When hunting for a new home, researching listings and attending viewings can feel exhilarating and exhausting. However, if you are considering purchasing a new build home in Ontario, the process might look a bit different.
So, what do you need to know if you’re considering purchasing a new build? An overview of some steps and considerations are set out below.
What is a New Build Home?
At its simplest, a “new build home” is a house that has not been built yet. New build homes are sometimes referred to as “pre-construction homes” as the properties are sold by builders, often long before they are built.
New build homes come in all shapes and sizes, ranging from condo and townhouse developments to detached houses. The builders will provide prospective buyers with floor plans and other details so that the prospective buyer knows what to expect from the finished product and what features will be included.
In some cases, a buyer might purchase a new build home from a buyer who initially purchased the home from a builder. This type of purchase is referred to as an “assignment sale.”
The Benefits of Buying New Build Homes
While every prospective home buyer will be looking for something different, there is no denying that new build homes offer several benefits, some of which are listed below.
A Clean Slate
For some buyers, being a home’s first owner can be extremely appealing. It allows buyers to make their mark on a property and get a truly fresh start with fresh paint, appliances, and more. When everything is new, a buyer is also less likely to have to start replacing appliances or renovations for at least a few years.
For some new build projects, buyers may be allowed to have input on layouts, styles, and finishes to ensure that the home is up to their standards on move-in day.
Lower Prices and Potential Appreciation
Purchasing a new build can also be a smart financial move as new build homes in Ontario are often cheaper than their counterparts.
The Drawbacks of Buying New Build Homes
While there are many benefits to buying new build homes, there are also drawbacks that a prospective buyer will want to consider, as highlighted below.
Move-in dates can shift for new build homes as builders run into delays in their construction schedule. When purchasing an existing home, it is important to bear in mind that there will be less certainty regarding your move-in date.
Often, builders of new build homes typically require larger deposits.
It is also important for prospective buyers to reconsider their budget as they will be required to pay additional taxes on new build homes.
Purchasing New Build Homes in Ontario
Purchasing a new build home looks a little different than a standard real estate purchase. Below is a broad overview of some key differences between the processes.
Down Payments on New Build Homes
When purchasing any type of home, a buyer must make a down payment upfront. If the buyer is planning to obtain a mortgage for their purchase, it is important to be familiar with the requirements that Canadian lenders have regarding minimum down payments depending on the purchase price of your home. The amount of the down payment will often range between 5% to 20% of the purchase price.
For new build homes, the builder typically requires a larger down payment broken up into installments, often based on their lender’s financing requirements for the project. For example, a buyer might be required to make a 20% down payment and pay in installments between the offer date and the occupancy date. A larger down payment can be a deal-breaker for some when determining whether to purchase a new build or another home; on the other hand, paying in installments can be appealing to other buyers.
Warranties on New Build Homes
Under the Ontario New Home Warranties Plan Act, all new build homes come with warranties relating to workmanship, water penetration, and structural defects administered by Tarion, a non-profit consumer protection organization that administers the home warranty program.
Specifically, every builder must provide a seven-year statutory warranty on every home they build, including protection for deposits, financial loss, delays in closing or occupancy, and major structural defects. In addition, they must provide one- and two-year warranties for certain work and material defects.
Taxes on New Build Homes
When purchasing a new build home in Ontario, a buyer will have additional tax obligations – specifically, they will need to pay HST (13%) which is calculated based on the price paid for the property plus any additional taxes paid on real estate purchases.
Keep in mind that a buyer may be eligible for a GST rebate on a new build home if they purchase it from a builder for use as their primary residence. For more information, including how to make a claim for the rebate, prospective buyers can review the Ontario government’s publication on the GST/HST new housing rebate.
“Cooling off Period” on New Build Condominiums
When purchasing a new build condominium, buyers have the right to a 10-day “cooling off” period under the Condominium Act. This cooling off period allows buyers to rescind their purchase agreement, for any reason, without facing legal repercussions.
However, this “cooling off” period only applies to contracts where the buyer purchases from a builder and does not apply to assignment sales where the buyer purchases a new build from the original owner.
Final Thoughts on New Build Homes in Ontario
There are several benefits and drawbacks to purchasing a new build home in Ontario, along with several differences in the purchase process compared to a used residential real estate transaction. Keep in mind that some of the benefits listed may, in fact, be drawbacks for prospective purchasers and vice versa
Ultimately, the decision on whether to purchase a new build home comes down to personal preference, and prospective buyers are encouraged to do their own research on any home before committing to a purchase to ensure they are making the best decision for their lifestyle and budget.
Oakville Real Estate Lawyers Representing Buyers, Sellers, and Professionals in Residential Real Estate Transactions
When buying a property, there are many things to consider. Whether purchasing a used residential home or a new build home, the real estate lawyers at Campbells LLP can guide you through every step of your transaction. Our lawyers can review your contracts, negotiate on your behalf, and preserve your interests in the event of a dispute.
At Campbells LLP, our lawyers offer a broad range of legal services to help meet your residential and commercial real estate needs. To speak with one of our experienced real estate lawyers, contact us online or call us at 905-828-2247.