Are you looking to move to a new subdivision? Are you thinking about buying a detached house, townhome or condo that hasn’t been built yet?
Before you’re seduced by shiny quartz countertops, heated floors and flex space in glitzy model homes, consider the advice from these top experts on what you need to know before buying a new build.
Kevin Lee, chief executive officer of the Canadian Home Builders’ Association (CHBA), Ottawa
How is it different than buying a house that’s already built?
A new build is all about choice and getting the latest and greatest. You choose the builder and style and get to personalize your home with different feature finishes. Today’s houses are built to the latest building codes and beyond with options such as net zero homes (up to 80 per cent more energy efficient than conventional residences). That translates into better home comfort.
Walking through model homes opens your eyes to new possibilities. Housing technology and styles are always evolving, so you’re going to see things you probably didn’t realize were available. Plus, you get a warranty. A third-party new house warranty is mandatory in B.C., Alberta, Ontario and Quebec, however not in the rest of Canada.
In provinces without a mandatory warranty, choose a professional home builder that works with a third-party warranty provider. Members of CHBA offer a warranty as a condition of membership.
What’s in a warranty?
At a minimum, a new home warranty includes deposit insurance and protection against defects in work and materials as well as major structural defects. Some warranties include living expenses for temporary accommodations, moving and storage in case you can’t occupy your home on time.
Before signing a contract, ask about the warranty – what’s covered, for how long and what’s not covered. Verify if the builder is registered with a warranty provider by contacting the provider by phone or checking their website.
How can you find out if a builder is good?
CHBA has a presence everywhere in Canada and one of the best ways to find professionals is through our association. You want to buy from a professional builder with a solid reputation, excellent after-sales service and a third-party warranty. Also, there’s lots of information online about a builder’s specialization, history and experience, so do your research.
Buying a new build is a journey. You want to feel comfortable with how it’s all going to happen and the builder’s commitment to customer satisfaction, so go with an experienced builder.
What else should you to take into account?
Know your budget. Get a pre-approved mortgage so you don’t waste time looking at what you can’t afford. You’ll also want to engage a lawyer to review the agreement of purchase and sale and to help in the process afterwards. Some builders work with real estate agents, but typically you don’t need one.
James Laird, co-founder of Ratehub.ca and president of CanWise Financial, Toronto
Why can’t I get a mortgage on a pre-sale house?
A mortgage can only be put on a home once that home exists. So, you can’t get a mortgage on your new build until the new build is complete, and you take ownership. There’s a big gap between when you sign the initial paperwork and make your first deposit and when that home is finished. Until then, you’re on your own from a financial perspective.
Why do you still need mortgage pre-approval?
Most builders require proof of a pre-approval so they know that the buyer can come up with the cash required to close the transaction.
How much of a deposit do you need and when?
It varies depending on the builder, but typically a deposit of 5 per cent of the final purchase price is due when you initially sign the contract. Then the deposit schedule might be two or three more 5-per-cent amounts owed over the construction process, bringing the total to either 15 or 20 per cent. That’s money you need to have in hand or can access, possibly with a personal line of credit. No mortgage financing is available because the house does not exist yet.
How is zoning an issue, especially for condos?
Something people should consider, especially going into a condo contract, is whether the builder already has the zoning required to build the project as described. Builders actually are allowed to start selling and reselling units before zoning has been approved.
An experienced builder typically knows what is likely to be approved on a piece of land versus what won’t be, so it’s often not a problem. But if the required zoning changes aren’t approved, then the builder has to change everything.
In the extreme scenario where the building can’t be built, the builder simply owes you your deposit back with a modest interest rate. But if you’ve waited a year, homes have already appreciated by 8 or 9 per cent and you’re starting over without a home.
Doug Whitney, vice president of sales, Douglas Homes Ltd., Calgary
What should buyers consider before looking?
People should first decide on location, then have a conversation about what they need or want. Often people move to a new community or new build because they want to change the situation they’re currently in. They should also look at proximity to work and public transit and at schools if they’re parents.
How do you judge which design is right for you?
Probably 80 per cent of the people coming into the sales centre will have already looked up the builders online and identified the floor plan they’re interested in. Most want to walk through that model or see it virtually. That’s usually where things begin to gel, and you can identify what other needs they have for that floor plan to be the perfect fit.
There’s a discovery period that goes on where the sales representative is trying to identify what’s important to the buyers, and then showing them product that matches up with their specified needs and desires.
How much time do you have from when you buy to when you move in?
It varies by product type but our target date for possession is six months from when we obtain the building permit. Pre-construction, we meet with the homebuyers, review everything they’ve added to a plan, and confirm with them that this is what they intended.
Once we have an unconditional sale, we can make the application for building permits. In Calgary, building permits usually take a month to process.