What are the differences between buying a pre-construction assignment and a newly built property? Today, let’s explore this topic briefly.
Property Listings
Resale Properties
- You can easily find numerous listings on the MLS system through any real estate agent.
Pre-construction Assignments
- Many developers do not allow public listing of assignment information, so most pre-construction assignments are conducted privately. This requires a real estate agent who can help you find more pre-construction resources.
Nature of the Purchase
Pre-construction Assignment
- This involves transferring the original purchase contract through an Assignment, changing the assignor’s name to the assignee’s. At Final Closing, the assignee receives the property title and becomes the first homeowner.
Resale Properties
- Directly purchasing a newly constructed property makes you the first homeowner upon closing.
Cost Differences
Resale Properties
- Down Payment: Generally 35% of the purchase price, depending on your financial situation.
- Land Transfer Tax, Legal Fees: The rest is typically covered by a bank loan.
Pre-construction Assignment
- Costs at the time of Assignment: The developer’s down payment paid by the original buyer, and the price difference (negotiated assignment price – original price).
- Subsequent Costs: Unpaid down payment, Occupancy Fee, Land Transfer Tax, Legal Fees, and miscellaneous closing costs.
Why Pre-construction Assignment Seem Cheaper
Resale Properties
- Buyers only need to pay a down payment (usually 35% of the purchase price), with the rest covered by a loan.
Pre-construction Assignments
- Buyers need to pay the original down payment plus the price difference. This means preparing an extra 65% of the price difference in cash, increasing the financial burden, making the assignment price seem cheaper.
For buyers who do not need much financing or can pay in full, buying a pre-construction assignment can be a great deal.
HST Rebate Issues
- New Property HST Rebate:
- GST Rebate: 36% of the GST will be refunded if the property price is below $450,000; properties above $450,000 do not receive a GST Rebate.
- HST Rebate: 6% of the HST will be refunded, up to $24,000.
- Principal Residence: Must meet certain conditions to qualify for the HST rebate.
- Investment Property: HST Rebate must be paid upfront and can be reclaimed with a one-year lease, usually refunded within 30 days.
Therefore, if you are buying a pre-construction assignment for rental investment, you need additional cash to prepay the HST rebate, although it can be reclaimed later, you need to be prepared at closing.
For more inquiries, feel free to contact us by submit webform or Tel: 905-731-2266.
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