PURCHASERS OF NEW HOMES FROM BUILDERS
The process of purchasing a new home is VERY different from that involved in the purchase of re-sale home. Aside from the possibility/probability of a number of extra closing costs – see below there is the simple fact that the agreement of purchase and sale is very much more complicated than the type of agreement used in are-sale.
This brings me to my first point – it is imperative that our clients READ and UNDERSTAND the agreement. Although, We will read this document in order to ensure that there are no particularly onerous or unusual provisions, your reading of the agreement will educate you as to the general process and also as to the particular clauses included in your deal. Please call us with any questions that arise from your review.
In general, although your agreement may be conditional upon a lawyer review, this provision is not intended to give you the opportunity of re-negotiating your arrangements with the builder. Rather, it is intended to allow you to withdraw if the legal review brings to your attention provisions that you just cannot live with and that the builder is unwilling to amend. Some builders are more willing than others to entertain changes. A few builders actually design the agreement with the idea that the purchaser will seek legal advice and propose changes to which the builder will agree. This is all part of the game!
There are a few things to remember when buying a new home:
Your agreement with the builder contains ALL of the terms of your deal. Any verbal promises or representations are non-binding on the builder. If a particular issue is important to you GET IT IN WRITING.
The builder is entitled to delay the closing in accordance with the agreement and the Tarion – Ontario New Home Warranty Plan. Please visit their website at www.tarion.com for more details with respect to permitted delays.
In terms of closing date, you, the buyer, can best compare the scheduled closing date with the state of construction at any given time. For instance, if the builder is telling you that the home will be completed, on time, in three months and if no foundation has been poured, then, obviously, the builder is not being straight with you! As a rule of thumb, four months is the required time to start and complete an average home. This is assuming no strikes, labour shortages, weather or governmental delays.
Every agreement for the construction of a new home permits the builder to make minor changes to plans and specifications. They also permit builder substitutions for buyer colour selections etc. Efficient builders will consult with their customers when these types of changes are contemplated.
However, it has been our experience that many of our clients discover that the builder has made changes only when our clients make one of their periodic visits to the property! Unfortunately, in most circumstances builders nowadays are not responsive to their customer’s complaints that the customer was not properly consulted or notified of changes. Indeed, we have had many clients in the past few years who have negotiated for and paid for changes/upgrades, only to visit the home and discover that these items were not implemented. Rather than re-do their work most builders will simply credit the purchaser with the amount paid for the extra or change. If your agreement does not specify a dollar amount then the credit is likely to make the purchaser very unhappy. Accordingly, if your purchase price includes specific extras or changes make sure that a dollar value is listed, in the agreement, for each item.
As with many consumer-oriented decisions the best protection for the consumer is to obtain references from others that have bought from the same supplier of goods or services. A person who has bought from the same builder and is unhappy will be delighted to steer you away. By the same token, a happy consumer will gladly give the builder a positive review. How do you find someone from whom to obtain an opinion? I suggest that you knock on a door or two. The decision to buy a home is as important as any non-personal decision in a person’s life. Accordingly, a little self-protecting legwork by the purchaser is certainly in order. Although the costs involved in the purchase of a new home are, undeniably, higher than those for are-sale, there is one redeeming feature for first time purchasers. If you have never owned a home anywhere in the world then you are entitled to deduct from the land transfer tax otherwise payable an amount equal to the lesser of the tax or $2,000.00. There are special rules for persons who are otherwise eligible but who are married to an ineligible spouse as well as rules for eligible/ineligible unmarried co-buyers.
In the event that the builder requires an extension/extensions of closing do NOT sign any documents without speaking with us first. We do not want you to give up any of your rights under the Tarion – Ontario New Home Warranty Plan.
If you are arranging a new mortgage you should obtain a mortgage commitment that is binding upon the Bank/trust Company for a period of time expiring well after the closing date. This will guaranty your interest rate in the event of extensions of closing imposed by the builder.
Attached to this memo is a list of POSSIBLE closing adjustments. Unless your agreement includes an adjustment, either specifically or generally, then you are not subject to that adjustment. It is recommended that you insist that your builder quantify the amount to be charged for a specific item. If the builder is not prepared to do this then insist that h& at the very least, “cap” the amount to be paid. For instance, if you are responsible to pay for a water meter ask that the agreement contain something such as “said cost not to exceed $250.00” . You absolutely and unequivocally CANNOT rely upon the verbal representations of the salesperson or builder as to the amount of these adjustments. Finally, you should be very wary of any adjustments relating to municipal/governmental/educational charges or levies. You should absolutely insist that the builder deletes or “cap” these types of adjustments. If you do not, you could be faced with an unexpected adjustment of$500.00 to $5,000.00 depending upon municipality and house price.