TOP 10 WAYS first time buyers get into trouble when purchasing pre-salesPosted on March 30, 2016
Learn from others and don’t make these mistakes when purchasing a new home solely based on the show home!
Mistake #1: They fall in love with the show home
The result every builder is aiming for is that the buyer falls in love with the show home. Most people fall in love with the show home!… but you have to realize that everything you see in that model home is an upgrade, and the upgrades are a major portion of a builder’s 10% to 20% profit margin.
Mistake #2: They trust the floor plan
Ken Grunber, who works at a video production house in Toronto, found out too late that the new condo unit he bought in 2007 wasn’t nearly as large as advertised. When he and his partner moved in and measured the area, they discovered it wasn’t 700 square feet after all. The condo was actually 560 square feet—if you don’t count the balcony and bathroom.
Unfortunately, many new home decisions are based solely on brochures or artist renditions.
Mistake #3: They don’t get their contract lawyered
Whether you’re buying a new detached home or a condo, the purchase agreement is the legally binding document that spells out what you’re getting and the conditions of the sale. It’s full of fine print and legal-speak, and if you sign without legal representation, you risk being bound to terms you don’t understand or don’t want.
Mistake #4: They don’t bother with an inspection
During the home buying process there are two specific times when it’s important to have your house inspected. The first is the pre-delivery inspection, a mandatory walk-through for all new homes under warranty. This inspection takes place with your builder shortly before you officially take possession of your home. The second inspection should be scheduled for about one month before your home warranty expires.
Hiring a professional home inspector to do a second walkthrough before your warranty expires is a must! This will allow your home to go through all four seasons, which is enough time for major defects to start showing up, and you’ll still be able to get them fixed under the first stage of the standard provincial warranty, which covers against material and labour defects.
Mistake #5: They accept delays without a fight
Believe it or not, until quite recently, if your new house wasn’t ready on time, it was your problem. Builders were not required to provide reasons or to limit their delays. Now things have changed. If a builder misses critical dates and requires an extension, a buyer can either agree, and seek compensation, or simply get out of the deal. Get legal advice if the timeline changes drastically.
Mistake #6: They forget they are moving into a construction zone
Anyone considering a new condo or home purchase should take into consideration the impact of ongoing developments. One buyer recalls, who bought into the first phase of a three-phase condo development: “It’s noisy, everything is dusty and the air quality is just plain horrible—not even the best furnace filter could catch this dust. Combine that with the fact that the whole area is ugly for quite a long time and that access points can open and close, depending on the phase, and you have a recipe for long-term aggravation.
Mistake #7: They think they have a warranty—but they don’t
Most buyers assume that all new-build lofts, condos and homes are covered by a provincial warranty, but this isn’t the case. Only three provinces—We here in B.C., Quebec and Ontario—make warranty coverage mandatory. In fact, those are the only provinces that require new home builders to register with their respective provincial regulator at all.
Mistake #8: They’re not speedy with their warranty claims
Be proactive and understand that there are strict time limits on making claims. To ensure you understand how long you have, carefully read the package you get during the pre-inspection, as there are different deadlines for different types of warranty claims. While you’re reading your new home package, you should also familiarize yourself with the maintenance you have to do to ensure your warranty remains valid. For instance, if you forget to change your furnace filters or fail to clean out your gutters you could find a claim regarding deficient heating or water penetration into your basement is deemed to be invalid.
Mistake #9: They’re ambushed by hidden closing costs
When you sign the purchase agreement for your new place, many of the closing costs are estimates. These costs often escalate as you approach your possession date.
Mistake #10: They buy at the wrong time
If you’re buying a new condo or townhouse as an investment, the key is to get in as early as possible. In order to get the financing to start a new project, builders will often raise initial funding through pre-sales. These pre-sales often kick off with invitation-only VIP events. Usually, only high-volume realtors who specialize in the type of building on offer are invited. Once the VIP event is over, the builder will open sales up to all interested realtors, then finally they’ll open the project up to the public. Each local market has its own cycle, so it’s best to talk to an experienced realtor.