Should "VIP" Condo Sales Be Banned?
Doesn't it seem like every time you try to buy a pre-construction condo in TO, it's already sold out?
If you've ever tried to buy a pre-construction condo in Toronto, I'm sure you've experienced this:
"Oh look, a development proposal sign just went up in that parking lot! Great location. I'd definitely invest there. I'll wait for the sales center to open and I'll be first in line!"
Two months later...
"Looks like the development sign is still there, but no sales center yet. They must be going through the planning process. I'll still be first in line!"
Two months after that...
"Oh look, some agents on Facebook are advertising a condo coming to that parking lot! Maybe I'll sign up for their VIP list, just to get some info. It says they have guaranteed units. So I definitely won't miss out!"
And another two months after that...
"Hmmm... now I'm seeing billboards go up about the condo. I'd better register with the builder's website as well, so I don't miss out."
Yet another two months after that...
"The sales center is finally opening! But it says 'private appointments only'. How do I get an appointment?"
And still another two months after that...
"The sales center is finally opening to the public this weekend! But wait, who was it open to before? I'd better get there the minute it opens! This way I won't miss out!"
And finally, that weekend...
"Well I'm here, at 9am, before anyone else. Now I can snap up the best unit!"
Salesperson: "Hello sir, thanks for coming! We are 99% sold out but we have a couple great units left overlooking the garbage bins in the back of the building! You don't want to miss out!"
And this is the experience many, many, everyday condo buyers in Toronto have when trying to purchase a pre-construction unit.
Where do all these units go? Most units are first sold to "insiders" - friends, employees, and family members of the builder typically get the first shot at units, and at the best prices. Then, "VIP" or "Platinum" agents are given the opportunity to bring their clients to get a shot at units before the general public.
Who are these "VIP" agents? Every builder has their own criteria but they are typically agents who have done a lot of business with the developer and sold a number of units in their past projects. And as a reward for their continued business, they are given first access to the developer's next project.
So when does the general public get to buy?
The general public gets whatever is left after the initial insider and VIP sales, and almost certainly at higher prices. And in most cases, especially today where buyers (end-users and investors) snap up pre-construction condos like you wouldn't believe, there is almost no inventory left by the time the sales center actually opens to the public.
Is this fair?
The provincial government seems to think not. Their latest crusade seems to be aimed at cracking down on these insider and VIP sales because it doesn't give everyone the opportunity to buy on a level playing field.
But I personally don't think the government should dictate how and to whom a vendor should be allowed to sell their product. Is it frustrating for everyday agents and their clients who can never seem to buy units in new developments because they are sold out before the sales center even opens? Absolutely. But is it the role of government to tell a builder how to sell their product? Definitely not. I've been shut out of new developments before and I still don't think the government should intervene or restrict how these developers choose to sell their inventory. It's how they choose to sell and that's their right.
RECO has cracked down on some shady practices in the pre-construction game, like agents charging fees for access to units in a new development before the general public, and false advertising claimes like "guaranteed units available". But as far as dictating who, how, and when a builder is allowed to sell units - that's something I think the government and regulators should stay out of. Because where does it end? Will they then try to dictate how much these units should be sold for? It's getting a little too close to yet again messing with a free market and that's not a good thing for anyone.
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Your Toronto condo lover, Adil Dharssi