Real Estate Agent for Pre-Construction?

Discussion in 'Real Estate General Discussions' started by jafar, Mar 27, 2011.

  1. jafar

    jafar New Member

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    hello urbantoronto!

    We are first time homebuyers looking for a new home. We aren’t set on location or type but we liked the Etobicoke area near Humber Bay. We felt that this area was close to the downtown core with a lot of potential for future growth (being near the lake also helps!).

    In our search, we’ve primarily considered pre-construction condos. Our dilemma now is whether it would be beneficial in having an agent/broker represent us, specifically for pre-construction? For looking at resale condos, I understand it makes perfect sense, but are we missing anything if we were to look at pre-construction without a realtor?

    Your help is greatly appreciated!
     
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  2. GraceCondos

    GraceCondos Active Member

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    Yes, yes and yes.

    You have to understand that builders launch projects in many phases. (ie. VIP Agent Launch, Agent Launch, Public Launch). By the time the public walks in the sales centre door, all that is left is what the smart buyers didn't want. Also, there are usually strong incentives available to Realtors.

    Example: At Edge on Triangle Park, I got my client 1 of only 4 prime "2D" suites. In addition to getting a prime suite that he'll be able to sell easily and reap a strong profit from, he also got $7k off parking, free assignment, closing costs capped, option to rent during occupancy, free window coverings and prices immediately raised $5k.

    Realtors who have bought pre-construction can also help you choose the best floorplan within your budget. We know what to look for as it's our full-time job.

    Just my two cents! Feel free to message me with more questions...
     
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  3. AMB

    AMB New Member

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    I also agree that you should definitely get a real-estate agent. First because your a first time home buyer, but most importantly because like GraceCondos said agents have access as well as information the general public doesn't. The sales reps at the sales centers for new condos are really looking out for the builders best interest, while an agent looks out for yours. My sister recently bought a condo at James Club, and her agent helped her out a lot mostly with free upgrades as well as capping closing cost, which they seemed to not like very much!

    Just wanted to add my two cents, also I live in the Humber Bay area and am following the new developments closely. Not sure what your looking for but some of the built condos may also be worth looking into just to compare prices etc to the new constructions. As for the area, there is a lot going on and a lot to choose from.
     
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  4. Eug

    Eug Senior Member

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    Yes there are advantages to getting an agent, but I will say that for my pre-construction purchase without an agent, I was able to negotiate price changes to the unit and clauses in the agreement that my neighbours didn't get even though some had realtors.

    Specifically:

    1) The builder was guaranteeing a low interest rate at close, which meant they were paying extra to the lender to hold the low rate and buy it down. However, that rate specified a long amortization period. That didn't really suit me, so I negotiated a lower price for the unit, but I would have to go with another lender, without any rate guarantee, and no rate buy down.

    2) The unit I bought was a townhouse in a complex with both townhouses and a condo building. The agreement for the parking spot I bought did not guarantee the parking spot would be connected to my unit. I had a clause put into the agreement guaranteeing that the parking spot would be accessible directly from my unit.

    It's probably true that the realtors could have negotiated these clauses too had the clients asked, but it seems the realtors didn't think to ask.

    However, that was a long time ago. Maybe things are different now, esp. re: #1.
     
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  5. yaz16

    yaz16 Active Member

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    Just out of curiosity for those who know , how much do real estate agents/brokers get paid by the builder for helping them sell units? How do some agents have inside access to events/units before it gets sold to the general public?

    What would happen if you hired 3 agents to try to get you the same unit and disconnected ties with the 2 that couldn't come through? (other than these two never wanting to work with you again)
     
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  6. symmetrydev

    symmetrydev Active Member

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    Hi jafar,

    Congratulations on starting your search for a new home!

    Few pros and cons of having a realtor with you for pre-construction.

    PROS:

    Realtors have access to units released within one of the initial round of sales conducted by most developers. This round, referred to as the Broker VIP (among other fancier labels), is held after an initial release to
    "family and friends" of the developer. So the units available aren't necessarily the best units but there is definitely a larger variety to choose from. The prices during this VIP are usually lower than those in
    succeeding rounds of releases but not necessarily. The next round is the Public Opening and prices may be increased (depending upon the success of the Broker VIP) and fewer premium units
    may be available. So if it's access and potential pricing and incentives you're seeking, having an agent may benefit you.

    In addition to this access, experienced, ethical realtors will cut through the marketing fluff, inform you of prevalent pricing/finishes on offer within pre-construction projects in the area you're looking in,
    explain payment structures, closing costs, financial risks/rewards, and steer you towards units with good end-user, re-sale, and investment value, based on your criteria, budget and motives for purchase.


    CONS:

    As a developer, I've lost count of the number of times realtors walk-in to my sales center, head straight for the price sheet and inquire about the co-operating commission.
    They completely ignore the finishes/features on offer within the project, relying purely on price/sq.ft and commission pay-outs as the driving factors behind recommending the project
    to their clients. Then there are agents who don't even bother reading the Agreement of Purchase and Sale, relying on the Purchaser or the Purchaser's lawyer to comment on
    the content within. These agents simply care about the sale; safe-guarding their client's interest is a distant second (or a non-existent concern).
    There are pre-construction agents who have no clue about the re-sale potential of a unit. They look at the price/sq.ft and recommend the unit blindly, never taking the time
    to examine the location of the unit within the building, the lay-out, the finishes, etc.

    Also, should you be interested in a project that is in a more advanced cycle of their pre-construction sales, having a pre-construction agent may actually hinder your ability to
    get the best deal. Most builders are loathe to offer incentives in this later cycle of sales while paying out a commission and you may be able to get the best deal
    without an agent representing you.

    Ultimately, my recommendation is this:

    If you're experienced in purchasing pre-construction and have taken the time to research the various projects within the market and read up on real estate trends and market conditions,
    then you could definitely purchase without the aid of a realtor. Especially if you're considering purchasing within a project that has already had it's broker and public vip and is
    looking for a few more sales to achieve financing.

    If you're not confident in your ability to navigate the mountain of information that is out there and differentiate between the truly worthwhile, quality projects and those that hide behind
    marketing and sales tactics, then definitely seek the assistance of a realtor. Particularly one that has experience in both pre-construction and re-sale. Research the realtors you are
    considering working with and interview them to get a sense of their experience and integrity.

    Hope this helps!

    Cheers
     
    #6
  7. Condo George

    Condo George Active Member

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    Ken Yeung C21
     
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  8. neuhaus

    neuhaus Senior Member

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    Unless you are totally clueless to real estate and/or don't have the time to search for developments, I would not use an agent.
    Buying preconstruction is much more straightforward than buying resale, so having an agent wouldn't be a huge benefit. To agents, these sales are fast and easy commission.
    With the power of the internet you could easily research various new developments and Tarion provides good online and phone support when it comes to homebuyers in new/pre-construction.

    I always negotiated down what would have been the buyer's agent's commission into my purchase price, which never seems to be an issue with developers.

    If you really need an agent, I would strongly get a highly experienced and reputable agent who will look out for you, be very attentive and spend time with you, and fully understand your needs, financial situation and goals.
    There are way too many inexperienced agents out there simply looking to make a quick buck.

    Yaz, that is highly unethical to have more than one agent independently working for you and a big no-no in real estate. The agents that you do not go with could seek legal action against you.
     
    Last edited: Apr 21, 2011
    #8
  9. NikoS

    NikoS Active Member

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    Gonna be honest, I regret buying pre-con as my first time home. You waste your money and time paying rent while you wait for your place to get built.... I would suggest looking at what inventory is on the market currently before looking at pre-cons. Also pre-cons seem to be more expensive to purchase now than re-sale. Developers are charging future values in many developments not current market.
     
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  10. Palma

    Palma Senior Member

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    I know I am replying to a post 6 years old. I talked to a broker recently who told that when you are selling you would work with one agent but that when you are buying you should work with several agents. Whoever finds you the house you are looking for makes the sale. What is unethical? And he is a mortgage broker with Manulife
     
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  11. KSrealtyAdvisors

    KSrealtyAdvisors New Member

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    Always make sure the agent kicks back to you.
    Don't accept anything less then 1% of his 2.5% commission.
     
    #11
  12. lenaitch

    lenaitch Active Member

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    So a performance contract is signed by two parties and now there are "kick-backs"? Is this considered ethical in the real estate world? Why not a kick back to the agent by the seller to facilitate the sale? This sounds closer to the tow truck/body shot world.
     
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  13. RZ12

    RZ12 Active Member

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    None of your posts have been good contributions to this website.
     
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  14. TheKingEast

    TheKingEast Senior Member

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    I agree. Get a kickback if you can. The builder loves purchasers who don't have agents because they don't have to pay the commission.
     
    #14
  15. cdr108

    cdr108 Senior Member

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    builders pay 3-5% to the buyers agent, so try to get that reduction in price if you're doing it yourself.
     
    #15

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