7 Things You Need to Know Before Investing in Pre-Construction Condos (The Series - Part 4)
Closing Costs: Development Fees & Levies on Your Investment
If you’ve ever heard “Pre-Construction Horror Stories,” they were likely referencing some outrageously inflated closing costs that were levied against the buyer on final closing.
These are rare, but they do happen – however, they only happen to people who didn’t do their due diligence, bought with an untrustworthy builder, or worked with Realtors or Lawyers who don’t specialize in Pre-Construction condos.
Here’s the reality: You need to work with specialists who know what they are doing. In this specific case – you need to ensure that you have someone making sure your developmental and municipal fees and levies are capped. With over 15 years of combined experience in Pre-Construction condos, you can rest assured that your investment is in good hands when working with the Mourad Hanna Team.
A) What are Development Fees & Municipal Levies?
Development fees and municipal levies are determined when buildings are developed. When a building goes up, the population density for the neighborhood increases.
The city is going to determine the impact on the neighborhood, and charge the builder a per-unit price in order to fund the local infrastructure needed to support the residents that the building is bringing in.
This might mean new streets, parks, schools, future transit solutions, etc.
If your Agreement with the builder wasn’t reviewed by a good lawyer in the ten days, and you had an uneducated Realtor guiding you, it’s very possible that your closing costs aren’t capped.
In that case, if the City charges the builder $25,000-50,000 per unit (which is not uncommon for most areas in the city), the builder will pass that cost along to you on final closing.
However, if your Agreement of Purchase and sale has Pre-Capped closing costs, or if your lawyer amends the contract and has them capped for you, the builder can only charge you that capped cost.
For many developments, you can expect to get your closing costs capped at $7,500-10,000 for one bedroom units, and $10,000-15,000 for two bedrooms or larger.
The takeaway here? It’s critical to have a pre-construction Realtor and Lawyer on your side when you walk into the sales center. The sales reps that work for the builder represent the builder, you need to have representation on your side.
It doesn’t cost you a penny (and no, you won’t get a discount for not using a Realtor).