Monday, April 13, 2009

Accès Condos and the Lure of Free Money

The fire that gutted 96 units under construction in the Faubourg Contrecoeur condominium development has focused attention - though not the best kind - on the city's Accès Condos program.
As many as 40 buyers were hoping to move into their affordably priced condos between now and July 1 on the site of the old Lafarge quarry in Mercier. Those plans are now on hold until at least October, following a suspicious fire that razed the project to its foundation. The arson squad is investigating.
It is a stroke of pure misfortune for buyers using the Accès-Condos program to become homeowners.
Accès-Condo works in two ways. First, the municipal housing agency, the SHDM, sells land to builders at an advantageous price if they promise to build affordable housing.
Next, the SHDM advances buyers 10 per cent of the purchase price as a down payment. Buyers are only obliged to put down $1,000 of their own money.
The cash advance is repaid only when the owner-occupant decides to sell, whether in a year, two years or 25 years. At the time of the sale, the vendor also has to pay the SHDM 10 per cent of the profit.
I love the concept of Accès Condos, but there are a few things I would advise any buyer before plunging in. This advise is based on my own experience as an agent, working both with buyers and sellers.
Don't buy into the project as a short-term thing. If you buy today and sell next year - your home will not have risen in value sufficiently to pay off the SHDM "loan" and part of the profit. You also run the risk of competing with other unfinished and unsold units still available in your building. This investment will gain in value the longer you hold onto it.
Beware of shoddy workmanship. These condos tend to be quickly built, using cheaper finishes and less than careful workmanship. In one Acceès Condos building where I had a unit for sale, gaps appeared in the hardwood floors every winter when the heating came on, the air dried out and the wood shrank. The gaps closed in the spring and summer, but they looked like hell for five months of the year. Buyers were not impressed.
My advise? Accès Condos is fantastic for buyers who are unable to scrape together a down payment on their own. It has helped working families in places like St. Laurent, Cartierville and Côte des Neiges buy three-bedroom condos at reasonable prices, allowing them to stay in these neighborhoods.
There's no such thing as free money, however. My advice to a first-time buyer would be to scrape up the money for a down payment on your own and buy a place that you really love in a neighborhood that you really like. Buy to stay, not because you're getting a deal.

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