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Thursday, May 10, 2012

12 Reasons why you should NOT buy a New Condo

If you are looking for MY QUEST FOR A CONDO, click here.

#1. When buying a condo straight from the developer (or from someone who flipped the a new condo for a profit) you really have almost no legal recourse if there is anything wrong with your condo. Faulty wiring, bad plumbing, leaky insulation, noisy heating system, shoddy workmanship... unless you're a lawyer (or wealthy) the chances are extremely likely the developer will get away scot free.

When you purchase a new condo you're basically purchasing it "as is". If there is something wrong with it you are stuck with it. ie. When purchasing from someone who flipped the property its usually an investor (often from overseas) who will be difficult to contact later and get legal recourse for repairs if you find anything wrong with the condo that they didn't warn you about.

When purchasing a condo in an older building the previous owner is typically easier to contact and there will be lawyers/real estate agents/building assessments/etc to ensure that you know about any faults in the building.

#2. Many new condos end up with newly elected condo boards mostly made up of people who have never even owned property before. They are complete newbs (gaming term meaning naive person who is basically incompetent) when it comes to managing a large building. They're so green behind the ears incompetence is to be expected.

In contrast older condos have well-established condo boards and people who have been managing the building for years. They're more reliable and competent in comparison.

#3. Many new condos are made of glass and steel in an effort to save on construction time, material costs and also heating/cooling costs, but the problem is architecturally they're designed for a warmer climate like the southern United States. These glass condos are not made to withstand Canadian winters. What happens is the sealants around the glass crack in cold temperatures, the insulation (inert gas inbetween the glass panes) leaks out and the next thing you know its costing a fortune to heat and cool and building.

The condo board, which I've already established are incompetent newbs, will order repairs to the building and repairs will result in higher maintenance fees for all the residents to replace the glass and sealants.

In theory if they hire competent people to do the repairs it should be good for another 10 or 15 years, but in truth incompetent management often leads to incompetent repairs. Expect to need new repair every 5 to 8 years, depending on the cold winters.

#4. New condos often come with security guards and extra frills. Things like laundry / dry cleaning service, indoor pool, gym, sauna, movie theatre, babysitting / daycare services, valet parking, spa, hospitality services, room service, restaurants and so forth. All of these things need to be cleaned, repaired and managed which means extra staff and more money needed to pay their salaries. Quite a few of these things you may not even use, but you will still end up paying for them in your monthly maintenance fees.

In contrast many older condos may not have many extra frills, but at least you aren't paying extra for things you don't use.

#5. Many new condo units are purchased by investors hoping to flip for a profit... but they sometimes hold on to them hoping to sell when prices are higher so they rent out the condo.

Renters have a tendency to be hard on the structure of the building. They don't it so they don't care. Maintenance costs are higher in buildings with lots of renters. (Plus renters are typically a younger crowd and like to throw wild parties, so expect more noise in a newer building.)

Older condos are more likely to be lived in by the actual owners and they're not about to spill paint in the hallway willy nilly, jump in the elevators and run around like hooligans. Renters in comparison are slobs. (Not complete slobs, but certainly lower brow.)

#6. Unexpected Costs. Condo developers don't tell you everything. ie. Your parking space in the condo might cost you extra. When buying a new condo remember to ask what is and is not included in the price you are paying and MAKE CERTAIN ITS IN THE FINE PRINT. If you're buying your condo and its not even built yet and you've only seen a show room you may be in for a shock when you learn your condo doesn't come with all the shiny appliances you saw in the show room.

With older buildings you get a better idea of what you are purchasing because you can visualize and discuss with the previous owner what things are being left behind and included.

#7. New condo boards are more willing to raise maintenance fees without your consent. Don't expect a vote of all the condo owners. Only the people on the board get a vote. New condos are typically filled with young people and young people have a tendency to be greedy and ambitious. If you buy a brand new condo expect some rash decisions on the behalf of the condo board which results in higher fees. They will likely be drunk on power too and ram the changes through before residents get a chance to discuss their options.

Older boards are more reserved and understand that there is a balance of power and people don't want their maintenance fees going up.

#8. Older condo boards will have a well established set of rules for residents (ie. no BBQs on the balconies). A newer condo will be making up new rules on the fly and you may not like some of the idiotic rules they come up with. An older building means you will at least know what rules you are agreeing to.

#9. PRICE! Newer condos typically cost more per square foot. Pay attention to how much you are paying per square foot and keep track of how much of that square feet is actually usable space (ie. they might be including the balcony as part of the measurements.

Also developers and contractors have a tendency to make a "whoops" with the pencil when actually building the space. It may be 5 to 10% smaller than they originally claimed it would be because they wanted to save on building materials.

#10. Subject to change without notice. Buying a new condo before its been constructed means you will be agreeing to a contract wherein the developer has several lines in the contract containing the words "Subject to change without notice." This means you may have bought a condo that was supposed to have an indoor pool... but whoops! They changed it to a tennis court instead. They can pretty much change whatever they want due to that line.

Ie. Lets say you purchased a condo on the top floor, expecting to get a penthouse. But whoops, they decided to add 10 more floors to building and now you are somewhere in the middle.

#11. Lets say you've been given permission to move into your new condo on the 4th floor... but the 5th floor is still under construction and very noisy. As is the 6th floor all the way up to the 30th floor (which doesn't even have a roof yet). It might even be a year before the building is completed.

Its not just noise either. Its also DUST. And the building make shake sometimes during the constant construction.

#12. Incomplete common areas... So you've moved into your new condo... but the pool is just a hole in the ground, the hallway floors is just concrete with no carpets, the walls have been painted and there may be no mouldings or lights.

You may not even have a working toilet.

Drywall scattered about, garbage and old lunches left behind by workers, the lobby won’t be complete for 6 months, the "concierge" is a teenager with a hard hat. Don't even think about going to the sauna or the gym because it will be a year before those are completed and outfitted.

When you buy an older condo everything may be more worn down, but at least they are completed and you know what you are getting.

BONUS REASON: Clueless salespeople who don't care. The developers are the people who started the whole process in an effort to make money. The contractor and engineers just want to "get it done on budget" so they too make a profit. The clueless salesperson you purchased the condo from was on commission and doesn't really know or care if anything goes wrong with your condo. They're all just making a profit and taking their cut.

When buying an older condo the only people making a profit is the real estate agents, the lawyers and/or the previous owner (assuming that property values went up).

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