Buying From a Builder
Some of the common extras that are almost never clarified in the builder's sales offices are:
- The premium the builder pays for the Ontario New Home Warranty coverage.
- A $25 charge for negotiating each deposit cheque.
- $267.50 in builder's legal fees for negotiating any changes to the offer.
- The legal fees involved with holding the buyer's deposit in trust prior to closing.
- The builder's legal fees to pay off and discharge any construction financing.
- The cost of excess deposit insurance where the deposit exceeds $20,000.
- New taxes or levies imposed by any level of government.
- Increases in existing levies or development charges imposed after the offer is signed.
- All or part of any municipal development charges or levies.
- Meters and connection charges for gas, hydro and water.
- Provincial sales tax on included appliances.
- Sewer "impost charges" (taxes to fund the city's sewer system).
- Several petty charges, like the $25 cost of carbon monoxide detectors and the Law Society's $53.50 transaction levy.
Although not every offer contains all of these extras, even some of them could amount to thousands of dollars, and yet they are buried in tiny type and often scattered throughout the document. The builder's Offer to Purchase Forms are extremely complicated. Even as an experienced agent, I would recommend you take the forms to your lawyer to have him read them over. There may be too many costs that would be hidden, and you MUST be informed and know how much money you are actually going to be spending.
But extra costs are just the beginning of the small print to confuse an uninformed purchaser. Purchasers should be read a builder offer very carefully and be sure of the clauses that are containted within.
Other Items to be aware of:
- Verbal representations made in the sales office are not part of the offer.
- The builder has the absolute right to change the floor plans and the exterior look of the house without the buyer's permission.
- Any representation of square footage is usually based on exterior measurements, not room sizes.
- Square footage may be changed without any recourse by the buyer.
- Purchasers cannot obtain copies of architect drawings; the tiny sketches attached to the offers are subject to change.
- Furnaces are not included in many new homes; some builders require purchasers to lease them.
- Home purchasers are usually unable to obtain builder assurances that hydro transformer vaults will not be placed on their front lawns.
- There is no guarantee on views or sightlines.
- Appliances may be supplied but not connected, one builder just dumps them in the garage.
One of the most scariest of all clauses is the omission of any unconditional builder obligation to provide clear title to purchasers by discharging the construction financing after closing. We all must have clear title to properties that we purchase.
A common clause only requires builder lawyers to promise to register discharges of construction financing after closing when they receive the discharges. If they never receive the discharges or something goes awry along the way, the builder and their lawyers are off the hook.
Be very careful of the clause that is very common in new home offers. It is usually found on the extras sheet, which is marked as a "request" for extras and upgrades, but DOES NOT obligate the builder in any way to build or install the extras. If the extras are included in the purchase price at no charge and the builder omits them when the house is complete, there is no recourse and no refund.
Here are four recommendations on how to survive the battle of the builder's sales office:
- Ask the sales staff to write down and sign any promises or representations they make to you.
- Ask for an itemized, written list of extra costs. Walk out if you can't get it.
- Ensure that the extras and upgrades are unconditionally included, not merely requested.
- Make sure, in writing, that the appliances will be installed.
And during the conditional period, always have your lawyer review the agreement of purchase and sale line by line and give you a written memo of the red flags it contains. This is the best way to avoid nasty surprises on closing day.
If you would like to chat or some more information, fill out the form below with correct contact information and I will call you.