The New Home Puzzle

Guelph’s New Build Market is on absolute fire! Every sort of buyer finds New Homes intriguing, from investors to downsizers and to first time buyers/families! People building their forever home love the thought of customizing their dream home where investors look at the potential dollar signs they will make with each continuing phase of the development! Everything sounds picture perfect, right??? Unfortunately, this isn’t the case. There are many hidden costs and fees associated with building your new home and it’s a huge problem when buyers are uneducated and unrepresented in this huge life decision!

The Builder will give me the best deal

Buyers are under the impression that they will get a better deal if they do not bring their own representation when working with a builder. This is one of my biggest pet peeves!! Anyone that tells you not to have someone represent your own needs should not be trusted in the first place! The representatives at model homes represent one person and one person only, just a hint, its not you! They have the builders needs in mind and it is their duty to get the best deal for their client, the builder. It is common practice now a day that builders will co-operate with Realtors when bringing a buyer. Why would you not have someone who will professionally represent you and your needs when it won’t cost you a dime!?! As a Realtor we help you navigate the builder’s agreement (usually 100+ pages of tedious clauses) and find any hidden clauses that are detrimental to you as a buyer. We also help you negotiate, sometimes it’s not always the price of a new build home but we know what builders are most likely to negotiate on, such as upgrades, finishing’s, closings, etc. Most importantly we provide you comparables so you aren’t overpaying for your new home and we are knowledgeable about our Guelph Builders! We know their reputations and current standings with the Tarion Warranty Program.

Misleading Information

Builders can often be misleading when advertising their homes. “Detached homes from the low $400’s!” This is great until you arrive at the sales office to discover that is for the smallest home, on the smallest lot with builder basic finishing’s. Those lots will go fast so when you finally discover there is a new development and check out the sales office for yourself, you discover there are few lots left and all have hefty premiums attached to them. Lot Premiums can vary in price from $15,000 to upwards of $160,000.  Some premium lots include, backing onto greenspace, pie shaped lots, corner lots, walk out lots or you can have the jackpot of all lots with a walkout on a pie shaped lot that backs onto greenspace!

Additional Costs

You buy your house, pick your lot and finishes and your done, move in ready! No … not at all. Most buyers do not realize or factor in the additional costs that they will have to put into the home after they take possession. Here are just a few items that may be a factor;

  • Water Softener (aprx $1,000-$1,500) – this isn’t a MUST item but if you want to keep all your appliances running their best you should have one, Guelph has hard water!
  • Air Conditioning Unit (aprx $3,000) – some builders may have incentives including an air conditioning unit but don’t count on it with all builders
  • Appliances or upgraded appliances (aprx $1,500-$10,000) – once again some builders include an appliance package but some either include only white/black appliances or none at all. Be prepared to pay upgrade costs through the builder for stainless steel or buy your own packaged set of appliances. I suggest to my buyers to buy their appliances separately because when you upgrade or buy through the builder the costs are rolled onto your mortgage. Yes, that’s an awesome option if you don’t have the cash on hand but if you go this route you are paying interest on the extra amount added onto your mortgage for your whole mortgage term.
  • Deck/Fencing (aprx $1,500-$10,000) – builders will often lay sod and do bare minimum for landscaping, it is the buyers responsibility to add privacy fencing or decking.
  • Driveway Paving (aprx $3,000-$5,000) – some builders will include a landscaping package which will include your driveway being asphalted but in other circumstances the buyer will need to pay for this expense. Some cities even require it to be done within a year of possession of your new home.
  • Window Coverings (aprx $1,000-$7,000) – your home will have brand new beautiful windows but sometimes we want a little privacy! All the windows will need to be outfitted with curtains, blinds or shutters, whichever you prefer.
  • Painting (aprx $1,000-$4,000) – unless you like “builder beige” you are going to want to personalize your home with warm, inviting colours. Homeowners can choose to paint themselves but this can still be an expense with paint, brushes, rollers, trays, etc. Easiest and quickest option is to have a painter come in before you even move in.
  • Mirrors and Bathroom Fixtures (aprx $500-$2,000) – this may be one of the most ridiculous items on the list but I have dealt with builders that make you buy your own bathroom mirrors, toilet paper holders and towel rods. These little details add up quickly!!
  • Basement finishing’s (aprx $20,000-$30,000) – it is becoming rarer for builders to throw in a finished basement as an incentive. They usually charge you as an upgraded cost to finish the basement which will also be rolled into your mortgage costs. Surely, you can hire your own contractor to finish the basement after you take possession, it can be cheaper that way however if there are any foundation cracks/leaks the Tarion Warranty will only cover the repair of the foundation not your finishes. Your personal insurance will have to take on those costs.
  • Backsplashes and Upgraded lighting (aprx $500-$4,000) – remember if you want to completely personalize your home you will be paying out of pocket for these extra finishes after possession.

Think Resale

Most buyers, usually investors, when buying a new build often choose very personal finishing’s or the builder basic and do not take into account resale value. Cherry red cabinets may be your absolute favourite thing in the world but when you want to sell your home it may be detrimental. Let a realtor assist you when choosing your finishes and help you determine where you will get the best return when picking upgrades.

The Downpayment

Downpayment structures differ from builder to builder. Some first time buyers can’t even get into the New Build market because they only have 5% down and some builders require more than that. I have seen some scenarios where a builder requires $100 deposit to hold the property and then only $5,000 upon firming your conditions until the property closes but on the other hand I have seen builders require $1000.00 to hold the property, $4000.00 upon firming conditions, 5% down 10 days later and another 5% down 90 days in. These are all questions a Realtor who is experienced with New Home sales will know to ask before entering their buyer into an agreement

Taxes

When buying a New Build for your personal residence the builder usually pays the HST and submits for a HST rebate after closing. However, if you are buying a New Build for the purposes of an investment you will personally be responsible for not only having 20% down but you will have to pay the HST upfront as well. You, just as the builder, will be able to submit for an HST rebate through the government after your home closes but you will still have to be prepared to have thousands of extra dollars to pay this cost at closing time. This process can take 2-3 months to get the rebate money returned.

The New Build Condo

Many people do not know this but when purchasing a New Build Condominum project, such as a townhome, there will be a period, beginning on closing day, where you will have to rent your own unit from the builder until the entire phase is complete and registrations are finalized through the condo corporation. This could take upwards of 6 months of rent you are paying before being able to pay your own mortgage. The whole complex needs to be complete inside and exterior common element spaces before the city and condo board can fully register the property.

With all this being said, I still love a great New Build project, but I strongly believe buyers need to be educated before purchasing one. You need to factor in all costs not only for your personal budgets but to make sure after all your upgrades, premiums and finishing’s that you are not overpaying for a home and can still turn around and at least break even if circumstances change and you need to sell. If customization is what you are looking for there are a number of great resale options throughout Guelph waiting to be restored to their former glory! Resale is a great way to build value and great return in a home as well! I always develop a plan with each of my clients and fully weigh the pros and cons of building versus resale and determine not only what is the best financial option for them but the right fit for them! Find a Realtor that gets your needs and is experienced in not only resale homes but New Builds as well, by coming into the TW Store where we are always talking Real Estate!

Amanda xo

Amanda Lord

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