How to avoid costly mistakes when buying a new build

Who doesn’t love a brand-new home; a house that no one has ever lived in before? Your dream home, a fresh, clean slate with nary a fingerprint on the walls. Sometimes, though, you get so caught up in the excitement of buying that new home, you might gloss over key details that could cost you money.

So says Patrick Francey, CEO of the Real Estate Investment Network (REIN).

“Your best defense against making costly mistakes is due diligence… be excited about your new construction, but don’t be so swept up in the emotions,” Francey says. “Do your research, take the time it takes so in the end, it takes less time and less stress.”

Here are Francey’s top seven costly mistakes to avoid:

1. Not choosing a qualified real estate agent and mortgage broker who specialize in new builds

You want to hire those who work exclusively with a developer or are well versed in new builds. The best source for finding a specialized realtor/mortgage broker is referrals. Then, don’t be afraid to ask them questions about their experience.

2. Not vetting the builder

Not all builders are created equal. If you have never bought a new build before, one of the first things is to check the builder’s credentials: How long he/she has been in business, are there complaints against them, do they owe money to their trades people? If he is legitimate, he will be happy to provide references. Then call past clients who can vouch for them. Never sign a contract until you have checked the builder out.

3. Making an offer without conditions clearly stated in the legal documents

For example, never buy a home without first having a “subject to finance” and “subject to satisfactory review” written in the documents filed by a lawyer. Also, read the contract so you know exactly what is included in the price … is landscaping included? What about light fixtures?

4. Not being clear on what upgrades are included in the price

Some people think that if they buy the show home, they get every upgrade included in the price. Unless it’s clearly stated and in written form by the builder, you need to ask. People get a surprise when changes they’ve asked for come with a cost. Maybe in the middle of the build, you’ve decided you want to change the paint colours or you want better quality or more a powerful electrical supply. All of a sudden, you have added $1,000 more to the cost of your new home. Unless the builder stipulates in writing that the upgrades will be done without incurring a cost, assume you will be charged.

5. Not understanding the builder’s warranties

Every province has new-home warranties but what about your builder’s warranties? This also goes back to references and referrals. You must ask the builder what warranties he offers. Builders sometimes offer an “express” warranty, which has more precise wording on what is covered, and cut-off times for varying parts of a new build. A builder’s warranty spells out the remedies a builder is responsible for if there are any issues during or after the build, as well as the duration of the warranty and a mechanism for disputing issues.

6. Unsure about financing rules

When you have a house built, you need to know in advance what your financing obligations are. What if through the course of the build, a new stress test is applied or interest rates go up? Or what advances are required and when? Ask!

7. Move-in date delays

Delays happen and that’s why you want a lawyer involved to spell out terms in the agreement about what the builder is prepared to pay for and what you are prepared to accept, like a hotel room(s) if you have to be out of your home, and moving charges.

M.I.C.s: An alternate way to finance a new home