Builders are the most motivated sellers in any real estate market. With several projects still waiting to be sold, builders are offering more incentives than ever. Some common ones include:
1. Free Assignment
This is a gem for investors and buyers who might need to sell the property before it’s officially theirs (before closing). Normally, an assignment fee can be quite hefty, but with this incentive, you can transfer your purchase agreement to another buyer without the extra cost.
It’s like having a flexible exit strategy even before you’ve moved in. In bigger cities like Toronto, Mississauga, and Oakville, builders usually cap assignment fees at $5,000.
2. No or Capped Development Levies
More homes mean more people, which in turn means a greater need for roads, schools, emergency services, and recreational facilities. However, development levies range between $10,000 to $25,000 and can add a significant amount to your closing costs, covering everything from infrastructure to city improvements.
Builders that offer no or capped development levies are essentially taking on this cost themselves or limiting your exposure to it, which can save you thousands of dollars at closing. If they are capped, they are usually under $10,000 and still will be a big chunk of your closing costs. The charges are tiered depending on your unit size, so bachelor units pay the lowest and highest is set for the larger unit.
3. Discounted Mortgage Rate
Builders collaborate with one big bank including CIBC or TD Bank on their projects to attract buyers by discounting mortgage rates. They offer .25 to .50% discount, which makes a big impact on your total mortgage amount.
4. Free 5-piece Kitchen Appliances
Imagine walking into your new home to find a fully equipped kitchen waiting for you. This incentive is exactly that – a set of essential kitchen appliances at no extra cost. You are immediately saving $50,000 to $150,000 on appliances and save yourself from the trouble of waiting months for appliance delivery.
5. Decor Dollars
Decor dollars range from $5,000 to $15,000 for upgrades through the pre-construction project’s interior decorators. You can spend this money on upgrades and finishes including countertops or designer light fixtures to add personal touches to a designer-grade unit. Any additional bill is your responsibility.
6. Free Internet
Many condo builders offer high-speed free internet cable for one to two years after move-in. It is a $600 to $1,500 discount over two years and a relief for first-time home buyers or new investors. It is more often seen offered in pre-construction projects outside of the Greater Toronto Area.
7. Rental Guarantee
This incentive means the builder will pay you a certain amount for a fixed period if you can’t find a tenant. Any projects that guarantee rental offer up to 2 years of coverage, which is ample time for you as a landlord to find the right tenant.
8. Parking and Storage Discounts
In GTA, underground parking costs around $7,500 to $15,000. You’ll immediately save $1,500 to $2,500 on these costs. Builders outside GTA offer free parking or one parking spot included in the price.
9. Closing Cost Credits
Some builders offer credits toward these costs, as a gesture to add to your closing funds. Projects that we’ve seen until now offer around $15,000, which is just enough to cover developmental levies.
10. Referral Bonus
If you love the project you’re already investing in, why not recommend it to friends or family? Referrals aren’t mentioned as incentives, so don’t be afraid to reach out to your agent or their sales office for more information.
11. Limited-Time Price Discount
Last but certainly not least, a limited-time price discount creates a sense of urgency and if you have funds ready for initial deposit, make the most out of this opportunity.
Can I ask for a price reduction instead of some incentives?
Builders are sometimes ready to offer some discount but never mention it officially as it reduces the overall price of the project. However, they need some nudging. Work with an experienced real estate agent who can negotiate on your behalf and already has connections with the sales team.
If you do prefer lowering the price with the builder directly, look for projects that only have a handful of units left. Builders don’t want to set the future precedent for property prices in the neighbourhood but they don’t bother much with the last few.
You will have better luck in getting free upgrades from them than a direct price dedication. On the other hand, you can save on some closing costs through your mortgage lender. These are conditions you put while negotiating with different lenders. Here’s how:
– ask them to cover closing costs
– lower interest rate to save money in the long run
Whenever you are entering a pre-construction deal, read the fine print, whether it’s the purchase or the mortgage agreement. Consult with a real estate lawyer to review these documents and follow up with the builder or lender with changes.