Buying from a Builder - Top 10 Tips

TOP 10 THINGS TO DO
When you are buying a newly constructed home

Reprinted with permission from Dickie & Arnold - all rights reserved

  1. Make sure the neighbourhood is right for you - Think long and hard about your prospective neighbourhood before visiting any model homes and falling in love with anything. If your wonderful home is in a declining part of town, it may not retain its value. Drive around the neighbourhood at different times of the day, check out location of schools, services, places of worship, and distance to important places in your life before shopping for the specific property.
     
  2. Check out your builder - Once you have narrowed down the neighbourhoods, now check out the builders that are offering new homes in that area. The best way to do this is to talk to actual residents in the neighbourhood you are looking at. Walk around and ask people to chat, or if you are bold, you could even ring doorbells. You need to get straight talk from people who have just dealt with your prospective builder. Some suggested questions: Did the builder let you visit the site during construction? What was after-sales service like? What state was the home in at closing?
     
  3. Don't sign the Agreement! (#1) - You should be careful with relying upon assurances from the Sales Office. They are there to sell you a home. All of them are very polite, most are very helpful, and they earnestly want to assist you in making a difficult decision. However, generally they don't know much about the legalities of the Agreement of Purchase and Sale (the main contract between you and the builder to buy/sell the home) they are presenting to you to sign. They are NOT there to protect your interests. Assurances such as "this is not binding upon you" (see paragraph 5 below) or "we can't let you on the site before closing because that wouldn't be legal" should be taken with a large grain of salt.
     
  4. Don't sign the Agreement! (#2) - The Agreement of Purchase and Sale is a very long and complicated document and there are many terms buried in the small print that may surprise you. It is unwise to sign an unconditional (ie. fully binding) agreement before having the document explained to you by your lawyer. Signing without speaking to your lawyer creates a real risk that you are undertaking obligations you do not understand or want, and also removes any opportunity to negotiate (and improve) any of those terms;
     
  5. Don't sign the Agreement! (#3) - If you MUST sign the contract with the builder to secure your desired lot, then at least have a condition added making the deal "conditional upon approval of the terms by your solicitor". This secures your lot, but leaves a door open to get out of the deal if you really don't like the terms (once they are explained to you);
     
  6. Understand that every new home contract contains clauses that allow the builder to move the closing date. It is hard for a builder to unconditionally promise that your home will be ready on a particular date because the builder may be delayed by labour or material shortages. For example, a closing date of October 1st this year may turn into January 15th, next year. If the builder gives you proper notice (often 60 days, but check the contract) you will have no right to complain. This often causes havoc for those moving out of rental accommodations and makes the provision of notice to your landlord difficult. If you can't handle a moved closing date, you might want to look at the used-housing market where fixed closing dates are the norm.
     
  7. Get a home inspector involved immediately - I can't stress this enough. Your builder may be very reputable, and come very well recommended by your friends or family, but when it comes right down to it, that doesn't mean anything when the crew begins building your house. A home inspector will ensure that what they are building complies with the specifications you and the builder agreed to, with the material grade and quality agreed to, and most importantly, that the proper construction methods are being followed. For more details (and horror stories) consult other parts of this web site, or call a qualified home inspector.
     
  8. Visit your home site - This is the best way to ensure that you are not going to be surprised by anything after closing. As much as the builder and the crew will let you, and as much as you can afford the time, go out to the site and examine what is being done. You can often ask questions of the crew and you will, literally, feel that you know your house "inside and out". You may spot some errors or deficiencies and be able to advise the crew or the supervisor right there. Hopefully, that will lead to the builder fixing those deficiencies before the construction proceeds too far or that crew disappears from the site. Furthermore, the information gathered will be useful to you later on as a homeowner - when doing your own repairs or renovation, or when dealing with contractors.
     
  9. Be picky during your "Pre-Delivery Inspection" - The inspection done by you and the builder just prior to closing to determine what deficiencies remain in the home is called the "pre-delivery inspection" or "PDI". It pays to be picky during that inspection. Make sure ALL deficiencies are listed. Try not to be bullied by the builder into not putting something down because "that is normal" or "we don't fix stuff like that". One large local builder's rep. actually told my clients that the pre-delivery inspection was "for him" and that my client's inspection happened "after closing". That is 100% untrue. It is YOUR inspection. Try to bring your home inspector to this inspection to be sure all the deficiencies are discovered and noted. The list of deficiencies forms part of your Ontario New Home Warranty file and if a deficiency isn't on the list, you might face a claim that it occurred after closing and is not covered. Protect yourself!
     
  10. Document everything - You may be caught later in a fight with your builder or the Ontario New Home Warranty Plan about deficiencies with your property. Proof will be essential. Document any phone calls, with a time, date and who you spoke to. Write a brief description about the call - what did you want, what was the builder's response, etc. Also take photographs and record the date you took them (or turn on the feature available on most cameras to date the film itself). Good preparation will assist in the protection of your rights in any future dispute.

    J. Christopher Arnold is an Ottawa lawyer whose practice includes real estate law. He teaches a course at Algonquin College called Buying a Home, and is an instructor in Real Estate at the Bar Admission Course for the Law Society of Upper Canada. Chris is a partner with the firm of Dickie & Arnold, LLP  http://www.dickieandarnold.com.

Reprinted with permission from Dickie & Arnold - all rights reserved

 

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