Tricks of the Trade- Buying New

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BY: JAY BRIJPAUL 

John and Mary bought their first newly built home two years ago and closing is quickly approaching. They had already signed off on the pre-inspection and in a few days, they will receive the keys. It was a long wait, but they were prepared for it.

Before purchase, check the builder’s reputation. Talk to the neighbours that are already living there. Check with the Canadian Home Builders Association if the builder is a member. Consider the builder’s after sale service and what is covered by the warranty.

When buying new, plan for the next five to ten years. Will the family structure change? Take into consideration additional parking and consider changes in lifestyle. Seniors may want a bedroom and a full bath on the main floor while a young couple may want to raise a family. Choose a location that is right for you. Always take into consideration schools and commuting time. The next step is to take a realistic look at your financing.

Unlike resale, new home purchases can be daunting. Hidden costs, such as development fees, deposit verification fees, mortgage discharge fees, education lot levy, builder’s lawyer fees, new home warranty fees, water, gas and hydrometer fees and many more, cannot be added to the mortgage. All of this is in addition to the down payment.   

The salesperson works for the builder and usually coheres buyers to buy on the spot. In Toronto’s hot housing market, buyers would line up for days to buy and getting a chance to purchase is equal to winning the lottery. Unlike condominiums, purchasing freehold properties do not have a cooling off period. However, some builders will allow the buyers forty-eight hours. Make the contract conditional upon your lawyer’s approval.

Most people fall in love with the model home but almost everything in the model home upgrades. Budget yourself and choose only the most important upgrades. Builders usually make the most profit on upgrades. Choose upgrades that are easy and cost-effective to do at the time of purchase such as higher ceilings, larger basement windows, and separate basement entrances. Upgrades such as thicker carpets and granite countertops can wait.  Banks will finance the property at base value and may not cover the cost of upgrades. The closing cost and cost of upgrades may be out of pocket expenses.

When buying new, expect delays. Builders will give adequate notices in the event there is a delay. The contract may have a “critical date” and if passed, the buyer can agree with the closing and seek compensation or opt out of the deal. About one week before completion, the builder will schedule a pre-inspection.

At the pre-inspection, check if the home is built according to the plan and look for imperfections and defects. I saw new homes without insulation in the attics, toilets that are not anchored and missing towel racks and dryer vents. It is important to have homes inspected by professional home inspectors. After the inspection, the builder will give you an inspection sheet to sign stating that you reviewed the home and that you are satisfied with everything except the defects listed in the statement. If you missed something and it is not covered by the warranty, the builder can refuse to fix it.

New homes are protected under a private third-party warranty. The warranty will cover deposit insurance, protect against work defects and materials and major structural defects but may not cover everything. Before the warranty expires, get another home inspection done so that if there are any defects, you are covered.

New home purchases are a roller-coaster adventure that can be exhilarating and exhausting but with careful planning can be the most rewarding.

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