David's thoughts on anything real estate related

Buying New Construction and Pre-Sales

After location, one of the fundamental decisions that guide the home buying process is whether to buy a new or a 'used' home. Some of my clients know emphatically one way or the other, but others need to weigh the pros and cons. Below, I have drawn on my experience as both a Developer and a Realtor to outline some key issues in buying "New" construction. Next month (July) I'll talk about some of the less-obvious factors in buying "used" homes.

2-5-10 Warranty

As any Developer will point out, new homes come with a 2-5-10 warranty. What does this mean? As of 1999, residential builders (other than owner-builders) in BC are required to be licensed by the Homeowner Protection Office and arrange for third-party home warranty insurance on proposed new homes prior to obtaining a building permit. Minimum coverage and allowable exclusions for third-party home warranty insurance are set by legislation. As a minimum, homes built by Licensed Residential Builders must have 2-5-10 year home warranty insurance - the strongest construction defect insurance in Canada. Coverage includes 2 years on labour and materials (some limits apply), 5 years on the building envelope and 10 years on the structure of the home.

Latest Trends

If only the latest styles and gadgets will do, you may lean towards new construction. Developers work hard to identify, and indeed they often set, the most modern trends. Currently, for example, I am seeing a lot of new homes with home automation packages that work with your iPhone or iPad. Knowing the complexity of setting this up in a retrofit situation is almost enough to get me to move!

Buying from a Floor Plan

Not everyone can visualize a floor plan in three dimensions, which is why Developers invented show suites. However, these idealized samples of your prospective home don't necessarily give you a true flavor of what you are buying.

Not every suite is the same and you may find your kitchen is smaller due to a service corridor, or you hear the noise of the garage door every time it opens. Similarly, not all Developers model the view you will see out your window. Can you live with a building 35 feet away? What does that feel like? Are those transformers in the alley (which weren't shown on the model) going to be buried underground? Will a highrise be built next door?

As a Developer and Realtor, I can help you with these questions so that you know exactly what you are buying.


There is a long wait (one to three years) between when you buy a unit and when you obtain title. A lot can happen. The market can fall, construction prices can rise and risk the development completing, at least in the way it was originally proposed. Or, the market can rise dramatically, which is what you want as a buyer with the foresight to secure a low price, right? Well, not necessarily. I have seen Developers (not my own company) "miss" completion dates and then try to give back deposits to purchasers so that they can turn around and re-sell the unit at the now higher price. Thankfully, such situations are relatively rare, but it is important to understand your rights going in to a situation.

Contractually, there is no 'standard' contract that you, as a buyer, can rely upon to protect you. Even the right to assign a property may not be included, or if it is, may incur a penalty to the potential buyer.

Bottom line, I always recommend that buyers have third party representation and don't negotiate directly with the Developer. The good news is, you CAN negotiate with Developers, and I know how to do it well!

Price Premium

The price premium for new construction is about 20% to 25% after factoring in the HST. Need I say more?

Regardless of which way you lean, it is always useful and interesting to view some new projects to get a sense of where trends are going and what you can get for your money. It may make you fall in love with "new" or it may make you see the value of "used". Get Answers next month and learn more on this perspective.

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