Some home buyers believe that a brand new home is automatically better. They feel that a new home is like a new opportunity, and the chance to make something your own. A newly-built home means that you do not need to worry about previous owners or tenants, or any information they may not have revealed during your transaction. The older a home you purchase, the more stories it has to tell — and those stories may not always be happy ones.
Instead, a newly-built home offers the peace of mind that the home and everything in it is a brand spanking new. You need not worry about the age of the water heater, the state of the roof, or any wear and tear on the foundation that you cannot see. You know the exact age of everything and can take comfort in the fact that you will likely not need to do any major repairs or replacements out of warranty for quite some time.
Yet with that comfort can come some fairly significant costs, especially if you are trying to build your dream home. With roughly one-third of Ontarians buying newly-built homes each year, we wanted to take a look at the good, the bad, and everything in between.
The Pros of buying a newly-built home
The price structure for new builds is significantly different than it is for existing homes, but that can be an advantage for some buyers. Prices for new homes are relatively established, given the fixed cost of land and materials, and so there is no need for buyers to worry about cutthroat negotiations or last-minute bidding wars. Buyers also do not need to worry about the cost of a real estate agent, since their commissions in the transaction are generally covered by the builder, not the purchaser.
Best of all, new builds can be the right option for those on a tight budget. Instead of a lump sum downpayment, the payments work in intervals, giving a buyer time to stretch out their spending and improve their financial situation over a longer period.
The other best part of purchasing a new build, should your budget allow, is the ability to customize your new home wherever possible. Unless you plan on undertaking significant renovations to an existing home before moving in, you are generally subject to the choices of prior owners. Furniture and wall colours may be easily interchangeable, but layout and configuration are harder to overhaul. Instead (and for a cost), buyers can work with a builder to adapt plans, change layouts, and implement whatever upgrades they are willing to finance. Remember that a show home you may see when deciding to buy is just that and that changes or customizations are possible. This can result in a home that is custom-built to your tastes, rather than strolling through an open house and envisioning your furniture instead of a stranger’s.
While a new home may be customizable and has the potential to be upgraded from the beginning with all the bells and whistles, that does come at a price. Newly-built homes can be 20% more expensive than existing homes, which is a hardship for some buyers. There is also the issue of HST to consider with newly build homes although HST rebates may be available to lessen that burden. The expense of a new build can be significant, especially given the timing of construction. It is difficult for some purchasers to fathom the idea of sinking that much money into an investment that may not be ready for several years.
There are logistical challenges to living in a brand new neighbourhood as well. Cosmetically, buyers expecting an established boulevard and tree-lined streets will be disappointed by gravel driveways and bare saplings. It can take several years for a neighbourhood to establish its character, which not all home buyers would appreciate. Geographically, newer subdivisions can be situated in the remote outskirts of a city, and it can take several years for local commerce and retail options to become available.
Most importantly, a new construction project may only be as good as the reputation of its builder. Prior to signing anything, research the builder and their experience thoroughly. Check into how many projects they have completed, how many of those were done on time, and if they have any significant complaints against them. There are inevitable delays in construction, such as weather events, which may be outside of a builder’s control. Yet doing your homework on a builder’s background ahead of time may help ensure that they will do everything in their power to deliver your home as promised.
What You Need To Know
When purchasing an existing home you have a strong sense of the item you are purchasing, and an inspection can clarify any unknowns. With a new home rather, you are effectively signing a very expensive contract. Ensure that everything you and the builder have agreed to is set out clearly in writing before you sign your agreement. If they have not offered a ‘cooling-off period (mandatory in some transactions), ask for one to be included in case you get cold feet and need to back out quickly.
It is crucial before signing off on a new build to understand what your warranty does, and does not cover. The builder will go through the property with you prior to moving in, but hiring a third-party inspector before your warranty expires is even more important. Your builder is responsible for making repairs on items covered by the warranty, but warranties have strict time limits in terms of reporting any defects. Ensure that you read every line of the warranty package that you are provided so that you know what rests on your shoulders, and what timelines may help or harm you depending on the circumstances.
Most importantly, hire good counsel to represent you in this process. An astute lawyer will review every letter of your agreement and will inform you of exactly what you are signing up for. A careful legal review can help you avoid any unexpected surprises from the construction process, or can hold the builder accountable if they miss any steps.
Real estate lawyers are always necessary for purchase and sale, but rarely are they more important than when buying a newly-built home. Our team at Pavey Law has extensive experience helping with real estate transactions in the Cambridge, Kitchener, and Waterloo areas. We would be pleased to work with you in helping review your agreement, and representing your interests so that you truly end up with the home of your dreams