Toronto-area condos are cheaper than they have been in years. Can you finally afford to buy one?

The downturn brings its own risks, of course; to avoid selling at a loss in the immediate future, Re/Max realtor Jared Gardner urges buyers to make sure they’re purchasing something they’re comfortable owning for at least three to five years.

Still, for the first-time buyer crowd, he sees the allure. “There could be some really good buying opportunities out there,” he says.

With condo sales slow and supply ample, these new condo hunters are surrounded by options. So how do you make sure you’ve budgeted enough for the home in front of you — and aren’t caught off guard by the final price of a purchase? 

Here’s what real estate industry players say you should take into account. 

What does your maintenance fee cover?

While maintenance fees are an expected expense in condo buildings, what exactly is covered by those fees can vary widely, realtors caution.

Some fees will be wide-reaching, covering utilities like air conditioning, heating and water along with long lists of amenities from pools to pickleball. Others are more limited, covering the upkeep of common spaces like lobbies and elevators and contributions to the building’s reserve fund for major capital upgrades.

Realtors differ on their view of the ideal setup. Gardner prefers a building where utilities are paid separately by each unit owner, allowing them more control over their bills than if they paid a share of overall usage. “I always would rather be responsible for my own expenses because I may not use air conditioning 24/7 or have my house at 25 degrees in the winter,” he says.

Others see having fees that are inclusive of more utilities and amenities on-site — which tends to be the case in older condo buildings — as attractive. James Frodyma, an agent with Sutton Group-Admiral Realty, sees value in the more plentiful amenities he typically sees in these buildings, in addition to the inclusive utilities. While fees can be higher, he noted older units tended to be larger in size, allowing a household to grow. 

Stephanie Newlands, an agent with Heaps Estrin, says she generally advises clients that costs below $1 per square foot for maintenance fees are a good deal, but that higher fees could be worthwhile if, for example, an older unit had a lower overall price.

Financial health of the building

Reviewing the building’s status certificate is another major safeguard to your finances, realtors say; that document gives financial information like the size of a reserve fund, which is a pool of money that all owners contribute to via their condo fees to cover both planned and unexpected repairs to common spaces.

It’s important to consider if the reserve fund is sufficient to cover any forthcoming repairs, Frodyma says. If it isn’t, residents may face what’s called a special assessment — a process that determines how much more money each condo owner will suddenly owe to the condo to make up the gap.

A real estate lawyer can help a buyer with this review, Frodyma says, but buyers should be sure they’ve budgeted for the legal fees that process entails. 

With condo fees, if you see they’ve gone up over time in a gradual sloping pattern versus sudden hikes, that’s also a good indicator, he says.

Gardner cautions that condo fee change trends may be trickier to determine in a new-build versus in an older condo building. “One of the risks associated with new is the condo fees might skyrocket up right away,” he warns. 

Mine versus ours

Buying a condo means owning your own space and sharing responsibility for common assets — meaning new buyers should know which repairs they’ll have to cover out-of- pocket versus costs covered by management. Your balcony needs repairs or windows need replacing? That typically covered by the condo management, Frodyma says. “But if any appliance was to break down, or your fan coil on the AC unit stops working? Sometimes that’s the responsibility of the owner.”

Newlands notes that kind of information would be included in the status certificate. Closely reviewing that document, she says, can “hopefully make people feel very comfortable knowing exactly what they’re responsible for.” 

Sealing the deal

One big cost realtors say homebuyers need to be aware of is the land transfer tax. In Toronto, buyers owe land transfer money to both the province and the city, though some rebates are available to first-time buyers. “The biggest one people are not aware of is land transfer tax,” Gardner says, noting there are also geographic differences. While working with a buyer looking in Etobicoke, he advised that their tax costs would vary if they went to Mississauga instead.

The exact amount a buyer owes in land transfer taxes is calculated and paid at the time the real estate transaction closes, and depends on the purchase price of the property.

Another potential cost associated with a home purchase is an inspection, which Frodyma says he encourages in the condo market downturn, where buyers have less pressure and can include conditions in their offers. That makes it easier to know when, for example, an appliance is at the end of its life. “A lot of people will skip them on a condo, which I think is a mistake,” Frodyma says.

Other costs a buyer will face include title insurance, which protects an owner if there are issues related to the property’s title or ownership, and moving services. 

Newlands says she typically sees mortgage brokers having conversations about the full brunt of purchase costs, including factors like property taxes, during pre-approval for their mortgage amount. It’s one reason she strongly recommends potential buyers get pre-approved upfront. 

So, you’re in the unit — now what?

Your monthly costs are more than your mortgage bill and condo fees: new buyers should factor in any other ongoing financial pressures, such as any potential imminent renovations or repairs. 

“In a condo, I would always say leaving a rainy-day fund for surprises is certainly less than a freehold property would require year-over-year, because you’ve got the protection of the major functions of the building being taken care of in the maintenance fees,” Newlands says. “However, I would always recommend leaving a little bit of money on the side, for if your appliances were to break down or if you had any unexpected water in the unit.”

Gardner recommends his clients ideally set aside $10,000 to $25,000 they would otherwise put toward a down payment for unexpected repair needs in the first year post-purchase. To him, it’s a kind of personal “reserve fund,” and a piece of advice he learned the hard way after buying his own first home. 

“I remember my AC breaking — and not having money to fix it.”