Here are 5 questions to ask when buying a new home from a builder to make sure that you do not make a mistake that you will regret later:
What is the builder’s reputation/references?
This may be the most important research you can do before buying from a builder. Check any prior home/subdivision/condominium project that they have built in the past. Look at the Tarion website under the Licensed Builder Directory. Better still, go visit any prior homes and talk to the neighbours. For example, ask if the builder was diligent in fixing every problem with the home that was identified by the buyer during their pre-delivery inspection.
Is the builder contract unfair to buyers?
In many ways the contract favours the builder. For example, the builder usually has the right to extend the closing date, change the layout or square footage of your home and also many of the finishings and there is little the buyer can do about it. This can cause real problems if the delay affects your child’s new school year or your employment plans. Again, remember to ask prior buyers if their home was delivered on time, and whether they received substantially what they were promised.
What extra charges will a buyer have to pay?
When you buy a new home or condominium, the price quoted to you in the sales office will be the base price of the home, inclusive of HST. If you order any upgrades, that is extra. In addition, there is now a separate schedule of additional charges that you also have to pay. Some of these are spelled out with an exact dollar figure, such as Tarion Enrollment fees, legal fees, grading deposits, hydro or water meter installations. Other items are more vague, which may relate to levies or development charges which are added by any governmental authority after the agreement is signed. I have seen some cases where these extra charges exceeded 6% of the original sale price, and the buyers only found out about this a few days prior to closing. Make sure you get a cap on the total amount of these extra charges. My own rule of thumb is that the total should not exceed 1.5% – 2% of the original purchase price.
What upgrades does a buyer need?
Builders in general make a lot of profit from upgrades which they offer to buyers for finishings in the home. Here is where you may want the assistance of a professional real estate agent, who will tell you in advance which rooms these upgrades will make the most difference on any re-sale. An agent can also offer helpful advice about which lot or unit location and layout will have a higher re-sale value.
Can a buyer transfer the agreement before closing?
When you sign your builder agreement, the home may not be ready for 2-3 years down the road. Things change. Try to negotiate right away the right to transfer your contract to someone else before closing if your circumstances change. Some builders will not allow it, others permit it for a fee, while some will permit it one time only, for no fee.
Ask the right questions before you buy a home from a builder and you won’t be disappointed later.
How to prevent a condo board breakdown
When owners lose trust in a condominium Board o Directors, necessary repairs do not get done, lawyers get called and the value of all of the units in the building start to decrease. Here are some tips both before and after you buy to make sure this does not happen to you.
- Read all the condo documents before you buy, including the rules, restrictions and financial statements of the corporation. Make sure they are not operating a deficit and there is enough money in the reserve fund to pay for needed repairs;
- Volunteer to join committees to assist in making the building more of a community; to learn about problems and pass them on to the property manager for resolution;
- Attend all meetings to make sure that you understand and agree with all decisions being made.
Remember that most directors do this work for no compensation, and are required to make sure that there is enough money being collected to pay all current and future repairs that are necessary.
Now is the time for home closing protection insurance
Since writing my column on how to avoid a real estate train wreck, I have received many inquiries from buyers, sellers and realtors about home closing protection insurance, and how it can solve many of the problems associated with delayed closings.
Due to the growing possibility of buyers being declined their financing at the last minute, sellers need some protection in the event their closing is delayed or cancelled and they are forced to carry 2 homes for an extended period of time.
One company that I have dealt with that provides this coverage is Canadian Home Shield. Their President, James Vlachos, who is an insurance broker, advises me that for as little as $99, sellers can purchase a $25,000 insurance policy that will cover all mortgage payments, real estate taxes, utilities and insurance premiums up to a total of $25,000 in the event that the deal does not close through no fault of the seller. I personally have had 2 seller clients recover over $9,000 in costs after a buyer failed to close their purchase agreement.
Buyers can also purchase breakdown insurance protection for their home systems and appliances. Since most real estate contracts provide that sellers only warrant their systems and appliances to the date of closing, this provides buyers with the opportunity to purchase additional insurance protection for a year after closing.
How to avoid a difficult tenant
The Alberta case about the tenant Andreas Pirelli, who claimed that he was a “Freeman on the Land” and that the property had become a foreign embassy highlites the need to properly qualify tenants in the first place, so this does not happen to you.
Here are some helpful tips to remember:
- When you advertise for a tenant, make it clear that you do background and credit checks;
- Ask any tenant to complete a detailed rental application, showing every place they have lived at least in the past 5 years;
- Ask for a current cheque stub from their place of employment, as proof that they are regularly employed;
- Ask for at least 3 personal references and call each one, including any prior landlord;
- Interview the tenant where they currently live, to see for yourself how they treat someone else’s property;
- Check out the tenant on social media – whether it is pictures that they post or blogs that they may have written. For example, if you search Andreas Pirelli, the Alberta tenant referred to above on linked in, you will see that he claims to be the senior chief justice at Tacit Supreme law court;
- Have the property regularly inspected, to make sure that the tenant is properly maintaining the property and not causing any damages;
- Treat your tenants with ongoing respect, and they will look after your property better; consider a gift card if rent is always paid on time, or a Christmas present.
How long is a banking day?
Sheri-Lee Weslock agreed to sell her home in Burlington to Neil Sexton on March 30, 2008, for $647,500. The deal was conditional for 4 banking days on the buyer obtaining satisfactory financing. If the notice was not delivered, the deal would be cancelled. Mr. Sexton claimed that his real estate agent told him that the clause meant that he had until 4 pm on the last day, being April 3, 2008, to deliver the waiver, or the deal would be cancelled. There was no reference to 4 pm in the condition. Mr. Sexton admits that he faxed his waiver to his agent at 3:30 pm on April 3, 2008 but that he then immediately changed his mind and told his agent not to send it after all, because he did not have confirmation that he had obtained his financing. The waiver was however, faxed to the seller’s agent at 6:30 pm on April 3, 2008. This was not disputed.
Mr. Sexton attempted to cancel the deal the next day, saying that he did not get his financing, did not intend to send the waiver and if it was sent, it was sent too late, because the banking day already ended.
Ms. Weslock then re-sold the property for $520,000 because the market turned and sued Mr. Sexton for her loss, which including carrying and other costs, which exceeded $180,000.In a Superior Court decision dated February 7, 2012, Judge William Hourigan determined that a banking day is no different than a regular day and ends at 11:59 pm. If Mr. Sexton had wanted the condition to be time sensitive, such as 4 pm, it should have said so in the condition. Therefore, the waiver sent by Mr. Sexton was in fact sent in time and he could not get out of the deal. Mr. Sexton thus had to pay the entire buyer loss of $180,000 plus $14,000 in costs. Mr. Sexton represented himself, without a lawyer.
There are many lessons to be learned from this case. Under the Real Estate and Business Brokers Act, a business day means a day that is not Saturday, Sunday or a statutory holiday. However, that is not the universally accepted definition of a business or banking day. There are also arguments as to when you start counting the days. In addition, many banks are now open on Saturdays and Sundays.
In my opinion, not only should the words “calendar day” be used in any condition, it is better to pick an exact date when the condition will expire and it should also be clear that the condition is open until 11:59 on the final day, so that there is no confusion or misinterpretation. Never send in a waiver for a financing condition until you have a written signed commitment from a lender agreeing to give you your money.
How to keep your house price secret on title
More and more buyers have been requesting that the amount they are paying for a home not show on the government’s title records. You can keep this information off your title by paying the Provincial land transfer tax in advance to the Ministry of Finance in Oshawa and by supplying the proper supporting information, including the agreement of purchase and sale, draft deed, statement of adjustments, 3 copies of the signed land transfer tax affidavit and a certified cheque for the tax owing. If your property is in Toronto, than the Toronto Municipal Land Transfer Tax can also be paid in advance, at the Toronto Revenue Services office in North York, by supplying the same information and paying the tax. Once this is completed, all that will show on your title is the sum of $1 or $2 as the purchase price. If it is your first home, you will still be entitled to the applicable first time buyer rebate. Click here to read the article.
My Law Practice
I have received many inquiries about my law practice, providing legal services to real estate buyers, sellers and investors. Working with Real Property Transaction Centres, I am now able to close real estate transactions throughout the GTA. If you require any assistance on a transaction that you are working on, please email me at email@example.com
If you or your clients are looking for a written quote, please visit www.realproperty.ca and search under “How much does it cost” or contact Suzanne at 1-877- 219-9618, ext. 231.
About Mark Weisleder
Mark is a lawyer, author, instructor, Toronto Star columnist and keynote speaker for the real estate industry.