How To Protect Yourself When Buying A Home From A Developer Before It’s Built
You’ve made up your mind and decided to buy a brand new home. You will be embracing the rising Canadian trend of purchasing a new home that hasn't been built yet. In fact, nearly one-third of all homes sold in Canada each year are brand new.
There are many benefits to buying a new home from a developer. Of course, you get the creative freedom to customize your home any way you like. New homes are also generally more energy efficient and you can rest easy knowing that the materials used to build the home are new. However, buying before it’s built isn’t without its risks. Learn how you can minimize your home-building and home owning headaches so you can enjoy your new dream abode.
- Related Read: What’s NOT Covered Under Home Insurance?
Research Your Home Developer
Building a new home is an expensive, life changing decision. Of course, you’ll want to hire an honest, reputable professional who will do the job right and has great after-sales customer service. The Canadian Home Builders’ Association (CHBA) has compiled the following list of questions to ask the prospective builder of your new home:
- Is home building your profession?
- What is your experience and how long have you been in the business?
- Are you a member of the Canadian Home Builders’ Association?
- Are you a member of a home warranty program?
- Will you give references from your past clients?
- What after-sales service is provided?
- Can I visit your work sites?
Once you’ve got all the information you can from the builder, go to other sources of information. For example, in Ontario through Tarion (a new home warranty program) you can use their Ontario Builder Directory to find out if the builder is licensed in the province, their contact information and related companies that they operate, how many homes they’ve built, the communities where they were built, whether Tarion has had to resolve claims and how much has been paid out for the claims.
And of course, ask for recommendations from friends and family, and see what past clients have been saying online with a quick google search.
New Home Warranties
You may be surprised to learn that only four Canadian provinces (British Columbia, Alberta, Ontario, and Quebec) require builders to provide homebuyers with a third-party warranty. In all other parts of Canada, it’s up to the builder.
- No matter what province you live in, protect what will likely be the single largest purchase you will ever make and only work with builders who provide a third-party warranty.
What Does a New Home Warranty Cover?
According to the CHBA, new home warranties—at minimum—should include deposit insurance and protection against defects in work and materials, as well as major structural defects. Over and above this however, and new home warranties will vary and additional coverage may include:
- Defects in the house’s mechanical systems
- Defects in the building envelope (this means the building components that separate the outside from the inside---walls, foundation, roof, windows and doors)
- Living expenses (accommodations, moving and storage) if you’re unable to live in your home as a result of builder failure or warranty repairs
Before you commit to a builder, have the builder explain in detail the warranty—exactly what’s covered, what’s not covered and for how long.
Home Inspection: Before You Take Possession and Before Your Warranty Expires
You’ll have an opportunity, before you take possession of the home, to do what’s called a Pre-Delivery Inspection (PDI). This is likely your first chance to see your finished home, and is also your opportunity to highlight to the builder the items that are damaged, incomplete, missing or not operating properly.
Tarion, in Ontario, has compiled a couple of documents to help guide you through the PDI and highlight what you should look for: Getting Ready for the Pre-Delivery Inspection (.pdf) and the PDI Checklist. Great resources for any new home buyer getting ready to take possession of their home shortly.
You’ll also want to do another inspection, after you’ve moved in but before your warranty expires. For this one, you’ll want to hire a professional home inspector. This is a good idea, because your home will have now experienced all four seasons giving the home enough time for major defects to come to light.
- Related Read: How To Find A Good Home Inspector
New Home Insurance
While home warranties and home insurance may sound like the same thing, they are in fact very different. A home warranty will protect you from builder deficiencies, while with home insurance you will be protected should your home (and your contents) be damaged by perils such as fires or theft, and you will also have liability coverage if it’s found you’re at fault for someone getting injured on your property.
While your home is under construction, you will not need home insurance because technically the deal hasn’t closed and you’re not yet officially the owner. However, even with a home warranty, once the home is yours, you’ll want to get home insurance to protect your new ‘Home Sweet Home’.