Selling pre-construction condos has proven to be a sweet gig for Hersh Condos.
It’s not just because the real estate brokerage has sold dozens of pre-construction projects over the years. It’s also because Hersh Litvack, its president and broker of record, has a business card in the form of a Hershey chocolate bar and is nicknamed “The Sweetest Guy in Real Estate.”
Licensed with Hershey, the Hershey chocolate bars contain wraps with the brokerage’s information. It hands out about 5,000 of the chocolate bar business cards every year.
“I’ve had more fun with these business cards than probably anything,” Litvack says in a video.
Mitch Parker, marketing and sales director of Toronto-based Hersh Condos, says pre-construction condos are also a sweet deal for buyers and Realtors alike.
For buyers, “you get to pick a condo exactly to your specifications that’s going to be brand new, never lived in.” And when house prices are on the rise, pre-construction units appreciate in value between purchase and possession.
Commissions for agents selling pre-construction condos are typically much higher than for resale properties, he says. “On virtually all of our deals, the agent gets four- or five-per-cent commission – depending on what we work out with the developer – and the part Hersh gets is totally independent from that,” Parker says.
Hersh Condos, which has been in business for about 15 years, is not a direct-to-consumer brokerage. Projects by its builder clients are marketed to agents who in turn market to their clients.
It is currently marketing the latest phase of Charisma Condos by Greenpark Group in Vaughan, Ont. and Ultra Towns townhomes by City Park Homes in Thornhill, Ont.
Pre-construction condos received some negative attention in the GTA in 2018 when several projects were cancelled. From January to mid-December 2018, 4,202 new condo units were cancelled, according to condo analytics firm Urbanation.
But the cancellation problem has eased this year. “Of particular importance, virtually every project launched for pre-sale in the second quarter had received planning approval, reducing the risk of cancellations, which have been on the rise over the last couple years,” Urbanation said in a report on the second quarter of 2019.
In October, Tarion, which is tasked with administering the Ontario New Home Warranties Plan Act, announced that starting in 2020 new rules will require builders to provide buyers with information sheets highlighting the risks and considerations that come with buying pre-construction condos.
The information sheets, part of the purchase agreement, will include details such as the risk that pre-construction condos may never be completed, early termination conditions, information about the state of the development (including zoning approval and construction start date) and the expected date when the purchaser can take occupancy.
Parker says there are ways for agents and buyers to reduce the element of risk involved with pre-construction condos. He says they should ask such questions as: What are some of the finished developments they’ve done? Have they finished on time?
“You really want to make sure you’re working with one of the bigger and more reputable builders because the likelihood of them cancelling a project is much, much less than if you’re working with a guy who’s brand new or was a home builder who decided to do a condo tower for the first time.”
He says Hersh Condos gets approached by a number of developers who are new or new to the GTA, but “we’re very selective. It’s our reputation at the end of the day.”
Hersh has dealt with developers like Minto, Kingsmen Group and Lamb Development Corp. over the years.
Pre-sale condos “are typically going to be a little bit more expensive than resale,” Parker adds, but “you’re buying for less than what the building will be worth in the future.”
Parker believes that Toronto area real estate is cheap compared to where it’s going to be in the next 10 to 15 years. “In the next number of years it’s really the GTA that’s going to do exceptionally well. It’s not going to be a big deal in 10 years to say, ‘I live in Vaughan and jump on the subway to go downtown every day.’”
In addition, many buyers are looking not just for a condo but for a lifestyle, he says, and condo and town home builders are increasingly developing communities with “livability and accessibility” where everything you need is within a couple of minutes walk. “They’re not just dropping a building in the middle of nowhere.”
Hersh holds seminars with agents for each development it handles. “We just ran one where we had about 250 Realtors in our office,” who then bring their clients into the sales centre on specific nights, Parker says. During a recent sale event for a project in Burlington, Ont., 133 units were sold in one evening.
“We don’t really put a salesperson into a sales centre and grind the sales out one person at a time. We find that typically doesn’t work.”
Hersh also creates incentive programs for its condo projects. For Ultra Towns, a 55-townhouse development priced from $1.049 million to $1.3 million, Hersh created an incentive program in which purchasers get a cheque back from the developer for $100,000 on closing, which can cover the monthly mortgage, maintenance fees and property taxes for 24 months or reduce the down payment.
It’s “something unique that we’ve never done before,” Parker says of the cash back deal. “We think $100,000 is really enough to pique someone’s interest.”
Hersh recently launched the podcast The Hersh Condos Digital Experience, with the primary aim of helping agents do their job better.
In one video, Litvack teaches how to use social media to build your brand. In another, he stresses the importance of Realtors being nice. “If you’re just looking for your commission, it’s never going to work for you… If you’re looking out for your client, commission just comes naturally.”