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Buying Pre-sale Condos in Toronto

In spite of the recent news about global financial crises, the prices of condominiums in some large cities like Toronto, Ontario continue to rise. In places where they are not on the rise, prices still remain high. Developers continue to make plans to build new condominiums. They typically offer these condos for sale before the ground is ever broken to begin building.

Prior sales of condominiums are called presales. This is where the developer agrees to sell condominium in advance of the building being completed. The benefits of these agreements are obvious if you happen to be the developer. You will have your unit sold well in advance construction being completed, which will allow you to avoid being stuck with vacant units.

New condo construction in Toronto

What are the benefits of buying a presale condo? Usually, if you plan to buy a presale you will be able to negotiate a discount off the price that will be set once construction is complete. In other words, you get a condo for a smaller price than what it will be worth when you move in. You don't usually have to put anything more than earnest money or a deposit down on these types of contracts. Once you have a signed contract or a set price, you may have the option to sell your assignment to another person at a profit. That is why presales attract so many real estate investors.

Buying a condo before it is built allows you to choose a better location in the building. If you want the top floor with a view, buying a presale contract will usually allow you to get it. As they say in real estate, location is everything. That is true even with a condo.

A presale contract usually allows you to assign it to someone else. Since you probably got a great price in your contract, as long as condo values continued to rise, you could make a profit by selling your contract to someone else a higher price. Having net cash on hand, may be a big comfort in these troubled financial times.

What are some of the cons about buying a presale contract? Presales are great as long as the cost of real estate is going up. When the market begins to come down, that is when presales are not a good option.

As we have seen recently, bad financial news usually reaches investors and the media too late. Prices can still be rising, while banks are facing collapse. If you have been thinking about buying a condo and you know the prices are stagnant or dropping, wait until the economy improves before you buy. The last thing you want is an overpriced home. You'll never be able to sell it if that happens.

Presales can be a good investment if done at the right time and at the right price. However, when the market goes down, stay out of presale is contracts. This is just one more reason why it is always a good idea to hire a real estate professional to help you with any real estate contract.

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