Buying in New Developments

Have your own Agent.
Believing they might get a better deal, or just never having been advised, many buyers use the developer's sales agent to represent them. Truth is, all homebuyers should be represented by their own agent who has a fiduciary responsibility to them. Buyers should understand that most developers require the agent to accompany you the first time you visit a sales center. Your own Agent will negotiate in your favour, and many builders will let Agents bargain for appliance upgrades, flooring, etc. The benefits of having your own Agent really come into play closer to the completion of your purchase when negotiating for deficiencies, or negotiating for cash back from the developer when your purchase is not completed on time in accordance with the New Strata Property Act.

Ask how much a home costs "as-is" without upgrades.
Models can be filled with every upgrade the developer offers as an example for buyers. Buyers should ask freely how much the model costs as they see it. Typically this cost will vary dramatically from advertised starting prices for a development.

Pick the right developer.
Working with a developer is like a short-term marriage. Ask for references from the developers' sales agents. Do your own investigation of the developer's previous projects, history within the business, and complaints filed with business bureaus.

Consider re-sale characteristics.
The allure of being the first to occupy a home sometimes clouds a secondary location or poor craftsmanship. Consider a resale home in a primary location before signing on the line just because it's new construction.

Question percentage of project sold.
Developers love to promote the sell-through of projects. Inquire how much of the percent sold are reservations ("dating" the project, no deposit or commitment) versus contracts ("engaged" to the project). Some reservations don't go to contract because of a change of heart, financial concerns, or occupancy timelines.

You may want to have an attorney review all contracts.
Developer contracts favor the developer and are different from standard local real estate board approved contracts. Retain a real estate attorney to review all contracts. There is little wiggle-room once you sign a developers' contract, and they don't like home sale contingencies.

Investigate property taxes independently.
Property taxes can be an unexpected financial surprise with the purchase of a home. Because tax assessors haven't valued a home or project, developers can underestimate how much the property taxes will be. Complete your own due diligence and call the local taxing authority to find out the worst-case scenario.

Perform a home inspection.
Never skip or waive the right to an inspection: the benefits far outweigh the costs, and could save you numerous headaches and expenses later. New construction is not immune from defects and lackluster workmanship. Hire a professional, not Uncle Bert. Perform the inspection at least seven days prior to closing, and familiarize yourself with the developers' deficiency program.

Inquire about investor purchased units.
In the post-real-estate-bubble-world many developer contracts restrict purchase of units by speculators to flip at completion. Look for clauses in contracts that require purchasers of units to owner-occupy the first 12 months after closing. Ask sales agents what the percentage of owner occupancy is for the project.

Get a certificate of occupancy.
Local municipalities issue a certificate of occupancy after a unit has passed all building code inspections. Most mortgage lenders require a certificate of occupancy before they will close on a loan. If you are paying cash, verify prior to closing that the developer will deliver a certificate to you.

Understand why developers request upgrades paid for in advance.
Experience has taught developers that some buyers will not purchase a unit which has pre-specified floor-coverings, countertops, kitchen cabinets, etc. Other buyers will want to select their own finishes, and a unit that has pre-selected finishes by a terminated buyer is a marketing problem for developers. Plan on paying up-front for all upgrades and changes you make to a unit, and if you decide to walk from the project once you have paid for upgrades, expect a fight from the developer if you want a refund on installed changes and upgrades.

Deposits go into a Trust Account.
Require that all deposits and payments you make go into a Trust account, not the developers' business account. If disputes arise, it is easier to receive refunds from a neutral third-party or Trust account than from a developer.

Request copies of blueprints, floor plans and surveys.
It's easy to forget to obtain clean copies of blueprints and floor plans of your new home with all the activity and decisions during the construction process. In the future when you want to make changes or sell, having the footprint of your home will save you both expense and time. Make sure the developer provides you with an updated survey, showing just your parcel. Verify that your new home also has it's own parcel identification number issued by taxing authorities.

Research warranties on structure, finishes and appliances.
Developers typically offer "two-five-ten" year warranties (visit  www.CMHC.ca  for  warranty  information)  on structural elements of a home and rely on manufacturers warranties for appliances, furnaces, windows and overhead garage doors. Beware of one-year warranties on any new construction.