Buyer Beware When Buying Pre-Construction
A number of people have called lately wanting to “assign” their agreements of purchase and sale for properties they purchased through builders, pre-construction, during the real estate frenzy in 2015-2017. It seems these people bought with the expectation that the prices would keep on climbing and that they could sell their positions, never close the deal and make some fast money. That didn’t happen. Since then, mortgage rules have changed and some buyers are panicking as their new closing dates approach.
There are many other buyers who put offers in on new construction and then sold their homes expecting to move into their brand new homes by a certain date. That didn’t happen either as many projects have been delayed up to 24 months from their original planned closing dates due to a shortage of labour and/or having sold homes before final approvals were in place.
Then we have projects like Red Maple (read the comments section!) where people bought back in 2015, put down deposits and the project to this day, has not moved ahead as all necessary approvals and infrastructure were not in place.
Then we have other developments where builders have gone bankrupt, where sales just have not happened enough to proceed or where changes in ownership have taken place. There are far too many just in our Southern Georgian Bay area to list. I should add here that there are other very credible developers/builders who have an excellent track record in the area – it is a matter of knowing which ones.
This article, which appeared in one of our national real estate trade magazines, discusses the dangers of buying a home in the pre-construction period. While the concept of “caveat emptor” or, “buyer beware” is understood when buying a resale home, people do not always apply it and do their due diligence when buying a new home. They are dealing with salespeople who represent the builder – not the purchaser – and they are wowed by the model homes (forgetting that they are usually VERY expensively upgraded).
As the article suggests, buyers should check the TARION website to see the builder’s history and, they should search online for other reviews and comments. If homes are already in place, speak to other homeowners. I would add that people should work with a local REALTOR® as most builders will cooperate in that process IF the buyer has not already signed up for information or signed a guest registration. (Don’t do that if you want help from a REALTOR®!) Buyers can benefit from the REALTOR®s advice and knowledge. In our area, of course, I am happy to help.