Nicky from the Northside asks, “How does it work if I wanna buy a new home?”
Purchasing a new home has its advantages, primarily among them is your ability to pick floor plans and finishes, providing you get in early enough in the build process.
Some clients can’t find what they are looking for in the used market, this is especially the case if they have needs that fall outside the typical home owner’s.
Builders come in a wide variety from starter home to luxury home builders. The mid-range builders will often have a number of completed or nearly completed “spec” homes which are homes they choose the plan, lot and finishes for, build and sell to buyers that don’t want to wait the eight months or so that it takes to build a home from scratch.
What many buyers don’t realize in all of this is that they can still be represented by a realtor and get all the benefits from doing so just as though they were buying a pre-owned home.
Here are some key points to keep in mind:
If you do not have a signed written agreement with your realtor, find out why. This signed agreement will ensure that you are being shown everything on the market no matter what the builder or seller is offering the buyer’s realtor as compensation. This way your realtor can truly work in your best interests with no hidden agenda going on regarding his/her fees.
Have your realtor introduce you to the show home staff or builder, avoid walking in for the first time without your representative (realtor) with you. This serves two purposes, firstly the builder will be more likely to include in the negotiated price all or a portion of your realtor’s fees without having to negotiate that into the price and secondly, you can be told things by the sales people that aren’t in the contract you sign which will leave you with an unrealized expectation. Your realtor will be able to define for you the actual outcome so it reduces or eliminates any misleading “sales talk”. The bottom line is you want to end up getting what you thought you were getting and all for the price you wanted to pay and not a penny more, right?
The sales people in the show homes are employees of the builder in most cases. Sometimes the builder will hire a realtor to sell their home in either case the sales person or realtor is representing the builder not you. This is key as it tells you where their loyalties lie. Don’t go in with the assumption that they are looking out entirely for what is best for you. Your realtor will be interested in making sure the home will suit your needs and that you will be happy when all is said and done.
Go over the purchase contract thoroughly as it, is written in favour of the builder. This is not the case with a “standard” purchase contract supplied to your realtor from the Alberta Real Estate Association or AREA, which treats both the buyer and the seller in an even-handed manner tending not to favour one over the other. For example the builder contracts will typically give the buyer 10 days to cancel the deal for any reason, if you don’t say anything, after 10 days the contract is binding and all deposits become non-refundable. In contrast the “standard” AREA contract allows for contigencies such as financing and inspection with a certain amount of time to fulfill these. Once you have financing in order and have completed an inspection you will then have to sign a document saying you are moving forward with the deal, it just doesn’t happen automatically after 10 days. Also, delays in possession caused by the builder are forgiven in most cases whereas, if you, the buyer delays the posession you can be fined. The point is to know what each clause means in the contract so that you move forward with eyes wide open and are not surprised when something goes wrong or not as planned, which often happens when building.
What about inspections? Do you need to hire your own inspector to check the home out, after all it is a brand new home? The sales people, from my experience will discourage you from getting an inspector in but will not stop you from doing so. Just like a pre-owned home, the inspector can find things wrong that you would otherwise not find out about. Things like missing insulation, lack or caulking, unfinished walls, built-in dishwashers not hooked up, etc. I recommend getting an inspection for both new and pre-owned homes. The inspector can compile a list of deficiencies that the site supervisor can ensure are remedied prior to possession so you get a home that you can sign off on without having to allow trades people in after you move to fix things that should have been taken care of before. Many reputable builders strive to achieve a “zero deficiency possession” because it is not only inconvenient for the new owner but costly for the builder to schedule trades around the new owners time frame. If something major is found by the inspector your lawyer can be informed and if warranted a hold back can be put in place until the problem is rectified. A “hold back” is a portion of the money you paid for the home being kept in your lawyer’s trust until such time as certain expectations are met or not at which time the money is forwarded to the seller/builder or to you the buyer as the case may be.
Not all realtors will represent you on a new home purchase, this is primarily because it can be eight months or more before they get paid. Some builders will pay the realtor once the ten days has passed and the home is “sold”. In either case work with a realtor who is not under the gun financially needing to be paid right away and off to the next deal once they are leaving you with unanswered questions. Ensure your realtor will back you up and be there for you even after you are in the home enjoying it. I’ve heard it said that it is not what you do before you get paid it is what you continue to do after you get paid that ultimately wins over your client and ensures repeat and referral business.
Is price negotiable? Absolutely, even when the sales people indicate that it isn’t possible. The key point here is to ensure your realtor provides you with enough market information and comparables for you to determine what the fair market value for that property is, no matter what the asking price is or how many other buyers have “indicated they want to write on this one”. With this number in mind you know what you will start at and what your top dollar is before you put pen to paper. Remember you are in the driver’s seat. In the case of a seller’s market your numbers may have to be adjusted a bit but this again is reflected in the fair market value determined by you with the help of your realtor, the market conditions and the comparable properties that have recently sold.
If you have any questions on this or any real estate matter, you can contact me via firstname.lastname@example.org or 780-893-0269. Don’t forget to subscribe to my blog for more informative articles and monthly updates. I look forward to hearing from you and being of assistance in any way I can.