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Sunday, August 23, 2009 - Risks of Buying a Brand-New Home - by Kelly Grant, REALTOR at MaxWell Realty

Most Buyers who buy a new home direct from a builder do so without knowing and understanding the additional risks involved. Below are my top five risks to successfully mitigate when buying a brand-new home vs. a pre-owned home:

(1). Financial Risks: The list price advertised sometimes fails to mention the 5% GST that is always applied to new homes and raw land (but rarely or never applied to pre-owned homes). Also, usually extra costs must be incurred by the buyer of a brand new home after purchase for uncompleted landscaping, fencing, concrete, etc. and in some cases architectural guideline caveats specify exactly what type of finishes must be used. Plus,  Buyers without REALTOR® representation do not have access to past sales to determine if the price they are paying for their new home is consistent with the current market values for the neighborhood.

(2). Schedule Risks: When buying a new condominium, the pace of construction is directly related to the pace at which building units are sold. As a result, you may put a downpayment on a brand-new condo only to discover that it may be several months or years later before the building is finished and you can move into your new home. In some rare cases if not enough units are sold the condominium project can be stopped altogether and never finished. When buying houses, it is not uncommon for builders to fall behind their estimated scheduled completion date by as much as three to six months or more causing anxiousness and confusion for the Buyer as to when exactly their new home will be ready for move-in.

(3). Legal Risks: Some builders may attempt to talk buyers (without representation from a licensed REALTOR®) into the following: tricky contractual terms; using the builder’s lawyer rather than using your own independent lawyer; and out of the need for a home inspection - all are not recommended since legal issues and construction quality issues from poor workmanship (e.g. issues that could be avoided by having a certified inspector look at the property) commonly develop on the purchase of new homes. While there are exceptions, most builder contracts can have as much as 40 or 50 minor and major legal changes that should be made in order to protect a Buyer’s best interests equal to their protection when using a REALTOR® to write an offer using the Alberta Real Estate Association standard purchase contract.

(4). Location Risks: Many surrounding areas of new home developments are undeveloped at the time of purchase so in the near future there could be an apartment building, roadway, or some other undesirable complex that could suddenly become erected across the street or behind your backyard causing a severe decrease in property value and enjoyment.

(5). Construction Risks: New homes often have not endured an Edmonton-Area winter and may not show evidence of upcoming problems with settling, cracking, leakage, poor workmanship, etc. whereas for a pre-owned home over one year old, evidence of these issues would often be present since the home would have endured one or more winters already.

In summary, buying a new home has its advantages, but when buying any home you should always use a REALTOR® for representation. If the Builder’s contract is used, be sure to get it reviewed by a good real estate lawyer for any changes that are necessary to protect your best interests, and be sure to get the home inspected by a quality certified home inspector. 

[Article written and ©2009 by Kelly Grant, M.Eng., ABR, NCSO, P.Eng. - REALTOR® at MaxWell Realty in Edmonton, AB]

Disclaimer: for those readers not currently represented by another licensed REALTOR®, to obtain more information on this topic and / or if you are serious about selling or buying in the Greater Edmonton Area, call Kelly at 780-414-6100 (pager) or send Kelly an email to to schedule a confidential appointment.

posted in General at Sun, 23 Aug 2009 13:59:52 +0000

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