Buying a home or a condominium before it is built is a bit of a leap of faith and certainly a big commitment. When you can’t physically see your finished product, you are placing your trust in your builder to deliver what you’ve purchased.
Not surprisingly, a purchase of this magnitude comes with a lot of paperwork. But understanding these documents can make you a more informed buyer and help you protect your investment, even if your new home or condominium has yet to be built.
By far the most important document is your purchase agreement, which is a legal and binding contract between you and your builder. It is a long document, full of legal terms, that can be somewhat overwhelming if you’ve not bought a home before. But there are three key pieces in it that you should look for and ensure you understand.
1. Addendum
Buyers of pre-construction homes and condominiums typically have concerns about when their home will be ready and what happens if construction is delayed. This is where the addendum comes in. The document contains information about your closing or occupancy date and how long your builder is allowed to delay that date.
By law, your builder is permitted to extend your home’s closing date depending on the type of closing date agreed on the Addendum – provided you are given proper written notice. Be sure to check out more information on Tarion.com about the specifics on how much notice is required about extensions and compensation you may be entitled to.
The addendum also includes the conditions under which your purchase agreement may be terminated and how your deposit will be protected if that happens.
2. Warranty Information Sheet
Knowing what comes with your new home warranty is a critical piece of information for protecting your investment. The good news is that as of February 1, 2021, builders of new homes must attach a warranty information sheet to every purchase agreement.
Clear and concise, this information sheet is tailored to the type of home being sold and ensures that buyers are aware of the important coverage they are entitled to. It provides a basic overview of warranty coverage (including deposit protection and compensation for closing or occupancy delays), highlights the importance of the pre-delivery inspection, and directs buyers to additional resources for learning more.
3. Condominium Information Sheet
If you’re buying a condo unit, your purchase agreement must include an information sheet that describes the considerations and risks that come with this type of new home purchase. For example, it explains the risk that pre-construction condominium projects may never be completed as well as early termination conditions that would allow a builder to cancel a project.
The sheet also provides information about:
• the status of the project (e.g., zoning approval, date of commencement of construction);
• any restrictions on the builder’s land title that may prevent the project from going forward;
• a buyer’s right to cancel a sales agreement within 10 days; and,
• the expected date when a buyer can take occupancy of their condominium.
There is no doubt that the paperwork for purchasing a new-build home or condominium is a lot to digest. But it’s critical that you be a well-informed buyer, and a good real estate lawyer can guide you through the documents and help you buy your new home with a lot more confidence and peace of mind.