March 12, 2023
fearless pre-construction buying
The 10 Day Cooling Period
So, you made an offer on a pre-construction condo, but now you’re second guessing your decision and thinking if it was the right move. Well, this could be one of two things. You either made the wrong decision or you just have fear of commitment. Not to worry, there is a solution and something many buyers aren’t familiar with when buying pre-construction.
It’s called the 10 day cooling period, which starts right after you’ve signed and submitted the offer. This means you aren’t legally bound to the decision yet and have the option to cancel the offer without penalty within these 10 days. So, for those of you who are scared of commitment don’t worry there are no strings attached. You can walk away problem free, just make sure you do it at the right time because timing is everything.
For those of you who think you made the wrong decision, it’s important to do some more research because something made you buy it in the first place. So, you shouldn’t turn away just yet. The best thing to do during this period is get a lawyer to review the agreement and get them to answer all your questions before making the deal firm.
Your lawyer can determine any restrictions to your goals and negotiate on lowering and capping charges. If you’re worried about the legal fees wait til you get slapped with an unexpected uncapped development charge on closing. So, do your due diligence, it’s better for the long run. That being said legal fees range. The lawyer we work with charges $200 for the review and $100 for an amendment (changes/ negotiations).
After the lawyer has completed the review and you still can’t convince yourself it’s a good purchase then you can walk away knowing you’ve done the research and hopefully become better prepared for your next deal. After the cooling period is over you’ve lost your chance to cancel without penalty, but it doesn’t mean you can’t cancel altogether. Depending on the builder/ project, There are clauses in the agreement that allow you to cancel after the cooling period, but you must pay a certain fee, sometimes $500.
Deposit Protection
Now what happens if you go through with the offer and certain unforeseen problems occur and the builder becomes bankrupt? Does this mean you lose all the money that you’ve deposited? The answer is no.
In pre-construction condominium buying there is an Act that states that all of the money that you’ve deposited into the lawyers trust will be reimbursed fully upon any unforeseen circumstance that causes project cancellation. So you can sleep at ease because the money you’ve deposited will always be returned in full.
However, for freehold pre-construction the warranty is different. If the price of the home is $600,000 or less the deposit is protected up to $60,000 if it’s over $600,000 it’s only 10% of the purchase price for a maximum of $100,000. This is a risk many freehold pre-construction buyers ignore and should be noted.
Much different than condo pre-construction buyers who enjoy full reimbursement on their deposit upon default. So, as a pre-construction condo buyer you get a 10 day cooling period, unlimited deposit protection and a chance to resolve your commitment issues. So what are you waiting for? Go shop around for some new projects!