How Are New Construction Condos Different From Resale Condos?

When looking for a condo, there is more to it than just checking out the asking rate, floor plans, and locations. The nature of the property you select can also influence how you buy the property, the amount of money you need to invest, the timing and the information you will receive before you close the deal. At first glance it can be difficult to distinguish between new and resale properties, but the specifics of the respective transactions can be quite different.

In the case of new construction condos, buyers can buy the condos directly from the developer while they are under construction or near completion. This can include the availability of various kinds of deposits, occupancy dates, warranties, and options for choosing finishes.

Resale condos can take a different route as the unit and building have an ownership history and has been maintained. Typically, the buyer will be able to tour the completed Condominium and access existing Condominium records. Knowing these distinctions helps to make a price, time, and fee comparison easier, as well as understanding warranties, building history, customization, and information available prior to making the purchase decision. 

What Is the Difference Between a New Construction Condo and a Resale Condo?

The key distinction is the ownership and the level of the real estate. The new construction condo is bought from a developer prior to or just as the condo is finished. A resale condo is a condo that has been owned by someone else in the past.

Rather than the age of the unit, therefore, a comparison between new construction condos vs resale condos is a comparison of a number of factors. The purchase agreement, the time of occupancy, closing costs, warranty, building records and maintenance history are also factors for buyers to consider.

Many new condos may still be in the planning or construction phase at the time of signing the Condo Agreement. A resale unit, on the other hand, already has a proven track record and typically permits the person to come take a look at the actual unit prior to closing.

This disparity also impacts on how much information is available to each buyer. A plan, specifications, disclosures and projected timelines are essential to new developments. Financial and maintenance records of an existing building can be accessed through resale purchases.

How Does the Buying Process Compare?

Purchasing a New Construction Condo

Typically, the first agreement used in the purchase of a new condo is a developer’s agreement of purchase and sale. Purchase can occur at the early planning, construction or after substantial completion.

When purchasing pre-construction condos, these are typical documents that buyers will look at: floor plans, specifications, disclosure documents, deposit schedules, and project information. At the time of signing an agreement the final home might not yet be built.

There may also be a difference in the timing of the deposits compared to a standard sale. The agreement can be broken up in several settlements, instead of 1 settlement when a resale offer is accepted.

Proper timing of occupancy is also important. New condo construction in Ontario is subject to the Tarion warranty for delayed occupancy of the condo. The Addendum is an important set of critical dates that are included in the purchase agreement.

There are some projects that have a hard date for the occupancy. Some employ provisional dates for buildings where the construction dates are not as precise. The dates in the agreement ought to be understood by the buyer instead of depending on the marketing projections. 

Purchasing a Resale Condo

Typically a resale purchase begins with an offer for an existing unit. Normally, buyers will be able to see the actual property before starting negotiating the price and closing date.

The buyer has the right to view finishes, rooms, appliances, views, common areas and conditions of the building. This offers a greater degree of assurance than plans.

The paperwork for the condominium should also be examined by a resale buyer. The consumer information outlines what a consumer can ask for on a status certificate, which includes various key condominium documents. These comprise declaration, by-laws and rules.

The status certificate may also include details regarding common expenses, increases, assessments and other issues that impact the condominium corporation. The Condominium Act of Ontario specifies the requirements for the certificate, and its contents. 

How Do Prices and Closing Costs Differ?

The advertised purchase price is not the only measure to consider when comparing prices between rental and home properties. The cost of the transaction may vary depending on the structure of the transaction before and after closing.

A new condo can include a deposit plan that could be spread out over several months, or even years. There may be closing adjustments that the buyer must be aware of in the purchase agreement.

A resale buyer typically will be dealing with a more mature transaction structure. But the buyer must also allow for the land transfer tax, legal fees, title costs, adjustments and other closing expenses. 

Are new construction condos cheaper than resale condos?

There are no universal pricing rules that one category is cheaper than the other! The final cost can vary depending on location, unit size, building age, market conditions, amenities, maintenance fees and incentives, as well as closing adjustments.

If the buyer looks at the two units, he/she should also look at the total cost they are expecting to pay for the unit, as it is not just the listing price or the initial price that is to be considered.

For instance, the amenities of a newer building may be different, which could result in a different monthly fee structure. The older building may have lower or higher fees, depending upon the maintenance needs and reserve fund status.

Other condo purchase considerations when making development-related adjustments may also apply. It is advisable for the buyer to have his or her attorney review the contract for sale to determine whether any of the stipulations in the contract applies. 

What About Condo Fees and Building Maintenance?

Condo fees can differ greatly from one building to another and can be due on a monthly basis. The amount can include shared services, amenities, staffing, insurance, utilities, maintenance and contributions to the reserve fund.

The amenities of a new development can affect its forecasted maintenance costs. The buyers need to check the budget information, not that the newer buildings are always cheaper.

Another kind of information is available in resale buildings. Purchasers are allowed to view the building’s past maintenance history, shared costs, repairs, and financials. 

Why Building Age Matters

The age of the building may impact upon the long-term ownership cost perception of the buyer. The building may be newer and have been fitted with mechanical systems, finishes, new elevators, and other common elements.

But it is not a rule of thumb that the newer the car, the less it will cost you to own over time. All condominiums have different needs over the course of their development.

If a resale building has been in existence, it can provide a longer history of repairs and maintenance. Purchasees can also get additional details about previous projects, reserve fund contributions, and adjustments to common expenses. 

What Warranty Protection Comes With a New Condo?

A key difference is the warranty coverage for new homes. Ontario offers warranty protection for newly constructed homes, including condos, that meet the requirements.

Tarion informs you that new-home warranty coverage can cover various types of defect in various coverage periods. These are for one-year, two-year, and seven-year protection of qualifying homes.

Depending on the warranty period and requirements, coverage may include workmanship and materials, leakage, electrical, plumbing, heating, and major structural defects.

Buyer must not rely on builder warranty as a substitute for careful inspection. Pre delivery inspection is still a significant moment to discover the unit problems.

Rules, forms, timelines and procedures exist for the Tarion warranty. When the warranty question relates to the specific purchase, buyers are urged to check the official requirements and to take professional advice.

A resale buyer may encounter a different warranty situation. There may be further cover for some components, depending on the cover and warranties of the property and its contents. 

Which Condo Gives Buyers More Information Before Closing?

The type of information available before closing differs considerably.

The detailed project documents may be provided to a buyer of a new development; however, some information is still prospective. A floor plan may be used to describe the proposed design and projected amenities may rely on their completion at the end of the development.

Typically resale buyers will be able to see the completed unit and common areas in person. They can also perform a due diligence review of a condominium corporation that is already in existence.

That doesn’t mean that one information source is necessarily more useful. Instead, that information is for other purposes.

For instance, when buying from a new company, the specifications and the terms of contract may be of priority. When it comes to existing conditions, financial records, rules, and maintenance history, a resale buyer may be more apt to give these details a greater consideration. 

How Do Customization and Design Options Differ?

New Construction Options

Buyers may have options as developments progress before some stages of construction. These options can range from flooring, cabinetry, countertops, plumbing, colours, appliances and more, depending on the project.

Some projects may even include upgrade packs or just a few different layouts. Availability is subject to the developer, unit type, the construction phase and deadlines.

Buyers must make sure to record all selections and be aware of any associated condition of upgrades. Even a small decision can have a large impact on the final cost and timeline of your project. 

Resale Condo Options

A resale condo is usually accompanied with the current finishes. The buyers will be able to view the actual kitchen, bathroom, flooring, appliances, lighting and all other interior features before deciding.

This results in an alternate planning process. The buyer is not choosing finishes during construction, but rather after construction.

It is possible to renovate after purchase. But there are some changes allowed that may be prohibited by condominium rules, as these changes may relate to common elements, plumbing, electrical or structural components.

Therefore, it is important for buyers to check the condominium rules prior to assuming that all renovations are allowed. 

What Are the Main Risks Buyers Should Understand?

When buying a property, there are various things to take into account. Another difference in the risks is the difference between new and resale condos. 

New construction considerations

• New construction considerations
• Construction delays
• Any changes in Plan or Specifications
• Occupancy uncertainty
• Closing adjustments 

The duration of construction may vary due to the factors that occur during the construction. It is a buyer’s responsibility to read the occupancy provisions and not solely on an estimated completion date.

Tarion offers specific information regarding firm and tentative occupancy dates, extensions allowed, delayed occupancy, and buyer protections.

Plan and/or specification changes also can make a difference. The buying arrangement and disclosure documents set up the contractual structure, so buyers must scrutinize them carefully. 

Resale considerations

• Resale considerations
• Unexpected repairs
• Special assessments
• Older building systems
• Higher maintenance requirements
• Condominium corporation financial issues 

Historical data is available for resale buyers, but can show potential costs.

For instance, the special assessment can impose an extra burden on the property owners. The status certificate can be useful to provide details of assessments, shared costs, and the financial health of the condominium corporation.

Older mechanical systems may also need more maintenance as time passes. When purchasing a building, buyers need to look at the age of the building, as well as the condition of the repair reserves.

The principle is to consider the particular property and not assuming that any new or old building has these characteristics. 

New Construction Condos vs Resale Condos at a Glance

The following comparison shows how the two purchase types differ across common buyer considerations.

If you are purchasing a new construction condo, it is important to check the purchase agreement, structure of the purchase deposit, when the condo will be available, disclosure documents and warranty coverage, and closing adjustments.

Buyers of resale condos might focus on the status certificate, financial documents, maintenance records, existing condition and condominium rules.

The comparisons are not a substitute for property-specific due diligence. The review should be based on the details of the unit, building, the agreement, and the financial position. 

Final Takeaway

It’s not just a comparison of new versus old. Every condo transaction has different information, costs, timelines, documents and ownership factors. Purchasing a condominium should involve reviewing purchase agreement, anticipated costs, occupancy plans, warranties, building history, maintenance records and condominium rules. New construction condos can involve a purchase process that begins before a finished unit exists. Resale condos offer a proven property and history of building performance. It is also important to Ontarians to check with recognized sources for current information prior to making decisions. For buyers, consider information from Tarion, the Condominium Authority of Ontario and the official government resources of Ontario. A careful comparison provides a better foundation for buyer’s evaluation of the property, agreement, and financial commitment to purchase. 

FAQs

Are new construction condos better than resale condos?

This will depend on what the buyer wants and needs. If you’re a buyer who is looking for newer finishes then you need to look at new developments closely. An existing and visible maintenance history of the building, combined with an existing unit, could be more valuable to another buyer. Timing also matters. A buyer who requires a certain move-in date will value a condo differently than someone who requires a move-in date in the future. 

Do new construction condos come with a warranty?

The new-home warranty program in Ontario provides protection coverage for qualifying new condominium units. The coverage periods and covered items are different in each warranty category. Tarion recognizes one year, two year and seven year coverage periods for qualifying homes. The purchaser should check his/her particular warranty documents to find out deadlines for reporting problems. 

Can new construction condos have occupancy delays?

Yes. New condominium projects can have firm or tentative occupancy dates. Delayed occupancy warranty from Tarion for occupancy dates and extensions. There are critical dates for the Buyer as well as the Builder that are outlined in the Addendum to the Purchase Agreement. These dates should be taken into consideration by the buyer before signing, and if there are any legal issues to address the buyer is advised to seek legal counsel. 

What should buyers check before purchasing a resale condo?

When purchasing a unit, buyers should review the unit’s physical condition, condo fees, and financial records, as well as the rules, maintenance history and status certificate. The status certificate will include important information regarding common expenses, assessments, and the condominium corporation. A qualified professional can also scan the condominium paperwork and purchase contract prior to the transaction closing.