Welcome back, friends! Today, we're discussing an exciting topic that's been gaining traction in the real estate world: Virtual Staging vs. Traditional Staging. Whether you're a seller, a buyer, or just curious about the real estate market, this one's for you! Let's get started!

Traditional Staging

[show one after the other images of traditionally staged living and bedrooms]

Let's start with traditional staging. This is the classic approach where you bring in professional stagers to transform your empty or cluttered space into a stylish and inviting home. They'll bring in furniture, decor, and even artwork to create a space that appeals to the widest range of buyers. The goal is to help potential buyers envision themselves living there.

Pros:

Staging done in traditional manner creates a strong first impression, when the prospect comes in to view your property, they can feel the usability of the spaces with the staged furniture, it becomes experiential. When you are in process of doing traditional staging, by process you are able to identify any other shortcomings of the property and take care of those and make it more appealing.

Cons:

Traditional Staging setup can be expensive, it takes time to plan, transport and setup the furniture and lastly it needs you to first empty the living space with existing infrastructure and furniture, or decluttering your home.

Virtual Staging

This is where technology comes in to save the day. With virtual staging, high-quality images of your empty space are digitally transformed to show what the room could look like with furniture and decor. This is usually done by virtual stagers, or these days lot of great AI software's do their magic to turn spaces and areas to professionally looking spaces.

Pros:

Cost-Effective: Virtual staging is generally much cheaper than traditional staging since there's no need to rent or move physical furniture.

Quick and Flexible: It's faster to implement and allows for easy changes to the design style without the need to physically rearrange anything.

Less Time to Market: The turnaround time is must faster which enables your listing to go live that much quicker to market

Cons:

Buyers cannot physically experience the space.

Some buyers may need traditional staging to determine the usefulness of the property during their in-person visit.

Which one is better for you?

Budget: Virtual staging is generally more affordable than traditional staging.

Timeline: If you need to sell your home quickly, virtual staging can be a faster option.

Flexibility in terms of options on how you want to showcase a living area.

Buyer Interaction is better in the traditional model, as the prospect can walk around the furniture and visualize better.

Consider the preferences of your target buyers. Some may prefer to see a physically staged home. If your home needs significant repairs or updates, traditional staging might help to address these issues during preparation time.

Hybrid Approach

Often there is a hybrid approach one can utilize by doing a traditional staging at the main level living areas and a virtual staging at the bedroom level. This would cut down on costs and at the same time give the benefits of traditional staging, and the impact when one enters the property for in-person review.

I hope this blog helped you better understand the differences between virtual and traditional staging. Remember, the goal is to create a space that appeals to the widest range of buyers and helps your home sell smoothly for top dollar.

Wish you all the very best! Reach out to our dedicated team at Elixir with any queries you have about real estate, and we will do our best to help.

Mudit Mehta 

Broker of Record

ELIXIR REAL ESTATE INC.

Welcome friends, today we are going to explore objectively the ever-famous contest between choosing Pre-Construction vs. Resale Real Estate. I will delve into every aspect of this to make it an easier choice for you based on your family aspirations.

As you decide to pull the trigger on your Real Estate purchase, choosing between Pre-construction or Resale will majorly depend on your personal goals. Let me point out to you some specific reasons to make it much easier to decide and to make an informed decision.

Resale properties are previously owned homes available for purchase on the current market. In the Greater Toronto Area, similar to the majority of areas in North America, we have a robust MLS system where we get a continuous inventory of Resale properties. This inventory keeps recycling every week with new homes coming on the market and old ones being sold.

Upside of Resale:

Immediate Occupation: 

In Resale Real Estate, the wait time is considerably less, as after firming up the deal, within 2-4 months, you can move into the property.

If the property selected is vacant, the closing could be even sooner, and if you desire so, you can get everything completed in a fortnight. This also means that if I am trying to buy a property as a rental investment, my yield in terms of rent starts much sooner. Compare this to a pre-construction scenario where we are, say, closing in 3 years. In that case, my down payment is paid mostly in the first year, and then I wait for the rental yield to start for three years.

Visualization Becomes Easier:

Another significant benefit of Resale properties is that I can enter the property and see and feel the same, whether it fulfills my vision for the home and various living and bedroom dimensions are tuned to my needs. Whether the neighbourhood is aligned with my goals and aspirations, the schools, parks, amenities, transit friendliness etc. It gives major control to us as a purchaser when we are reviewing a built property in a neighborhood.

Negotiation Room:

In Resale Real Estate, price negotiation is another factor to consider, as in most situations, based on the prevailing market, the seller's disposition on how quickly they want the sale proceeds, and the current state of the home, purchaser is able to negotiate.

No Appraisal Concerns:

This is another major point that I want to highlight, as we saw the market dramatically changed for market value in 2022 and 2023. 

There were a lot of folks who bought a pre-construction in late 2021 and early 2022 timeframe, and committed to a higher price with the builder. And with the subsiding of the market, the lender is now not willing to pay the same amount as the market value is not the same and has reduced substantially. This results in a very difficult situation for the buyers on how to arrange the funding and complete their obligation with the builder. However, in the Resale world, there is not much time between firming up an agreement and the final closing; the lender sees the same market value in their appraisal as it was negotiated, as both happen in the same timeframe. The situation never comes where the lender doesn't see the value in the property you have agreed on, as long as we did our fair market analysis correctly while purchasing.

Mature Neighbourhoods:

The streets are matured in older neighbourhoods with grown trees, which provide an abundant supply of oxygen, and aesthetically, the community looks more green and pleasing at the same time. They go a long way to keep the city cool in the hot summer months and provide shelter from ultraviolet rays. They further help to reduce noise as they absorb sounds, contributing to making a neighborhood quieter. With mature neighbourhoods also come established schools, parks, recreation centers, transit facilities, market plazas, and libraries. These amenities would take years to mature in a newer subdivision. In the older neighbourhoods, you would also observe much wider frontages and a lot of offsets between the lots. This gives a lot of breathability and makes the neighbourhood look less dense and inviting.

Downsides of Resale:

Maintenance and Renovation Costs:

If the property is older, it might require some maintenance updates, like the replacement of roof shingles, repair/replacement of windows,

 update to appliances, light fixtures, kitchen or bath updates, flooring, painting, mold issues in attic due to leaky roof etc. These costs are totally related to the state of the subject when you purchased it and could be substantial if it was not a well-kept home. As a buyer, you might require to commission such expenses.

Energy Efficiency:

This is another overlooked factor, as older homes might have older windows and less insulation in the home based on the standards back then. The heating and cooling costs, due to this reason, might be more for older properties. Like in the new Insulation Building code 2021, the insulation R-Value has change to R-60. The R-Value defines how well an insulation layer will resist the air leakage.

Let us move on to Pre-construction; these are brand new, never lived-in homes purchased from the builder or developer during the construction time.

Upside of Pre-construction:

Customization Options - In the contemporary Greater Toronto Area landscape when we go into a pre-construction project, especially for a low-rise freehold opportunity, the builders generally offer a fair bit of customization and updates that can be done on the property based on your

 needs. The scale and degree of updates and customization will again differ from builder to builder. The majority of them would also allow changes in the material in their existing layout; a few of them would allow the layout to be customized as well slightly.

Modern Design and Finishes:

When we get into pre-construction ownership, this is one major benefit that is foremost. The layout design is contemporary, and the finishes of material and workmanship are modern. For instance, when we speak about the Kitchen in a modern home in 2024, it would have more shaker-style doors or flat panel doors. This was not the norm 10 years back when the design was still more traditional. When it comes to colors, the modern kitchens, for instance, will be White, Gray, or wood-tone in color. There is a lot of contrast color usage in the islands. These things were not commonplace 10-15 years back. Countertops would be mostly Quartz as of 2024 in a modern Kitchen setup. Similarly, in a newer bath, White or wood is the color of choice as of today for vanities, White color usage prevails in shower tiles as well as vanity countertops.

Potential for Growth:

If you get into the pre-construction opportunity with the correct pricing and the market supports, it could very well be a great way to increase your equity. If not already, please refer to our last discussion in which we discussed how to identify a good Pre-construction opportunity and to ensure the pricing is commensurate to the market. This potential for growth would not work at all if we buy an overpriced opportunity; in fact, it would just work in reverse and would take us more time to observe appreciation.

Downsides of Pre-construction:

Wait Time:

The pre-construction projects come with an inherent wait time for the project to translate from paper to life. And this would mean that your home ownership or investment plans would be deferred to a later date. This is especially counter to the investment aspect of Real Estate. Let's consider that I give a 15% down payment in 1 year to a builder for occupancy in 3 years, and I wanted to buy for an investment. 

This would mean that my 15% of money as a down payment is blocked, and my rental revenue will only start after 3 years; of course, my mortgage also will start at the same time. However, if it were a resale asset, the rental yield would start 3 years sooner. So, if my rental was, say, $2,500 for the subject, it would mean $90,000 of revenue, which would eventually go for my mortgage payments, and part of the mortgage payment is the principal repayment. So, in a resale property, I end up building more equity during this wait time. This is not possible in the pre-construction setup. Further, there could be delays in the timelines due to various reasons. Like in covid time, the majority of the builders had delays in deliveries due to bottleneck in supply chain issues, and their development stopped, all of this is beyond the control of a consumer.

Lack of Visualization:

When we get into pre-construction Real Estate, we are buying a layout and plan on paper; many times, I have observed it becomes difficult to visualize how the final output would be. A living room of 14 ft x 10.5 ft looks good on paper; however, when it is developed, it might not be the right one for your family size. An L-shape kitchen of 10 ft x 7 ft might look wonderful on paper but could happen that it's not able to fit all your appliances and equipment and feels restricted. In the resale world, you can walk into the kitchen and clearly see whether it fits the bill and meets your aspirations or not.

Deposit Structure:

Typically, in a pre-construction landscape in the Greater Toronto Area, the deposit requirement is 15-20% of the purchase price, usually between 6-12 months of initial signing. This becomes steep for many homeowners, and the reason they are not able to get into this. Especially the first-time homeowners who are not having such a measure of liquid cash to contribute towards their real estate purchase.

Narrower Lots:

With the advent of time, the lot sizes and their frontages are getting narrower, especially when we speak about freehold subdivisions being built in the Greater Toronto Area and beyond. This is happening as Real Estate is getting more prime in the region, and builders, due to sheer economics, want to ensure that they can get the highest efficiency from the land in their projects. You would see that not just frontage but the depth as well is reduced in newer builds when you compare this with older builds. A conventional 2-storey double garage detached, it was commonplace to have a 45 ft x 125 ft lot around 35-40 years back. And as of today, similar double garage detached 2-storey home are built on 35 ft x 90 ft lots. The backyard land front yard looks and feels stunted.

Ultimately, whether we go for a Resale or Pre-construction Real Estate, it totally would depend on your personal goals and needs. It would differ family to family; it's not one size fits all, and as we discussed here, both have their own unique merits and challenges. What might be great for you might not be good for someone else.

Thank you for your time today. If you find this information useful, please share it with friends and colleagues. Our dedicated team at Elixir is always here to offer personalized real estate advice. 

Wish you all the very best! Reach out to our dedicated team at Elixir for any queries you have in Real Estate, and we will do our best to help.

Mudit Mehta 

Broker of Record

ELIXIR REAL ESTATE INC.

Welcome, friends. Today we will explore the world of pre-construction real estate, exploring key considerations for selecting and evaluating these opportunities. When approached correctly, pre-construction projects can offer a robust option for building your real estate portfolio.

What is Pre-Construction?

Pre-construction involves purchasing property from a builder or developer when it's still in the planning stages, essentially buying it on paper. This often presents cost-savings opportunities for the consumer, as you commit to a purchase before the physical structure is built.

Condo Projects

The pre-construction realm encompasses both high-rise and low-rise condos and low-rise freehold developments, each presenting unique benefits and challenges. High-density condo projects are typically located in transit-friendly and accessible areas, zoned by municipalities for a denser population. These locations often come with the convenience of amenities and transit options. However, the living spaces in high-rise condo projects tend to be more compact, which can be a drawback in terms of both livability and rental appeal. Additionally, these properties often incur monthly condo maintenance fees, impacting the overall yield from rental income if you consider them as investment properties. On the upside, their smaller footprint and associated fees can result in a lower entry price point. In the Greater Toronto Area, condominium projects may take anywhere from 3 to 4 years to complete, though this timeline can vary depending on the builder and the efficiency of their supply chain and subcontractors.

Freehold Projects

As an alternative, there are freehold subdivisions and builder projects, typically found in low-density neighborhoods. These developments might include exclusive detached subdivisions or mixed communities with detached, semi-detached, and townhome dwellings. Such properties usually offer limited transit and accessibility options, often necessitating a vehicle for commuting and errands due to less frequent transit services. However, the rental yield on these properties tends to be higher, thanks to their larger living spaces, leading to potentially higher rental rates. 

The trade-off is a higher price point due to these advantages. The timelines for freehold builder projects are generally shorter, ranging from 1.5 to 2 years, but, as with condos, it can vary from builder to builder.

Condo Project Evaluation

To determine if a builder's pricing offers value and qualifies as a sound investment, consider an example: a builder launches a high-rise project with a 2-bedroom, 2-bath unit measuring 760 sq ft, priced at $680,000, with occupancy scheduled three years hence. To evaluate, compare this to similar units in the 700-800 sq ft range within newer buildings (0-5 years old) which were sold in the same community within the last 90 days. If the median sold price for these units is around $610k, the project may not offer the expected value. Conversely, if the median price ranges between $660k-$700k, it would represent a fair opportunity, considering the potential for market growth over the three-year period before occupancy begins.

Freehold Project Evaluation

Similarly, for a freehold project where a 3-bedroom, 2.5-bath, 2-storey semi-detached home measuring 1,450 sq ft above grade is priced at $650k with completion in 18 months. Your broker can help to pull all comparable Semi-Detached properties in the community which got sold in last 90 days. If the median sold price for similar semi-properties is around $580k, the project might not offer the best value. However, if comparable homes are priced between $640k-$675k, it could be a worthwhile investment.

In our examples for price analysis, we explored the sales which took place in the last 90 days. This timeframe could change based on the market behavior. If the market is saturated and balanced, it can be increased to even six-months to get even better handle on similar spec properties. On the other hand, if the market is very dynamic or is in a declining or inclining state, the duration of sales data potentially would be shorter between 30–45 days to capture the correct median price of comparable units. Maintaining objectivity in property valuation is crucial when investing in real estate at any time.

Legal Due-Diligence and Review

It's also vital to have your contract reviewed by a lawyer, especially given Ontario's 10-day cooling-off period. This would help to ensure the agreement aligns with your interests and would also help to review the development charges capping, assignment considerations, delay mitigation, and any other charges which you can expect at the time of completion.

In addition to pricing analysis, conduct thorough research on the builder's background, considering their past projects and reviews to ensure their reliability and quality.

Thank you for your time today. If you find this information useful, please share it with friends and colleagues. Our dedicated team at Elixir is always here to offer personalized real estate advice. 

Wish you all the very best! Reach out to our dedicated team at Elixir for any queries you have in Real Estate, and we will do our best to help.

Mudit Mehta 

Broker of Record

ELIXIR REAL ESTATE INC.

 The Assignment of a property is a process when someone who has signed an agreement with the Builder to purchase a property (hereafter referred as 'assignor'). And this original buyer allows another buyer to take the rights and obligations with the Builder. This new buyer is called as an 'Assignee'.

In this assignment process, the original buyer, the assignor, has yet to close the property officially, his mortgage hasn't started, and the title is not transferred to the actual buyers. No possession has happened. An assignment is sometimes also termed 'paper flipping'. This new buyer or the assignee is the party who finally completes the transaction with the Builder, sometimes called vendor or seller.
The Assignment can technically happen on a resale property as well, where the situation of the buyer clients changes and they are looking to assign their firm agreement to a qualified assignee. However, for the most part, you will see this happening with pre-construction projects for high-rise condos and low-rise freeholds.
The Assignment becomes a tremendous tool when the original buyer's (assignor) financial situation changes so dramatically that they are now looking to transfer their obligation with the vendor to the new buyer (assignee).

Reasons why the original buyers might resort to exercising Assignment,

1) Financial Situation - Financial situation of the assignor changes, and they want to hand over their obligation with the Builder (vendor) to another buyer (assignee).
2) Change of Plans - The plans of the original purchaser change for their own living, in terms of where they want to settle and raise a family etc.
3) Capitalizing on the Market – The assignor wants to book a profit on their purchase due to market growth; since they signed up with the Builder.
4) No Closing Costs - They want to get out of their contract with the Builder without committing to the mortgage and paying the land transfer tax to the government.

Let us explore the reason why and when the assignments work for the new purchaser (assignee),

1) They benefit on the purchase price, which would be slightly lower than the ready property available in the market, as the property is still not ready and available for viewing, and it is purchased on paper.
2) The incentive of getting into a brand new property without getting into the long wait for possession.
3) Less competition as fewer consumers are looking for assignments due to their intricacies on HST rebates and development charges we will discuss shortly. Assignment sales also have a relatively more significant deposit requirement, which contributes to the less competition we see here.

Let us go through a couple of scenarios with numbers to make it clear,
Buyer A purchased a pre-construction from Builder for a low-rise freehold 2-storey townhome in Jan 2020 for $485,000; they paid a deposit of 15% to the Builder within one year of signing, amounting to $72,750
Buyer A's personal situation changes, and they want to assign their obligation with the Builder to a qualified new buyer. They list the property on Assignment at $650,000. Buyer A becomes an ‘assignor’.

Buyer B is looking to buy a property in the area, and their broker is able to negotiate the Assignment. They negotiated and agreed on the assignment agreement at $620,000.  Buyer B becomes an ‘assignee’.
Similar 2-storey townhomes in the same area, which were relatively newer, are selling at a median sold price of $665k. 

The benefit of Buyer B is that they are getting the property for less than the market price and still being a brand new never lived-in property with a 7-year Tarion warranty. They are also receiving a discount on the price of similar spec properties in the area as they are willing to buy it on paper without having a look and feel of the property.

The benefit of Seller A, the assignor, is that he will not be incurring the closing costs in terms of land transfer tax, HST, development charges, furnishing costs for appliances, blinds etc, in the unit. And after not incurring these costs, he is still able to gain profit, which is why he is willing to let go of the entitlement for marginally less than the fair market value.

Now let us discuss on couple of finer things to keep in mind in dealing with Assignment Sales,
HST New Housing Rebate - You are eligible to receive Ontario's new housing rebate if you buy a new house from the Builder, up to a maximum of $24,000. Generally, based on your disclosure, the Builder will take this rebate directly from the government and build it into your purchase price. However, sometimes the builders don't do the same for the new assignee taking over the contract. In that case the assignee needs to come up with $24,000 at the time of completion. And later on, as they are utilizing it for their residence or lease, they can follow the due process and claim it back from CRA. However, when we are readying ourselves to buy an assignment, we should be prepared to take up this additional cost at closing.

Development Charges - The city and local municipality collect fees from the Builder when issuing the development permit. This charge ensures the commissioning of various services in the community as parks, street lights, roads, sewers, community services, paramedic services, police services etc. These charges are generally pre-calculated, and the builders will include them in their offered price. However, with the time elapsed between the actual approval of the permit and the final build, there could be a change in the city's budgeting, and they might ask for more development charges. In the pre-construction contracts, there is generally a capping clause on these charges. For example, suppose a person buys a pre-construction home from a builder with the Development Charges capped at $5,000. This means that if the municipality at the time of completion, comes back with an additional ask of $2,000, the buyer will be bearing this extra cost. If the municipality comes up with $7,000 as the further development charge, the buyer will pay $5,000, and the rest $2,000 will be borne by the Builder.

Deposit amount in the Assignment – Negotiation plays a very important role specially in the Assignment agreements between the assignor and the assignee. Let us understand with an example, supposed the assignor has paid a deposit of $80k to the builder, and the closing is 10 months from the day assignment agreement is being accepted by the parties. Here, the assignor might want to negotiate to take the deposit provided to the builder already from the assignee, as that would be his incentive to let go of the entitlement to the assignee. And they can utilize this amount and invest it elsewhere, as the closing is 10 months away. On the other hand based on the market it could be less than the original delivered deposit as well, if the closing is not far and both assignee and assignor agree on a smaller deposit, the rest would be accounted for at the time of completion. The release timing and payment schedule of the deposit in the assignment agreement plays a major role and is a big factor in the negotiation of a correct assignment agreement. The motivations of either side play an important part in agreeing to the the payment terms of the good faith deposit.

Due Diligence Clause - In terms of negotiating a correct assignment agreement, it becomes critical to put a due diligence clause to get the original APS signed between the assignor and the Builder and get it reviewed by the assignee's lawyer. The solicitor will look into these finer points in the original Agreement of Purchase & Sale between the assignor and the Builder, which might impact the bottom line of assignee as new purchasers. This is critically important as the assignee is taking over all of the obligations which are present in the original APS between the builder and the assignor.

In a traditional real estate resale transaction, two lawyers represent the buyers and the sellers. However, in the assignment sales on the day of completion, there are three solicitors involved: one representing the assignor, the second representing the assignee, and the third representing the Builder (vendor). Based on the documented assignment agreement, funds are distributed between the vendor for the original purchase price, and the appreciation, if applicable, is transferred to the assignor.


Wish you all the very best! Reach out to our dedicated team at Elixir for any queries you have in Real Estate and we will do our best to help.


Mudit Mehta 
Broker of Record
ELIXIR REAL ESTATE INC.
Off: 416-816-6001 | [email protected]

 

In this write-up, we will discuss the concept of development charges and those specifically in the pre-construction Real Estate both for condos as well as freehold purchases from the builder.When you are looking to buy a high-rise condo, low-rise condo or a freehold property as a pre-construction project or by way of an assignment sale, we hear a term called Development Charges. Development charges are the fees collected by the local municipality from the developer or the builders when they apply for a building permit, and it is issued.

These charges are meant to ensure that there are enough civic amenities like parks, street lights, roads, transit infrastructure, sewer pipes setup, community centers, paramedic services, fire services and police services, water and stormwater management etc. The purpose of development charges laid by a city is to ensure the growth costs due to newer dwellings and houses are recovered from the new builds and not the existing taxpayers of the given municipality.

It’s important to understand that Development Charges are not meant for operating costs or maintenance of existing infrastructure; the cities collect property taxes for that purpose. The development charges are for the initial commissioning and provisioning of the infrastructure to support the amenities of the new dwellings or apartments in a new building.

A municipality in three scenarios collects the development charges:
Constructing a new building
Making an addition to the existing building
Modifying a structure resulting in its change of use

Here is a table that will enlighten you on the development charges currently prevalent in the City of Toronto for various property types.




In this visual we can see the development charge rates for various amenities which are taken by the City of Toronto, this is a classification of how the various property types are charged for these amenities in the new permit applications.

To safeguard us as a buyer, we need to understand what is called Development Charge Cap; when we enter into a new construction purchase agreement with a builder, for both condos as well as freehold projects, we must ensure it is Development Charges capped to a certain amount.
The development charges are built into the price that the builder charges us at the time of launch of a pre-construction project; however, if the city increases their fees & levies during the construction period, they transfer this amount and charge the purchaser at the time of closing. The capping of development charges in the purchase agreements will give you peace of mind.
When the city fees for development charges increase during construction and after the initial permit approval,  the builder transfers this amount and charges to the purchaser. However, if in your initial contract you had a capped ceiling on Development Charges, your builder can charge you only up to a maximum of that amount and the rest will bear themselves. The cap will avoid any surprises when closing and need to arrange extra cash.

Wish you all the very best! Reach out to our dedicated team at Elixir for any queries you have in Real Estate and we will do our best to help.


Mudit Mehta
Broker of Record
ELIXIR REAL ESTATE INC.
Off: 416-816-6001 | [email protected]