September 16, 2011 - I recently read an article in the Toronto Star that got me thinking about the experiences of homebuyers purchasing newly built condominiums.
The article detailed buyers who had bought from floor plans, but, unfortunately, once the unit was built they were disappointed when they realized that one window looked at a brick wall, the floor was laminate and the balcony was “more of a ledge.” This article is a good reminder that there is a lot to consider when deciding to buy a new home.
Condominiums are regulated by the Condominium Act. In recent months, there has been some talk about the need to reform this law, in part to provide better consumer protection. There is no doubt that the act does need reworking, but caveat emptor, or buyers beware, can go a long way to help buyers when purchasing any home.
When buying newly built housing there are many things to consider. Firstly, when you walk into a sales office, understand that often everyone there is working on behalf of the seller/builder. If that is the case, you may have discussions with them, but their fiduciary duty is to the builder, not you as the buyer. With this in mind, you do have the option of working with a realtor and entering into a Buyer Representation Agreement to authorize them to work on your behalf.
At any time that you work with a licensed realtor they must disclose, to all parties, on whose behalf they are working, in writing. For years I have been hoping that Ontario would make disclosure part of all sales that happen in the province. Currently only realtors who are licensed under the Real Estate and Business Brokers Act 2002 must do so. Consumers would be better protected if all parties involved in real estate transactions — including lawyers, private sellers and new construction on-site salespeople — were required to do so. It’s only fair; anyone acting on behalf of someone else should have to disclose their relationship.
Secondly, a very important thing to know is that all buyers of newly built condominiums are entitled by law to a 10 day cooling-off period, during which time they can cancel their agreement. This is a good time to peruse all documentation and take it to a lawyer for review. When dealing with condominiums, it could help to use a lawyer who specializes in condo law. The lawyer may have good advice on stipulations that you can add into the contract to better protect yourself.
Thirdly, understand what you are buying:
• Make sure that a condominium suits your lifestyle. Do you have a good sense of the reality of a 665-square-foot unit with two bedrooms and two bathrooms? If you have house-sized furniture, are you ready to sell it all to make this type of new space livable?
• Be diligent in getting the details. If the plans show nine-foot ceilings, is that in all of the rooms? Where will the heating, cooling, and water be located for the apartment below and above? Ask for the full building plans so you can see where the bulkheads are planned.
• Understand the status of the neighbourhood. Is it a stable neighbourhood with little redevelopment, or is their significant development going on — or coming — that could change the nature of the area and affect things like the view from your unit. The municipality’s Official Plan and Planning Department staff can help you look into the future.
• Be realistic in your expectations for the property’s value; use common sense. Getting caught up in hype and speculating that your unit will increase dramatically in value from the time you purchase until construction is complete could leave you disappointed.
• Finally, be sure to consider all of your options. For many homebuyers, newly built housing is the right choice. However, if you are the type of person who likes to “kick the tires” before buying, purchasing a resale property might be a better option for you.
Newly constructed housing is an important part of the real estate market. It fills an important niche and is the right choice for many people. However, as with any major purchase, it is important that you take steps to look out for your best interests. Go the extra step to make sure that you understand what you are buying and consider working with a realtor who can provide assistance and advice during the purchase.
Richard Silver is president of the Toronto Real Estate Board. The views expressed here are those of the president. For more information, go to www.TorontoRealEstateBoard.com. Follow on Twitter @TREB_Official, on Facebook TorontoRealEstateBoard and www.youtube.com/TREBChannel.
Reposted from The Toronto Star