One of the nice things about purchasing a condo unit is that they are relatively straight forward to value. Your standard downtown condo will have a couple of hundred units with sales occurring with regular frequency. Comparables are readily available and standard adjustments to finalize valuations are based on floor, layout, condition, status certificate, views, etc.
In this post I will highlight two factors that I’ve seen come up during due diligence that can have material impact on negotiations and price: square footage and nearby projects.
The baseline metric to start a market assessment for a condo is the most recent price per square foot for an equivalent size condo, from there you make the necessary adjustments to determine market price. One of the biggest issues with the current MLS system is that there is no requirement to state the exact size of the unit. MLS only requires for realtors to pick a range and in many cases listing agents include remarks such as “All measurements to be verified by buyer or buyer agent”. Some listings will have floor plans from the builder, others will list MPAC square footage, and many list nothing but a general range like 500-599.
A recent condo I looked at was advertised as 560 SF, whereas the MPAC report stated it was 523 SF, common discrepancy and one with a price swing of over $40k+ on a PSF basis.
Another material and less obvious issue is the construction of future projects nearby and their impact to existing buildings and their residents. Investor preferred units are generally on lower floors as they are cheaper (no floor premiums), however construction noise from proposed future projects is a large risk for rental rates and resale in the future. An example of this is a unit I looked at 318 Richmond, a great location, however a low floor unit facing a proposed condo project slated to replace the Scotiabank theatre. Great example of a unit that educated buyers should expect a discount on for the risk they are taking on for holding this during the construction period.
Buyers beware. #realestate #toronto #condos
