Pre-Construction Condo Sales, How do they work?
With the skyrocketing prices and demand for residential units in Toronto, everyone is talking about investing in pre-construction condominium projects. Simply put, these are condo development projects that haven't started construction. If you’ve decided to invest in a pre-construction project or are just browsing to understand how the buying process works then you've ended up at the right place. In this article, we would be going through the basic Buying process and sales channels of pre-construction condo projects.
The Stages of Pre-Construction Sales
Friends and Family
VIP Platinum Sales Event
First access to condo units and preferred floors.
Early bird pricing & Flexible deposit structure
People who have registered with a VIP Agent of Real Estate have access.
All Broker / Real Estate Agent Access
Available to buyers 3-6 weeks following the platinum event
Still a good time to buy, prices may have gone up at this time
Fewer units available to choose from - some models may have sold out.
Public launch - Sales are open to all
The remaining units (if any) are offered for sale to walk-ins and buyers with an agent.
Prices have usually gone up by this time compared to all other stages
Buyers are left with what remains and choices are limited.
Builders’ and the ancient tradition of walk-ins
The entire project process starts with a builder taking on a new piece of land and planning a residential condo development based on upcoming demand and neighbourhood development needs and requirements. Usually, a builder would incorporate each development project as a separate corporate entity and develop a very specific brand image supported with marketing collaterals and projection graphics catering to the potential buyers who would like to inhabit that locality; usually, these decisions would be made based on intense research and market study. Traditionally you would have been able to walk into a sales office and negotiate your way into amazing incentive packages, free parking spots, and a beautiful pony for the little one. With changing markets and increasing demands - these processes have become more complicated and TBT, most of the units in a pre-construction project are usually sold out before the project even hits the Public market.
How do you be the first through the door?
Builders have started working with in-house and outside brokerages to move their units. Once the project is up and running, the first bids are usually offered to friends and family and then pushed off to Agents, salespeople and brokerages with platinum or first access to the development project. At this stage, your real estate agents' contacts and relationships will make you shine, mind it - the project is still not on the market as an open to all and there might not even be a sales office that you could walk into for your pick at the litter.
You would want to be on this list of people who get premier access to these projects because this is the stage where most of the residential units are spoken for, in other words - prices start to go up for whatever units remain.
What do these outside brokerages bring to the table?
With outreach being outsourced to these third-party brokerages with premium access, builders can multiply their marketing efforts as all of these brokerages have multiple licensed agents and salespeople who put in dedicated efforts to help the brokerage move these units.
On the flip side, these real estate agents and salespeople also have established databases of investors and buyers (such as you) who are looking for opportunities to be the first through the door. So this process serves a dual purpose, not just for the builder but also for the buyer giving out enticing upgrade packages that end up giving you and other buyers offers that would usually never surface in any other sales channel.
Something to keep in mind
Buyers never have to pay for the services provided by these brokerages and licensed real estate agents. The builder usually sets up referral programs for these exclusive brokers and agents to set off the services that they provide to buyers and investors. Builders rely on these independent agents and brokers to sell a majority of the inventory available in the project, if not all.
Conclusion
Be sure that you do your research and are aware of when projects are coming on the market, if possible consult with various agents and brokers to know which brokerage or agency works for you. Make sure that your agent has your best interest in mind and that you are not being taken for a ride.
If you have questions or want to know more about this process or anything related to pre-construction sales or would like to consult on your strategy and standing in the market, feel free to book a free consultation with us, and we can help you take the next step.
More topics
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Are you prepared to invest in a pre-construction project
Negotiating Terms
Flexible payments
Occupancy and Closing Costs