There were certain points that I have spoken about in previous blogs, and also have on my web site. So, feel free to get the free information.
The article talks about buying a condo from a builder and the problems that buyers can encounter. Remember, this can also happen when buying freehold homes from the builder. Bob states: " I had the opportunity to review a condo builder purchase agreement with clients. They had been told in the sales office what they thought was the total purchase price and asked me to see if there were any surprises in the 39-page offer."
"The salesperson had failed to mention that the price on the front page was not the final one and that there were a great many extras not included in that figure."
Here are some items that the builder forgot to mention and that now they were responsible to pay at closing in addition to the purchase price:
- - The unit's proportionate share of the cost of installation of gas, hydro, sewers and water service and meters, to an unlimited amount
- - Any new taxes imposed on the unit by any level of government after the agreement was signed (think HST) -- also an unlimited amount
- - The Tarion warranty enrolment fee of $502.
- - An unlimited levy against the unit for parks or other municipal charges.
- - Provincial sales tax on the appliances included with the unit.
- - An extra $300 for the paperwork to hold the purchasers' deposit in trust.
- - $150 to discharge the builder's construction financing and give clear title after closing.
- - The builder's $52.50 transaction levy payable to the Law Society.
- - $150 to subsidize the builder's legal fees.
- - Interest on the balance of the purchase price from the day of final closing to the next banking day.
- - The amount of any increase in municipal, education or transit development charges imposed between October 10 2008 and closing.
- - An unlimited contribution to the builder's proportionate share of all costs associated with a development agreement entered into with the city.
As you can see, the cost of these extras could easily exceed $10,000 to $20,000. And, "since they are classified as extras or "adjustments," they are typically not eligible for mortgage financing. Not one of them was mentioned in the sales office."
"To make the purchasers' cash flow worse on closing, the offer requires that the buyers prepay to the builder estimated property taxes for the year of closing and the year after - another $4,000 - $5,000 for taxes that won't even be assessed for at least another year."
In that 30 pages, Bob points out to more disclosure materials:
- A requirement for all the condo owners to jointly buy from the builder a $185,000 guest suite and a $215,000 superintendent's unit. The unit owners have to pay this money over 11 years with interest at 4% over the 10-year Canada Bond rate. The extra cost for this would total about $555, plus interest for 11 years. This charge is not mentioned in the purchase agreement.
The buyers were advised by Bob to go back to the builder and amend the agreement to cap the extra charges. Some builder will and some won't.
Extra charges always occur, and I don't think that any buyer has a problem with that. The problem is that there is a lack of disclosure of the charges in the sales office. This is typical in many builder sales offices. This is why I recommend taking the purchase agreement to your lawyer to review it before you sign anything with the builder.
This may scare you out of buying from a builder. Remember, there are very reputable builders out there and they will tell you everything. It's the ones that may forgo disclosure to ensure a sale. There are also many ways that a real estate agent can help. We know what questions to ask.
What a great article. I was very pleased when I saw this because I have talked about the hidden costs. You may question why a lawyer is even necessary in a real estate deal. Well, a real estate lawyer will find all the hidden points that could be missed and point them out to the buyer. They are available to answer questions that require legal interpretations. They are the experts.
Contact Betty Bartusevicius at 905.828.3434 or directly at 416.427.1875.
Re/Max Realty Specialists Inc., Brokerage
Contact me by email: http://www.bettybart.com/AgentProfile/contactme.cfm
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