One Quarter of all homes sold in Canada are brand new. With a new home, you can enjoy brand new modern features, lower maintenance costs and better energy efficiency. Buying a new home is different than buying a resale, however. One of the most important things to understand about the process is the contract you will sign with the builder.
Once you choose a builder and pick a home that’s perfect for your needs, the next step is finalizing all of the details with the purchase contract. This step is usually done at the sales office as you work with an area manager to review every item that will go into your Agreement of Purchase and Sale. Your contract will cover everything from obligations and restrictions for homeowners to the purchase price and upgrades you have chosen.
Here’s how your purchase agreement works and what you should know as you prepare to buy your dream home.
Making an Offer on a New Home
Once you’re ready to buy, there are a series of contracts that need to be signed. There are all legally binding so it’s important to review these carefully and make sure they work for you. First, you’ll sign your offer, and if the builder accepts they’ll sign too and both parties are committed to the sale. The builder might also ask you to accept an “offer to sell” contract.
Depending on the nature of the contract, there may be a few stages. After presenting an offer to the builder, they may accept or present a counteroffer.
You can also have a lawyer review the purchase agreement before it’s signed or make an offer conditional upon a favourable review by your attorney. Your lawyer can help protect your interests by guiding you through the process and helping you to prepare the relevant documents correctly.
What Is Included in a Purchase Contract?
The purchase contract will include a great deal of information, terms, and conditions regarding the purchase of your new home. This includes a clear description of the lot, the model you’ve chosen, options you’ve selected, the agreed-upon price, and financing terms. Your contract will have site plans, drawings, specification lists, and more as attachments that will be referenced in your main contract document.
In the “Schedules” section of your contract, you can review information about any restrictions that might affect your rights once you own the home such as restrictions on fencing and/or landscaping.
Important Elements of the Purchase Agreement
Here are some of the most important areas to check on your purchase contract before you sign.
- Payments and Advances – You should have a clear idea of any deposits you need to pay upfront when you sign, advances for construction or any extra payments that need to be made upon certain conditions being met.
- Financing terms – Your contract should go over how you will pay for the home whether it’s cash or a description of your home loan including your term, amount, and interest rate. Make sure your contract explains whether it’s conditional on securing financing, the number of days you have to obtain a mortgage, and how to notify the builder.
- Critical dates – The closing date is the date you are scheduled to take possession of your home but it’s not the only important date when buying pre-construction. All important dates should be included in the agreement. Find out how any possible delays will be handled by your builder.
Review the purchase agreement very carefully before signing to make sure everything is clear and there are no errors. This is a good opportunity to ask any questions you may have as well to avoid misunderstandings later. It’s also recommended to have a lawyer review your contract before you finalize your purchase to make sure you understand exactly what your contract says.