USING AN AGENT TO PURCHASE A NEW HOUSE????
The advantages of having a licensed realtor to help you purchase a new home are the same as those for purchasing a resale home. They ensure that your best interests are protected. They will also assist you in site selection, floor plans, analysis of builders specifications, changes and extras, contract review, schedules and covenants, zoning by-laws and easements, knowledge of the past and present market, help in finding the right builder and right home quickly, expertise in contract writing/negotiations, and finally closing assistance. The builder has a professional representative watching out for his interests; you shouldn't settle for less by not having the same expert opinion.
Utilizing the services of a Buyers Agent rather than dealing directly with a builder's representative has many advantages:
- They are familiar with the builders in this area and can provide unbiased information.
- They help buyers assess value and compare specification sheets.
- They advise on upgrades, draft and negotiate an offer, provide warranty information, offer tips for the pre-delivery inspection.
- They can answer questions and concerns about the building process.
- They can even do something that no non-licensed builders representative can do, and that's sell your existing home for you. This helps to make the whole transaction easier, and with only one coordinator orchestrating the entire deal, helps make it seamless and less stressful.
In short they look after the best interests of the buyer throughout each and every step of the entire transaction. They look after your interests and ONLY your interests. Always keep in mind that the representative of the builder by his very position must get the best deal for his boss, in each and every deal, or he won't continue to represent that builder very long. The bottom line is, no matter how nice and personable that representative is, he represents the builder's interests and ONLY his interests. If you're entering into a major dollar figure contract, it would only be prudent on your part, and recommended, to use a legal professional to protect your position. Why wouldn't you use a real estate professional for the very same reasons, especially when their costs are already included in the deal?
In our current, fast paced real estate market, there are many new home communities to choose from. You need to ask yourself some pertinent questions when looking for a new home. Is this a good builder with a solid reputation? How does the quality of his product match up with other comparable builders? What are the existing inventories of the various builders? (supply and demand can possibly affect the selling price of the home). Can that model home be purchased rather than wait through a lengthy building period? How do the builder's designs meet your needs? (floor plans, square footage, style). In what sections of the city are suitable lots available and is that particular builder established there?
It is very important that your interests be professionally represented when you are entering into a contract for conceivably the most expensive item that you will purchase in your entire life. These transactions are complex and the contract detail must be exact in order to protect, and ensure, you get exactly the home that you selected and want.
There is no room for error in negotiations of this caliber.
Always be aware that the only contract in Canada that must be in writing is one concerning Real Estate. There is no such thing as a verbal, understood, or handshake deal. If it's not in writing and clearly understood, it is not part of the deal and does not exist. There is no redress in the courts.
ANY ADVANTAGES TO NOT USING AN AGENT TO REPRESENT YOU IN PURCHASING A NEW HOME??
There is no financial advantage to buy directly from a builder. Builders have a "single price" policy, meaning you will be paying the same price, whether your interests are represented by an Agent or not. Just as in any resale, the Seller pays a standard commission which is published, and everyone in the industry is aware of. This in NO WAY affects the selling price of the home, as it is built into all new home construction prices. If that commission is not paid, it simply goes back into the builder's pocket as extra profit, especially in this aggressive sellers market. Understand that a very sizable portion of all new home sales are marketed on the Multiple Listing Service, in other words organized real estate. What you are achieving is loosing the protection, and advice of an invaluable expert opinion, and in this case, its loss will put you at a definite disadvantage.
The price of a new home is the cost of the land, the cost of materials, the cost of labour, administrative costs and taxes, and the profit that the builder must make in order to continue in business. The only thing that is added to this mix that will change the selling price are upgrades, (which the builder will make a profit on), and which he is counting on to augment his bottom line. He doesn't give away profits lightly, and in this market he doesn't need to.
The basic selling price is the selling price, and does not change, no matter what your being led to believe.
REAL ESTATE TERMINOLOGY
AMORTIZATION: The number of years it will take to pay off the entire amount of a mortgage. In Ontario, most mortgages are amortized over 25 years.
APPRAISAL: An estimate of a property’s market value. This is used by lenders to determine the amount of your mortgage.
ASSESSMENT: The value of a property set by the local municipality. The assessment is used to calculate your property tax. (the municipal assessment TIMES the mill rate EQUALS your property tax).
ASSUMABLE MORTGAGE: A mortgage held on a property by a seller that can be taken over by the buyer. The buyer then assumes responsibility for making payments. An assumable mortgage can make a property more attractive to potential buyers.
BLENDED MORTGAGE PAYMENTS: Equal or regular mortgage payments consisting of both a principal and an interest component.
BROKER: A real estate professional licensed in Ontario to facilitate the sale, lease or exchange of a property.
BRIDGE FINANCING: Money borrowed against a homeowner’s equity in a property (usually for a short term) to help finance the purchase of another property or to make improvements to a property being sold.
BUY-DOWN: As situation where the seller reduces the interest rates on a mortgage by paying the difference between the reduced rate and market rate directly to the lender. Or the difference can be paid to the purchaser in one lump sum or monthly installments. A buy-down can make a property more attractive to potential buyers.
CLOSED MORTGAGE: A mortgage that cannot be prepaid, renegotiated, or refinanced during its term without significant penalties.
CONVENTIONAL MORTGAGE: A first mortgage issued for up to 75 % of the property’s appraised value or purchase price, whichever is lower.
DEBT SERVICE RATIO: The percentage of a borrower’s gross income that can be used for housing costs (including mortgage payments and taxes).This is used to determine the amount of monthly mortgage payment a borrower can afford.
EASEMENT: A legal right to use or cross (right of way) another person’s land for limited purposes. A utility’s right to run wires or lay pipe across a property is a common example.
ENCROACHMENT: An intrusion onto an adjoining property. A neighbour’s fence, shed or overhanging roof line that partially or fully intrudes onto your property are examples.
FIRST MORTGAGE: The first security registered on a property. Additional mortgages secured against the property are termed “secondary”.
HIGH RATIO MORTGAGE: A mortgage for more than 75 % of a property’s appraised value or purchase price.
LISTING AGREEMENT: The contract between the listing broker and an owner, authorizing the Realtor to facilitate the sale, or lease of a property.
MORTGAGE: A contract between a borrower and a lender where the borrower pledges a property as security to guarantee repayment of the mortgage debt.
MORTGAGE TERM: The length of time a lender will loan mortgage funds to a borrower. Most terms run from six months to five years, after which the borrower will either pay off the balance or renegotiate the monthly payments for another term. Payments are calculated using the interest rate offered for the term, the amount of the mortgage, and the amortization period.
MULTIPLE LISTING SERVICE (MLS): A comprehensive system for relaying information to Realtors about properties for sale.
OPEN MORTGAGE: A mortgage that can be prepaid or renegotiated any time, and in any amount without penalty.
PARTIALLY OPEN MORTGAGE: A Mortgage that allows the borrower to pre-pay a specific portion of the mortgage principal at certain times with or without penalty.
REALTOR: A trademarked name describing real estate professionals who are members of a local real estate board and the Canadian Real Estate Association.
LAND TRANSFER TAXES: Payment to the provincial government, for transferring property from the seller, to the buyer.
VENDOR TAKE-BACK: A situation where sellers use their equity in a property to provide some, or all, of the mortgage financing in order to sell the property.
ZONING REGULATIONS: Strict guidelines set and enforced by municipal governments regulating how a property may, or may not be used.
Source: Ontario Real Estate Association