New or Resale Home
Pros & Cons

What to Do - Brand New or Resale Home?

Buying a new home from a home builder can be a very exciting event - and it holds potential challenges.

Aside from the obvious, that your purchase of brand new Canada real estate is subject to the unpopular Harmonized Sales Tax (HST) (which is usually buried in the purchase price), that builder contract terms are rarely negotiable, and that your possession date is usually many months, if not years away (especially a high-rise condo), it may seem that the differences between buying a new or resale home is negligible, that everything else is completely wonderful.

Whether you're buying a new or resale home, with the extremely long closing date inherent with new homes, you hope the real estate market continues to at least maintain market value or rise. Otherwise, you could be left handing over your hard-earned money in exchange for a key to a new home whose market value is lower than what you paid. It would be a bitter pill to swallow. But if you refuse to close the sale, you could ...

Lose Your Deposit

... and possibly be held liable by the builder for further damages if he decides (very likely) to sue you.

A difference between a new or resale home is that, for a used house, the closings are usually 60 to 90 days. Market values don't often fluctuate too much during the short term. And even if they do fall, which sometimes happens, you can just sit tight. It'll come back. Historically, it always does.

If the fixtures haven't already been ordered or installed by the builder, you get to choose your own cabinetry, the colour of the plumbing fixtures, flooring, exterior cladding (bricks, siding, etc), paint colours, roof shingle colours, and maybe even the exterior elevation (architectural style).

Everything will be brand shiny new when you move in. Plus, you get a limited warranty. But that's pretty much where ...

The Fantasy Ends

In most cases, you must buy on the builder's own purchase contract. Make sure you have your lawyer read all the fine print, before you sign on the dotted line, because it's typically heavily weighted in favour of the builder. Plus, unlike a resale purchase contract, the deposit required by a builder is usually very large, and divided into several installments over time.

This is totally understandable since the builder is at the mercy of labour, suppliers, municipalities, weather conditions, not to mention the buying public and general economy. If sales are slow, he may have to delay construction, sometimes indefinitely, and occasionally permanently.

And because of these potential disasters waiting to happen, he usually includes a clause in the contract which will unilaterally permit him the right to postpone the completion of the sale, sometimes up to three times.

He must give you a certain amount of notice, and your ...

Special Day Gets Delayed or Eliminated

This can be particularly difficult if you've already given notice to your landlord, who subsequently re-rented your apartment. Or worse - you've sold your old used house and must vacate on your previously agreed closing date. Then, you'll have to find temporary accommodation until the builder has finished your brand new home. So, you get to live with the infamous ...

Double Move

So, new or resale home? Let's see. Say your new home purchase went well, that there were no delays of closing. Or you've lived through them without too much grief.

You've been through the scheduled inspections with the builder's rep, and any corrections, touch-ups and repairs have been made (or promised after you move in).

Your Moving Day Arrives

Many production builders follow the 'just in time' practice, that is the house construction will be completed just in time for closing. The builder doesn't want the expense of carrying it any longer than absolutely necessary.

So, your lawyer completes the sale, and you've paid the typically 'higher than most resale' closing costs. You and your family arrive at the front door of your brand new home, ready to crack open the bottle of champagne to celebrate this long awaited special day. But - surprise - you're welcomed by the sight of workers scampering all over the place in a frantic, and often noisy, attempt to finish up and get the place clean. Now, you're starting to think you made the wrong decision between a new or resale home.

Wait - There's More

If there's been little rain, your 'lawn' is a garbage-strewn desert. The driveway is a wide, rutted gravel mess because they cannot pave it until the ground settles (if asphalt was even included in the price) and the road, not yet assumed by the municipality, is mired in mud, littered with brick skids and choked with construction vehicles.

The kitchen cabinets are dusty and the basement concrete floors and walls are still curing. So, the basement smells damp.

Oh, and it's advised that you not finish your dream recreation room for at least a year. If the foundation cracks, which it sometimes does, and it obviously must be repaired, any collateral damage to your basement improvements are not included in the warranty repair expenses. Hmmm - new or resale home?

And another thing to think about - many of the new construction materials, like paint, cabinets, flooring, particle board, plywood and vinyl all off-gas ...

Toxic Fumes

That new home smell you like - well, it'll definitely not contribute to your family's health and wellness. The house should be ventilated for several weeks to reduce the toxicity in the air. Oh my - another difference between a new or resale home you never even thought about.

For days, and sometimes weeks afterward, workers return to finish small details.

You're reluctant to let your kids and pets out into the backyard because it's still a construction site. They've not yet installed the topsoil, let alone the green stuff. And, of course, there's no fencing. That's your dime. If there's been any rain, instead of dust, you get mud ... everywhere. And forget about opening your windows unless you love perpetual ...

Dusting Absolutely Everything

Finally, being new construction, you will usually experience settling of the structure, and hopefully, no cracks in the basement foundation walls.

Most settling occurs in the first year or so. Cracks will appear in the walls above door frames, and the paper surface of the drywall in the corners may ripple. These situations are typically covered in the new home warranty, and will be taken care of by the builder. But it's still an inconvenience and potential mess.

If the house next door was sold later, the builder and his heavy equipment may still be excavating and building there for weeks or months ... years if sales have been slow. So, get used to construction noise and dust and mud for awhile. And here's bonus - you may be serenaded occasionally in a foreign language by one of the guys working on the construction site next door!

There may also be ...

No Schools or Convenience Plazas

... close by for shopping. And most often, there's no landscaping or large trees. That's usually your responsibility.

So, it'll be like living in a big brown field. And the public road, especially if the municipality hasn't yet assumed responsibility for it, probably won't have the finish asphalt surface for months.

If your new neighbours have already moved in, hopefully you'll like them because, well, they're ...

Your Neighbours

Maybe they won't even be loud and obnoxious. And maybe they'll take as much pride in their home as you do in yours. If not, then their deteriorating property (or not improved) condition may adversely affect the market value and saleability of your home. Oh, and hopefully, they'll not want to park their big truck or camper or boat in their driveway. Bad neighbours may make you wish you'd decided the other way in the great debate of a new or resale home.

I call this game of risk ...

New House Roulette

Now, new or resale home? If you buy a resale house in an established area, you pretty much eliminate all those potential negatives.

There's no HST applicable unless it's a brand new or substantially renovated home.

You don't get to choose your fixtures .. but then again, you do because you choose whether to offer on an existing home. And if you don't like the kitchen cabinets, you can pass on it. Or renovate it. If the bath tub is avocado, you can have it re-glazed or replaced. If the house needs renovating, you should be able to buy it at a lower price, if the home owner is a serious seller. Then, finish it just the way you want it.

All contract terms, including completion date, are agreed at the time of purchase, and the seller cannot unilaterally alter any of the agreed terms. So, possession date cannot be postponed without your approval. Another difference between a new or resale home is the contract. It's usually a lot simpler and balanced between you and the seller. Plus the deposit is typically lower than for a brand new home.

On moving day, there should be ...

No Surprises

... in store for you.

The seller must maintain the property in the same condition as when you viewed it. So, the lawn will be in place along with everything else you purchased. No mud, no dust, no construction. And hopefully, the previous owners left it in fairly clean condition. I've heard stories otherwise, but that's rare.

And here's a really big difference between a new or resale home - landscaping, fencing, decks, air conditioning, driveways, patios, finished basement, fireplace gas inserts, upgraded windows, garage door openers, hardwood floors, ceiling fans, garden sheds, swimming pools ...

Whatever You Bought Will Be There

Any settling has probably occurred long ago and repairs done.

And most important, you had the opportunity to explore the immediate neighbourhood before buying. You might even have met the neighbours already, or at least know they have pride of ownership in their home and don't park a Winnebego in their driveway. You know where the existing schools, shopping centres and the bus stops are located.

The parks are established. You can hug your ancient maple tree on the front lawn.

What You See is What You Get

... and it feels really good.

Now, having said all this - keep in mind that a huge difference between a brand new or resale home is they're totally different animals. A new home is a newly manufactured product on which a builder must make a profit. He's got his challenges and does his job usually to the best of his ability, all things considered. If you prefer everything to be brand new, and you can live with the disadvantages, then go ahead and buy a brand new home.

Are you undecided whether to buy a new or resale home? Here's another idea. Buy a nearly brand new home. Sometimes, family plans change, or life throws you a curve, and someone who had bought a new house from a builder, was forced to list it for sale, maybe a year later, maybe even before they took possession. So, you'll get all the advantages of a brand new home, without many, if not all, of the disadvantages. If you like this idea, check with your REALTOR® (or me if you're looking for real estate in the Greater Toronto Area). You might just get lucky!

So, I guess my bias has shown here. Early in my real estate career, I sold brand new homes. So, I know what I'm talking about. My personal preference between a new or resale home is to own a property in an established neighbourhood.

To me ...

It just makes perfect sense

Click new or resale home for another perspective from the Toronto Home Builders Association. And for information on new home warranties, visit Tarion Warranty Corporation.

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