Ah, the smell of sawdust and fresh paint! Hits my senses every time I walk into a new home in Lethbridge. And it will hit your senses too. Hard. New-home smell is an intoxicating force. After all, who can resist the thought of waking up to brand new everything?
Despite the emotional appeal, however, there can be many logical reasons to buy new. Maybe you love the master-planned neighbourhood and proximity to new amenities. You might prefer the assurance of new-home warranty. Or perhaps the builder is offering the quality and style you haven’t been able to find in the resale market.
All that said, there can be downsides to buying new, cost being an important consideration. Landscaping, window coverings, appliances, basement development and even extra GST can really add up, depending on the property you choose.
There is the reputation of the builder to consider too.
No matter what the market is doing, buying new can be just as confusing as buying resale. So do your homework and make your decisions based on sound reasoning, not just new-home smell 😉 Here are 5 things to know before you go house hunting:
1) You have the option to hire an agent. There is a pervasive belief that “buying direct” from a builder saves the homebuyer money. I can’t prove this one way or another. Each builder runs their shop a little differently. The question you need to ask yourself is, do you want an agent representing you, both in a negotiation and during contract-to-close? That is entirely your choice. Just know that the builder works for the builder. A buyer agent works for you.
2) In Alberta, warranty is mandatory. Different builders use different warranty companies. However, for all homes permitted February 1, 2014 or later, a 1-2-5-10-year warranty program is required by law. Make sure you understand what warranty actually means and the processes that the builder has in place to deliver on those obligations.
3) You can hire a home inspection. Like with any offer to purchase, you can request a home inspection as a condition of sale. While many buyers feel that warranty offers adequate protection, some buyers likewise prefer the assurance offered by an independent inspector. Talk it over with your agent if you have one, and do what feels right and sensible for you. (Hint: a reputable builder won’t take issue with inspections.)
4) New homes are GST applicable. In Canada, homebuyers can qualify for the GST new housing rebate, on homes selling for $450,000 or less (partial rebate only, if higher than $350k). Most builders in Lethbridge claim the rebate after the home is sold, and build that into the asking price on MLS®. So the price you negotiate will include GST and all applicable rebates. To avoid confusion though, I suggest including an appropriate term in offer to purchase that acknowledges this.
NOTE: if you are purchasing the home as a revenue property and not as your primary residence, then the home does not qualify for the rebate and is GST applicable.
5) Price and terms may be negotiable. Some builders will negotiate on price and some won’t. Based on inventory levels, margins and their overall business objectives, it is truly the builder’s prerogative whether or not to move on price. This is business after all. That said, price is but one factor of many when negotiating your offer, and it’s important to consider all possible terms and conditions. For example, you and the builder might make certain tradeoffs regarding possession date, landscaping, basement completion or any number of variables.
Those are just a handful of the many factors that go into buying a builder home, whether on spec or custom. The most important factor of all though is trust. Buy from a builder who’s product quality and presentation makes sense to you. And of course, when in doubt, call your REALTOR® and get a second opinion.