Are you looking into purchasing a pre-construction or new construction home in Ottawa? There are some great opportunities out there to buy a beautiful new house (while dodging the bidding wars sometimes associated with resales). But make sure you’re armed with the facts before you begin your search. Paul Rushforth answers your real estate questions on how to buy a new build house.
Do I need a real estate agent when buying a new build?
Yes, a licensed realtor for new construction is imperative, absolutely imperative. Unfortunately, the people in the sales centre are just selling a product for the builder and may not be in a position to tell you all the facts.
With an experienced real estate agent, you’re hiring a professional to look out for your interests. (However, you as the new home buyer won’t have to pay a penny of agency commission; the builder takes care of that.) We have a lot of inside information on new subdivisions… and what we don’t know, we can find out. There are tons of little things that you might not even think to ask about pre-construction buying process, for instance:
- What’s the zoning?
- What’s going to be behind your new home — a park or a gas station?
- Will there be fire hydrants or those ugly big green electrical boxes on your lot?
- Is a sidewalk going to go through your driveway in the future?
- Are there any restrictive covenants in the area for this builder? For example, will you be limited to certain upgrades, or colours when you paint your home?
We will do all the due diligence for you and find out what you’re actually buying to ensure your quality of life in your new home. Plus, we’ll also look over the purchase agreement (which of course, should be reviewed by a real estate lawyer before you add your signature).
CAVEAT: Never sign into a new build sales centre without an agent (even to request floor plans), or you lose your right to representation.
How can you pick out a reliable builder?
Once again, a realtor knowledgeable in the process of buying new construction homes, is your best resource to help you find trustworthy home builders. We know who the major players are. And we handle not only the initial sales of their new construction and resales of their homes, so we’re able to see how they build and how their homes hold up over time. We pay attention to things like a foundation that is forming cracks after only 5 years. We also notice who offers good layouts, good locations, and reasonable prices. So we are in an excellent position to prescreen builders for you.
How does new build pricing work?
Generally, you confirm your mortgage with the lender before signing the agreement to purchase. Then you put down a down payment to reserve your lot. After that, you’ll pay several installment fees (“draws”) as the construction moves forward. Every builder is different; some will ask for 10 percent of the price once the house is framed, another 10 percent after the windows are in, and so on.
Is there warranty coverage on new builds?
Yes, new build warranties are mandatory in the province of Ontario. You will have two deficiency forms to fill out — the first, 30 days after completion, is for minor issues, while the second is after a year and covers major issues. So check your new home very carefully during those time periods. We highly recommend a professional home inspection (because some builders cut corners), although, with new construction homes, you are not allowed to bring in a home inspector until after you close.
In addition, you should e covered by a Tarion warranty for 5-7 years. This warranty covers various components, such as the foundation. If a Tarion warranty does not cover the home, we warn buyers away — that’s a red flag.
How has COVID-19 affected new build houses?
The cost of essential building materials such as drywall and pressure-treated lumber has doubled or tripled, which obviously will affect the fees and price of new construction homes. In addition, some glitches in the supply chain have led to delays in the building process. However, the construction of new homes was never really shut down, and today, Ottawa’s major builders are successfully weathering the storm.
What are the hidden costs when buying a new build?
Even though the purchase price of a pre-construction home might look cheaper than a resale on paper, be sure to budget for hidden costs in new construction such as:
- GST/HST, which the government charges on newly built homes
- Connecting utilities like gas and electricity
- Putting up eavestroughs and downspouts
- Air conditioner installation
- Major appliances — refrigerator, stove, and so on
- Automatic garage door opener
All those upgrades are in addition to the typical closing costs and fees in Ontario you would pay when buying a home.
What areas have new build construction in Ottawa?
The hottest community for new builds is suburbia — Orleans, Stittsville, Barrhaven, Findlay Creek, and even farther out. Many new builders are now moving into the outskirts — to up-and-coming Ottawa neighbourhoods like Arnprior, Limoges, and Embrun. You’ll find very few new builds downtown unless it’s a condominium high rise. In the downtown core, you don’t see the sort of tract home building like Minto, Mattamy, Richcraft, and Cardel do.
The price of land is cheaper outside of central Ottawa, and because of COVID, there’s a high demand for model homes in the outskirts these days.
If you have a buyer choosing between a new build and a resale, which will you recommend?
My real estate team and I won’t push you as a buyer in any one direction but rather will recommend whichever home is best for your family. Our job is to educate you about buying a model home. We will point out the value of each property you look at and the pros and cons of buying a brand new home vs resale. And with this information, you’re in a position to make the best decision for your future dream home.
I might make more commission on a resale, but I would rather have a happy client than a happy wallet.