Buying a pre-construction home is exciting, but it can also come with a lot of uncertainty. Will your home be ready on time? Is there a chance it may never be built? Are there any additional costs you need to be prepared for?
While there’s no way to avoid uncertainties altogether, it is possible to obtain more information and clarity around them so you have a better understanding of what you can expect. And that’s the main purpose of the Addendum, a document which your builder must include in your purchase agreement.
The Addendum is a very important part of your agreement which you should review in detail with a real estate lawyer before you sign the deal. For now, however, you can read on to learn more about why you should familiarize yourself with what’s in it.
Details about your closing/occupancy
The Addendum sets out key dates related to when you can expect to take possession of your new home or occupancy of your new condominium, how and when these dates may be changed, and under what circumstances you might be eligible for delay-related compensation under the new home warranty.
The first section, called the Statement of Critical Dates, lists these key dates for you. Here you’ll find your closing or occupancy date, which may be firm or tentative. You’ll also notice the last possible date on which your builder can provide closing or occupancy, and the period during which you are allowed to cancel the agreement and get your deposit money back.
Reviewing the Addendum will therefore give you a good idea of how things can play out, the options available to you, and the protections you have under the new home warranty when delays happen.
Early Termination Conditions
Builders typically include clauses in purchase agreements that allow them to cancel the deal if certain conditions are not met, such as development approvals or adequate sales. These are referred to as “early termination conditions,” and a list of the ones your builder may use can be found in Schedule A of your Addendum.
If your builder is including any early termination conditions, they must clearly describe them in your purchase agreement. And for each condition, they must provide a date by which it is to be achieved.
While all of this does not eliminate the risk that your agreement may be cancelled, it adds a lot of clarity around the milestones that must be met in order for your project to proceed to completion.
Additional costs when your home is ready
Many buyers of new-build homes are taken by surprise when they find out, at the time of closing or occupancy, that they must cover additional costs, or “adjustments,” on top of the price of their home. In fact, this is a very common thing.
With the Addendum, there should be no surprises when it comes to these adjustments. Your builder must list all the fees, charges, or other costs which they anticipate adding to your home’s purchase price in Schedule B of the Addendum. And if it’s not listed here? Then your builder cannot force you to cover it. It’s that simple.
Every new home buyer should make a point of reviewing the Addendum in detail with a real estate lawyer before they sign a purchase agreement. By helping to give shape to some of the unknowns that come with buying pre-construction, it will provide greater peace of mind.