If you are buying a brand-new home, you will likely be asked to sign the builder’s form of Agreement of Purchase and Sale. Have a real estate lawyer review this document with you to make sure that the contract works out favorably for you. No two builders use identical forms and they differ quite a bit from the standard Real Estate Board forms. Additionally, builder’s agreements of purchase and sale are often lengthy and weighted in favor of the builder in terms of price, extras, delays and even the obligation to complete the transaction.
Hidden extras can cost hundreds and even thousands of dollars, so when you buy a new home make sure that the builder is registered under the Ontario New Home Warranty Plan, and that the Goods and Services Tax is included in the purchase price of the home.
Builder offers tend to be very complex, so don’t be surprised if you spend thirty to sixty minutes mulling it over with your lawyer. It is always important to find an experienced real estate lawyer who can be trusted to provide sound legal advice and assistance during these complicated proceedings.
Detailed below are some of the things that you need to know before making an agreement with a builder.
Things to remember when buying a newly-constructed home from a builder
When you decide to purchase a brand-new home, you are choosing to make a hefty investment toward your finances as well as your future. This method of home buying grants you the flexibility of shaping the appearance of your home without the lengthy and extensive dedication that is required in constructing a home yourself. However, not all of the important decisions are out of your hands. You still have to consider
– The lot where you intend to build
– What upgrade options you want for your home
– A home builder that suits your needs and budget
Buying a newly constructed home takes a lot of time, and occurs over the span of several stages. Because of the many steps involved in this process, it is vital that you take some serious time to soul-search and decide what your priorities will be during the construction of your new home. Other things to consider early on are what features you’d like to see in the home, as well as where you can get pre-approved for a mortgage. This will help you to determine your price range.
After you have figured out what you want out of your new house and how much you’ll have to spend, you can start exploring what is available with an informed perception. Take a look at local real estate listings in the paper or online to see what builders in the area offer. It’s also wise to attend home shows, where you can meet local builders as well as get a glimpse into the latest and trendiest home design features.
Home builders have model homes where you can go in to observe examples of their work. You might also end up making a visit to sale centers or offices, and it is important to take a good, long look around you when you go to these places. Make notes of what you like and don’t like, as this will make it easier to draw up comparisons when you are deciding on a home later on in this process.
It’s important to remember that all of this is about getting you the home of your dreams. It’s about you, your investment, your future. Don’t let yourself feel rushed at any point, and never be afraid to ask questions of your builder. Keep in mind that you have options, and make yourself as informed as possible by researching into prospective builders that you’re looking into to help you shape your dream. Look into information on other home models that they offer. Compare floor plans to find the one that best suits the needs of your family and lifestyle.
While we’re on the subject of doing your research, it’s not enough to just look into models offered by your builder. It’s important to feel secure that the builder will be fair and competent while developing your new home. Find out the basics, like:
– How long they have been in business
– Whether or not they are a member of a local home builders’ association
– What warranties and after-sales services that they offer
– Examples of their previous work
– Payment scheduling policies established by the builder
After you have made a decision about the home that you want built, you can request for the builder to draft a sales agreement. But before you put pen to paper and sign a thing, make sure to have your lawyer review everything to make sure that your rights are protected and that your needs are going to be fulfilled. After the agreement has been made and then signed, you will work alongside the builder or their representative to make sure that the home is built as you want it to be. Your builder will likely ask you about things like where you prefer electrical, telephone and cable outlets, as well as color schemes that you might have in mind.
Prior to the completion of your home, you will be asked to join the builder on a walkthrough of the home to check and see what work has been done and what yet needs to be finished. Your builder should provide a certificate of completion to you at the end of this walkthrough, where you can note any outstanding tasks that are not as of yet completed. This work should be finished by the time you move in, or shortly afterward.
On the closing date, your builder will exchange ownership of the property for the remaining balance owed to them. You will then get the keys and ownership will be transferred from the builder to you, the purchaser. This transfer of ownership over the property will be completed through lawyers who will register all necessary documents with the appropriate authorities.
Up until the first year of you living in your home, the builder will come back to touch up small imperfections that may occur due to the normal settling process of the house and the drying out of materials.
A pre-delivery inspection occurs when you and your home builder get together prior to closing and a list is created of any tasks that are still incomplete, damaged, missing, inaccessible or are in some other way deficient. During the inspection, the builder is required to explain to you how the systems in the home work and how to maintain them, as well as provide you with a Homeowners Information Package. The package will contain important information about your warranty coverage on your new home.
At the inspection you will be asked by the builder to sign a Certificate of Completion and Possession. This will establish the date wherein you took possession of your home or condominium. This date is considered to be the start date for any statutory warranty coverage in your home.
Every new home in Ontario comes with warranty coverage provided by the builder and guaranteed by TARION Warranty Corporation.
For purchasers of new homes and condominiums who took possession of their home between September 1, 2004 and July 1, 2006, the maximum coverage for warranty protection available to them is $150,000. After July 1, 2006, the maximum coverage was increased, doubled to $300,000. This coverage begins on the date of possession and remains in effect even if the house is sold to someone else before the expiration of the warranty. As long as the purchaser formally reports the home’s deficiencies before the end of the warranty period, it will be honored by TARION.
There are variations in warranty periods depending on what deficiencies are involved. The Ontario New Home Warranties Plan Act outlines warranty protection that new home and condominium builders must provide as well as any items excluded from warranty protection. Examples of items not covered by the warranty includes defects in materials, design and work supplied by the purchaser, and normal wear and tear caused by improper maintenance.
All builders request for the purchaser to make a deposit on your new home, and many of them will also require partial payments throughout the construction of your brand new home. Sometimes the deposit is staggered. This means that, for example, 10% of the purchase price is required with acceptance of an offer, another 30% paid 90 days after the offer is accepted, and so on. The total deposits can add up pretty quickly and may exceed what is insured by the TARION New Home Warranty Program. The program will protect your deposit on a new home up to a maximum of $40,000 per home.
With the help of your lawyer, you can amend the offering agreement so that any money you deposit in excess of $40,000 is payable to the builder’s lawyer. This money can only be released upon the final closing of the property transaction.