Many buyers make these mistakes before they even get possession of their houses, and they don’t even know how those mistakes have affected the whole home buying process. But worry not, we’re here to save you from making these top 10 mistakes people make buying a pre-construction house.
While buying a pre-construction house, many buyers have a surety that everything will work perfectly without any errors. But that may not be true. To buy your dream house, you have to be a smart buyer and for that, you have to know what you have to do and what you should avoid.
Let’s get started to know the top mistakes made by new home buyers.
Falling in love with the model home
Trusting the floor plan
Failing to get the contract reviewed by a lawyer
Skipping the Pre-delivery Inspection (PDI) or doing it by yourself
Accepting delays without a fight – construction delays
Forgetting they are moving into a construction zone
Occupancy and final closing
Thinking they have a warranty – when they don’t
Different types of warranty for different things and what these warranties cover for
Being too slow with warranty claims
Here we go back to the previous points. These duration would be mentioned in the contracts and will even be reviewed during an inspection
Being ambushed by hidden closing costs that are not typical to resale homes
Development charges,
Levys
HST
Upgrades
Hook up and connection charges
Hidden charges by the builder – NSF, any changes charges
You can watch my video on ‘The Real PRICE OF A HOUSE in Toronto!’ where I have explained the closing costs in detail and what all is included in it.
Buying at the wrong time
The best time to buy would be when the project is getting launched. At this phase the builders offer many deals and offers as they need to raise the funding for the projects.
Did you know that one out of every three homes purchased in Canada, is bought directly from the developer or a builder? That’s because buying a pre-construction house has more benefits than buying a resale house such as better value, easy customization, and ability to make money on appreciation without a mortgage while it is being built.
Here are some tips & tricks for you!
Research your builder
Know which projects your builder has previously worked on, what is their work style, how much time their projects usually take, what is their customer feedback like and if they are working on any other projects. Also confirm their licenses, and past legal history.
Ontario Builder Directory and The Greater Toronto Area’s Building And Land Development Association (BILD) are some of the best sites to get information about builders.
Start saving early
Choosing the right lender and the right mortgage will help save you a lot of money.
Start looking for lenders earlier, so that you’ll be able to make payments on time.
Understand that the standard cost and actual cost of the house vary a lot and there are many additional costs you need to plan for.
(Here’s a video I’ve made on the hidden costs of buying a house which explains all costs and expenses you need to know.)
Ask for a pre-construction timeline
It will help you understand the process better and you’ll be able to make any changes or updates before the process starts.
It will show you if your builder has the internal processes in place, or not.
The timeline acts like a checklist which contains –
Completion of structural engineering
Creation of construction budget
Completion of various surveys, drainage plans, MEP plans, etc.
Submission to HOA for approval
Submissions to the city for building permit
Creation of detailed construction schedule
Read through the contracts and make sure you understand the terms
All contracts and negotiations should be in a written contract. A verbal agreement is hard to prove in court.
Every detail should be put down on paper no matter how small it appears; all the parties involved must sign it.
Work with a realtor
A buyer needs someone to act in his or her best interest; this is the moment at which a real estate agent or broker has an important role to play.
In my real estate experience, I’ve always found out that people who approach realtors at the very beginning of the process, get more information, additional guidance and also save money throughout the process.
Learn about warranties
Before signing, understand the documents, and the new warranty and guarantee plans.
Under the Ontario new home warranty and protection plan, all new homes have a warranty for, among other things, workmanship, materials, Ontario Building Code violations, water penetration, and defects in your home’s structure and systems.
The warranty coverage is broken into one-year, two-year, and seven-year warranties and it is important to understand what types of defects and conditions are covered during each warranty period.
Be smart about upgrades
Don’t fall into their trap of expensive upgrades; try to negotiate the options.
Offering upgraded finishes is another way for builders to increase profits from buyers, so make sure you do your research on the quality and value of the upgrades being offered.
Hire a lawyer
It is important to get an experienced lawyer who knows what to look out for and can help negotiate on terms in your favor.
By hiring a lawyer, you ensure that all legal documents are correct and you are aware of all the hidden terms and conditions of the agreement.
Visit the site and the neighborhood
Before you book your pre-construction house, make sure that you visit the actual site more than once, as it will give you a clear idea of where exactly it is located.
Don’t fall for the model house, plans, online descriptions, images, and videos. The model house never matches the house you’re buying.
By visiting the neighborhood, you’ll know about the locals, nearest schools, hospitals, roads, and other facilities.
Most Canadians believe that pre-construction homes are going to be expensive, but doing your due diligence, making the money available for down payments, and being patient can give you a good return on investment.
Along with these tips, you can also do a few more things such as look for builder promotions, take a lot of pictures of the site, ask for leftover paint or other materials, etc. which would surely make your home buying process enjoyable. There are many incentives new condo builders are offering these days including a total 5% deposit till completion of the project and you can expect ROIs of up to 800%.
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