What To Do During Your 10 Day Cooling Offer Period?

As we mentioned in one of our recent posts, if you buy a residential pre-construction or new condo unit you have 10 days from the time you receive the signed agreement from the builder to rescind or cancel your agreement of purchase and sale. This is called the “cooling-off” period.

You may wonder whether you need to have a reason to cancel and the answer is that you don’t. This differs from a resale purchase agreement, you can back out of the agreement with no hassles, questions or repercussions from the builder or their sales representatives. In some cases your deposit will be returned to you with interest, and without any penalty or charges.

So, what should you do during those 10 days and why are they so important?  We touched on those points in the previous blog but we got some questions about it so we want to expand on this crucial detail.

Buying a condo should actually start before you even step foot in the sales office for a new condominium project, you should sit down with your real estate agent and talk about buying new vs buying re-sale. There is no ‘correct’ way to go but the re-sale vs pre-construction are different, the questions you ask going forward are different and, more importantly, your rights and who protects you are different. We have talked to countless clients who wanted a re-sale only for us to realize a pre-construction makes more sense, we have also talked to clients who wanted a pre-construction who actually needed a resale unit. We've even talked to people who have a pre-construction that is expected to take many years to finish who buy a resale in the meantime. In each of these cases it was important that we were able to ask the right questions and set our clients up for success. So regardless of which you avenue you take sit down with your realtor and make sure that you are set you up for the most success.

You have now confirmed the pre-construction project makes the most sense, you have found a great project in a location that you want and you have found a great unit that you have just signed to buy, what now? It’s time to put those 10 days to the best possible use to ensure you're going to have an awesome and smooth experience. Here are your next few steps (in no order):

1. Contact your lender and make sure that your mortgage approval will cover the purchase amount as well as the unit. Many people don't realize this but a mortgage pre-approval actually has 2 components, how much can you afford and whether the lender believe's the home you purchased is worth what you paid. You want your lender to confirm, you're approved and they will approve that condominium project. Also, the developer will likely want to see proof of a pre-approval for their specific project as well.
2. Contact your real estate lawyer and have them review your contract. This is a very important step because a typical preconstruction condominium agreement of purchase and sale is very long, is full of lawyer speak and most people will not read 98% of the contract. This is where your lawyer will come in and make sure that you are protected. So, what does your lawyer look for?
   a.      Are development charges and levies capped?
   b.      A review of what your potential closing costs could be.
   c.      Any changes to the agreement that you may want to make.
   d.      Are you allowed to rent out the unit during the occupancy period?
   e.      If you choose to sell the unit before it's finished are their fees or restrictions?
3. Review the contract for yourself, there may be things that are personal to you that are important and not to many others.
4. Ensure the timeline of the project meets your lifestyle, needs and life stage. We have had a client who bought a pre-construction project that was expected to take five years to build and in the first three years got married, had a child and then had one more child. When they bought the unit they were dating their future partner but life comes at you quick and they realized that that condo was not going to be sufficient for their family but they also needed the money they had put into the purchase to buy a home immediately. It was a pickle we were able to sort out.
5. Review what made that pre-construction project appealing in the first place and make sure that it's still appealing for you. Does that location really work? How close is transit? Will I still be working for the same company in the same location when I get ownership of this unit? What happens if I get a new job before this project is done and it's not anywhere near it? Do I like the amenities and are the maintenance fees reasonable for what I'm getting in those amenities? Is the unit on a floor that I want to be on or did I settle because it was all that was left? Keep reviewing everything that made it appealing in the first place.
6. Does the deposit structure work for me or am I going to be stretching myself and stressing myself?
7. Review Ontario’s Residential Condominium Buyers Guide (last updated November 2020). This is a really helpful document that will give you information about kind of life, your rights, moving in, creating the condo board, maintenance fees, and living in the unit and more.

Buying a home can be stressful but there are ways to mitigate problems and surprises. Whether it's a pre-construction condo or a resale detached home you want to use all the resources available to you to ensure you're making your best educated decision and those resources should include your team: real estate agent, real estate lawyer. Make sure the professionals are on your side and working in your best interest!