I want to buy a pre-construction home. Do I need a real estate salesperson to arrange the purchase?
The choice is yours. I suggest you weigh your options.
Many builders hire real estate salespeople to market their developments, much like resale homeowners do. Salespeople at a pre-construction sales centre may work for a brokerage retained by the builder, with the builder as their client. Builders that do not retain brokerages for their sites, sometimes employ sales staff to work in their sales centres to present the builder’s offerings and amenities. This makes closing a sale onsite without a real estate salesperson representing you (the buyer) entirely possible. However, it is important for you to be aware that staff at builder sales offices, whether they be brokerage salespeople, or independent sales staff, work for the builder and, as such, represent the builder’s interests.
You would be well-advised to discuss your purchase with a real estate salesperson who could represent your interests in a transaction. Especially if you are inexperienced in purchasing pre-construction properties. The process can be overwhelming for some people, so having a professional represent your interests could go a long way in giving you some peace of mind. In hindsight, I wish I had sought the expertise of a professional to help me in my first pre-construction purchase. I am sure I would have felt more reassured during the process, knowing where I might be in a position to negotiate and where I likely wasn’t.
There are other good reasons for you to work with a registered real estate salesperson.
If you don’t have a specific development in mind, a salesperson could start by helping you find one; salespeople are often invited to attend builder-hosted “VIP” events where pre-construction units are offered for the first time. A salesperson also has full access to listing services and has likely handled similar transactions, so they can evaluate the builder’s price and featured options.
An experienced salesperson should also be able to help retrieve and examine the building plans, offer insight into the neighbourhood, estimate the various closing costs (which can be substantial for some new properties), and assist in negotiating the agreement. Buying a pre-construction property can be an exciting experience, especially when the builder creates it to your specifications. A downside can be that you must wait for your new home to be built, and sometimes there are unexpected delays. For some buyers this is an upside since it gives them more time to save before the closing date. For others, it can be tricky trying to give notice or align the closing of the sale of an existing home to line up with the possession of the new one.
Hiring your own registered real estate salesperson can also be beneficial should your personal situation change, and you need to reevaluate your property ownership plans, or you simply have second thoughts while your future home is being built. For these reasons, you will want to know your options for exiting an agreement to purchase prior to completion, or if that is even possible. That means also showing the agreement to a real estate lawyer who can determine if it provides the buyer (you) with an opportunity to terminate the purchase and what is required to do so, or if it includes the right to assign their buyer rights under the agreement to someone else.
Even if terminating an agreement of purchase and sale is possible, you may learn that there are some limitations on what you can do and when, including marketing restrictions. Many pre-construction agreements contain clauses that prohibit the buyer from assigning (selling) the original agreement of sale to another buyer prior to their agreed upon closing date. If the contract prohibits the buyer’s right to assign the purchase agreement to another buyer, the builder may be entitled to cancel the deal and keep the buyer’s initial deposit(s) if the buyer was prohibited contractually from selling, assigning, or listing the property during this defined period.
Best of luck, I hope you find the home of your dreams.
If you have a question for Joe about the home buying or selling process, please email firstname.lastname@example.org.
Joseph Richer is Registrar of the Real Estate Council of Ontario (RECO). He is in charge of the administration and enforcement of all rules that govern real estate professionals in Ontario. You can find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube at http://www.youtube.com/RECOhelps.