Foremost Flexibility Enables Builder to Sell High

In the financial world timing is everything and the same holds true for builders, especially in the last few months with the cooling of residential sales in the GTA.

In the financial world timing is everything and the same holds true for builders, especially in the last few months with the cooling of residential sales in the GTA. For this Finch and Altona Road project, the builder was originally looking at selling the townhomes for around $500k, but with strong consumer demand, the pricing quickly moved to the $700-750k range before demand began to back off.   

In response, the builder’s strategy has been to build all 23 townhomes but sell only half now and sell the remaining half when the market comes back. 

Based on the builder’s credentials with prior projects, the great location, and the quality of the design and finishing of the homes, Foremost was quick to extend a $7,200,000 loan to finance the purchase of the property, fund development charges, hard construction costs, post letters of credits to the municipality, cover site servicing, and provide an interest reserve. 

Prior to funding the loan Foremost and the borrower mutually agreed that 52% of the project would be presold prior to the first construction advance, compared to common presales targets of 80-90% mandated by major lending institutions. 

This in turn not only made the initial presales hurdle much easier for the builder to reach but also gave the builder the flexibility of the sales he was seeking in order to maximize profits. 

“Not unlike any other project we finance, we’re there more as a business partner for the builder,” observes Foremost Financial executive vice-president Paul Rayment. “And we know the Durham Region market well enough to justify an inventory loan for the project so that the builder can sell the remaining homes when the market begins to heat up again.”

The project has been completed and a couple of the inventory units sold.

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