focus even further on Downtown Toronto, Ajax, Pickering, etc. You can even tell your Realtor about specific neighborhoods in which you want to live!
As you see more and more condos, update your list. Share your list with your Realtor and other trusted persons on your condo hunting journey.
STEP 2: Choose the Right Realtor for You
Purchasing your first condo can feel scary. With good reason - without the proper guidance, you can run into many issues.
For example, you can overpay for a unit - and we aren’t talking a few hundred dollars, we’re talking tens of thousands or more. Depending on the type of property you’re buying, this un-necessary amount can be considerable & financially painful. You could make the all to common mistake of buying a condo unit in a community with a poor financial track record.
Make sure you choose a Realtor that lives in the GTA, and knows the GTA condominium market very well. Click below for a helpful guide we created to help you vet the massive pool of Realtors vying for your business.
STEP 3: Get Pre-Approved for a Mortgage
Getting pre-approved for a mortgage gives you an immediate idea of your BUYING POWER.
This is a critical step you need to take before looking for your first condo.
In fact, we recommend that you get pre-approved for a mortgage even before shopping for condominiums with a Realtor.
Why waste your time looking at homes far out of your price range?
Why hold unrealistic emotional expectations looking at homes you can’t afford?
Why make an offer that will end up being thrown out because you don’t stack up financially against the others?
We recommend that you see a mortgage broker and get pre-approved once you’ve committed to buying your first condo.
If you skip this step, start looking at properties and putting offers without knowing what you can afford, then you’re shopping blind.
The last thing you want to experience is putting an offer in on a condo unit you love to only get DENIED for a mortgage.
STEP 4: Understand How Deposits Work
Many First Time Home Buyers don’t understand how the deposit works. Here’s a quick explanation:
Let’s say you’re buying a property worth half a million. If you want to avoid paying the CMHC tax (see our CMHC Calculator here), you require a 20% deposit (also called a down payment).
You may have been told by your mortgage broker that you require a 20 percent deposit which is calculated from the purchase price, which in our example is one hundred thousand dollars.
So, let’s say you have that hundred thousand dollars. You feel great about everything!
Then… surprise!
Closing costs!
Lawyers fees!
Land transfer tax costs! (see our Land Transfer Tax Calculator here)
And other costs that might arise!
Most First Time Home Buyers forget to factor in these additional costs that can come up before the closing date.
If you don’t have those extra funds set aside along with your deposit you could be at risk of losing your full deposit!
Great, You’ve found your Dream Condo! Now What?
STEP 5: Make the Offer
Amazing!!! You you’re ready to buy! It’s Offer Time!
Your Realtor will assist you in reviewing the offer documents and ensuring all the essential conditions are in place. It’s important you’re aware of what you are signing!
NO Realtor should encourage you to sign something without explaining what it is and ensuring you understand it!
Congrats! Your Offer got Conditionally ACCEPTED!
STEP 6: Leveraging the Three Key Offer Conditions
You’re so close to buying your first condo! Now it’s time for due diligence.
You managed to get the deposit cheque dropped off within 24 hours of acceptance. The Condo is sold conditionally with three conditions left in the offer. When buying a Condo, there are three important conditions within the offer to protect you as the buyer.
What are these essential conditions?
1. Mortgage Financing Condition
The mortgage financing condition is a standard clause that gets put in an offer. It gives the buyer up to five business days to see a mortgage broker to confirm if they will lend the required mortgage amount to purchase the property.
What happens if nobody will approve you for a mortgage?
Well its not over yet! You can look at other options such as B lenders. If you choose this route, you’re likely paying a higher interest rate on your mortgage. It might even be out of your budget.
This is something you would have to discuss with your mortgage broker to make sure it is feasible for you.
It’s another reason why it’s best to be PRE-APPROVED for a mortgage PRIOR to home hunting!
2. Home Inspection Condition
Why do you need a home inspection condition when buying a condominum property?
A home inspection is recommended so that you are aware of what you are buying and the current state of the condo unit.
For example, without doing a condo home inspection you could potentially buy a unit with asbestos or mould which are health hazards.
You may also end up buying a condo unit with makeshift electrical wiring, or improperly installed flooring that could cost thousands to fix. The appliances may not be working correctly. You might move in, and end up having to replace some or all of the appliances!
These are only a few reasons why you should not take the home inspection condition lightly, even in a condominium unit.
3. Status Certificate Condition
The Status Certificate condition is the final condition for this condo we just bought.
This is very important and it is highly recommended that you do not put an offer in for any types of condominium property without having your real estate lawyer review the Status Certificate.
This document will let you know the financial status of the building and the unit you are purchasing.
What can the Status Certificate tell you?
If the previous unit owner has missed some monthly maintenance fee payments
If the condo has a poor reserve fund
If the condominium has done a special assessment and they’re planning on doing a major renovation in the near future
If there is a lawsuit against the Condo Board
If there are other issues that relate to the building’s physical and financial state.
All of these scenarios could cost you money out of your OWN pocket to cover the previous owners expenses.
They could also possibly increase the monthly condo fees to an amount that you might not be able to afford if you purchased.
We’ve gone through All the Conditions and Due Diligence is DONE… Now What?
Congratulations! This condo unit is sold firm to you!
Wait! We’re not quite done yet!
STEP 7: Complete Closing Date Preparations
We now have to complete some tasks prior to the closing date. The closing date is the date the property you bought officially becomes yours.
We have to add your name on the utilities that are not covered by the monthly condo fees. Hydro is most commonly an extra expense. Water and heat are more commonly than not covered by the fees.
The condo corporation for the building will have what is called a new owners package. This package will provide you with all of the information you need to book the elevator for your moving date, how to set up pre-authorized payments for your monthly condo fees, and which utility company to call to add yourself to.
You need to set up Condo Insurance prior to closing. Your Real Estate Lawyer and Mortgage Broker would need this information. The good thing about condo insurance is that you’re usually not in a contract. Normally, if you set something up and you realize a month after you moved in there is a cheaper package at a different company, you can just as easily switch over. You might be thinking, “but I have building insurance! Isn’t that part of my condo fees? Would that not be enough?” Good question, and the answer is no, building insurance does not cover your content. It is exactly as the name says, it covers the building and any issues pertaining to its physical structure.
After you complete the above, what’s next?
STEP 8: Your Real Estate Lawyer’s Final Steps
Your Real Estate Lawyer will get in contact with you before your closing date.
Your lawyer will require you to make a bank draft in the total amount required by your mortgage lender. This is to show that you are putting down the remainder of the deposit along with lawyer fees and land transfer tax as agreed.
You can use a land transfer tax calculator (see ours here) to estimate the amount for this.
You then also add the lawyer fees which on average could be approximately two thousand dollars ($2,000). This amount is dependent on how much work the lawyer has to do.
How about an example?
Let’s say your new property cost a half million dollars ($500,000). You told your mortgage broker you’re putting down a 20 percent down payment, which translates to one hundred thousand dollars ($100,000).
However, the deposit upon acceptance of the offer is 5 percent which is twenty-five thousand dollars ($25,000).
The amount you give to your lawyer would be seventy-five thousand ($75,000). This amount is the remainder that makes up the full 20 percent down payment.
After you’ve given your Real Estate Lawyer the bank draft, now we wait for the mortgage lender giving you the loan to disburse the money to your real estate lawyer.
Your lawyer will make sure everything is financially correct on their end. Afterwards, they’ll wire transfer the money to the seller’s lawyer.
The two Real Estate Lawyers will communicate with each other to get the property closed.
Once it’s all done, your Real Estate Lawyer will reach out and tell you the property has officially closed. Your lawyer will then give you instructions on how to get your property’s keys.
A transfer document will be sent to you by your real estate lawyer. The transfer document recognizes that you are officially the new owner of this property. You must forward this document to to your Condo Corporation so that they have it in their records.