Buying a brand new home from the builder be it a detached house, townhouse or condo is a popular choice.
Almost one third of the all homes sold in Canada each year are brand new. In Ontario alone, more than 52,500 buyers chose newly constructed homes last year and the forecast by the Canada Mortgage and Housing Corporation (CMHC) predicts that the number will continue to grow.
When buying from the builder , buyers are driven by the idea to have a dream home which they can customize according to there exact tastes. It means higher energy efficiency ratings than older homes, and often higher quality building materials. The maintenance costs in the new homes are lower comparing to older homes and there is a little chance to surprise yourself with a cracking or tilting foundation, severe plumbing, asbestos or knob-and -tube wiring.
BUT…. practice shows there are some pitfalls specific to new purchases too, pitfalls that you have to be aware of.
Here are the most COMMON MISTAKES that new buyers make. Make sure you know them, try to avoid and do not repeat.
Do not get fascinated by the Model Home!
Most people fall in love with the model homes, but it is very important to realize that everything you see in the show home is an UPGRADE. And upgrades are a major source of a builders profit margin (may total to 10-20%)
Builders tend to charge double the sub-contractor’s fee- this cost normally is placed on the shoulder’s of the buyer. To give you a quick example…. 10 000 $ granite countertops that you ordered from the builder really cost the builder 5000$.
I am trying to say- do not order upgrades at all. No…. but when ordering pay attention to the what is an upgrade and what is not. Builders will not accept bargaining on the base home price, upgrades is the field where you negotiate and ask for a major discount. The rule is the more upgrades you order the bigger discount you get. Let’s say, for 5000$ in upgrades the builder may give you only 10% discount, but if you purchase of upgrades reaches the 50 000 $ mark or more ,do not be shy to ask for 10 000 to 15000 $ off the final price.
Never Trust the Floor Plan 100%!
How many examples we can count when a purchaser of the pre-construction unit gets a unit which is not nearly as large as advertised.
Make sure, you ask your builder if the square footage of the balcony and the bathroom is included in the total square footage, otherwise instead of the expected 700 sq feet condo you actually end up getting a 570 square feet of living space. Be careful, do not 100% rely on the verbal assurances of the sales staff, brochures or the floor models. However, in reality when we go in the pre-construction project, the only source we base our decisions upon is the printed materials. My advise-always read what the small fonts and asterisked remarks say.
Legal representation is crucial in the buying process of a new home. Try no to neglect it! When you sign the contract without lawyer’s consultation you are running a risk to be bound to terms you don’t understand and don’t want to. Skipping the legal advice may result in various type of inclusions and substitutions that can affect your house in the future. When buying a condo in Ontario, you have a cooling off period of up to 10 days during which you should go and spend 800-1500$ on your lawyer to go over your contract. If you do not like what lawyers find , you have a right to back out of the deal.
In the newly built freehold purchase, vendors try to make you sign the agreement right away to lock the price and lot choice, but there is a possibility to try to make it conditional upon lawyer’s approval.
Hire a home inspector before your warranty expires!
Saving 350-600$ on a professional home inspection before buying a brand new home may be a reasonable solution, but make sure you are ready to spend this amount prior to the broader portion of the Tarion Home Warranty expires which is 12 months after you take possession of the home.
If the major defects are revealed before the expiration date of the first stage of the standard provincial warranty on material and labor, they have to be eliminated by the builder at no cost to you.
If the delay happens, do not ignore it!
Since 2002 Tarion warranty has under gone some major changes regarding builder delays. Now, when the critical dates have been added to the agreement of purchase and sale, a buyer has a right to either agree, require compensation and say: ‘NO’ to the deal. Legal consultation is always advised when it comes to the request to delay a critical date.
Find out as much as you can about future developments around your purchase!
A promised fabulous lake view by the builder may be blocked within a year or so by the another development project rising up right in front of your building. This may badly affect the value of the unit and bring you huge disappointments.
Beware of hidden closing costs
When you sign the agreement of purchase for a new home, keep it in mind that most of the closing costs are estimates.
The closing costs can easily double or triple by the date of the possession date. The major adjusted charges are coming from hooking up electricity meters and hoking up gas, mortgage discharge fees, area development fees.
Buy in the right time!
When you are thinking about buying the freehold home December and January are perfect months to do that. This is the time when the activity in the market is relevantly slow and you have more bargaining power as a buyer. Also, consider July and August, when most of the people are on vacation and do not have time to look for homes. Anyway, try to get advice from your local Realtor regarding when is the best time to buy in this particular area
If you are on the market for a pre-construction development condominium and looking for a good deal, the best thing to do is to connect with the right real estate agent to get access to the so-called VIP Agent Sales event with invitation-only. This way you can save thousands of dollars and get the chance to be among the first to select the unit layouts. Once the the VIP Agent Sales Event is over, 50% of the units (that is what’s normally left after the VIP AGENT Sales event) gets thrown to public with the price increase of 3-4 times.
If you are considering buying a new home and looking for an advice, please, feel free to send me an email with your questions or give me a call and I will be happy to address your personal concerns about getting into new adventure of buying a new home.
SUTTON GROUP ADMIRAL REALTY BROKERAGE