According to the Canadian Homebuilders Association, new home construction in Alberta is a 6.8 Billion dollar industry annually. It's not an overstatement to say this is a big part of the real estate market landscape as it creates over 130,000 jobs. Buyers, whether they disclose it or not, are considering new home construction each time they look to purchase a home, and REALTORS® need to maintain open lines of communication with their clients to ensure they don’t end up in a bad situation. Let’s run through some key aspects of working with buyers and new home construction.
Clear communicationBuyers are looking to buy. What they want is a matter of balancing preference, price, and value, meaning that there are very few buyers who haven't thought about new construction as part of the list of options available to them. It's important to both client and REALTOR® that the possibility of new home construction is addressed at the buyer consultation. This is so the buyer knows that a REALTOR® can help them with purchases of new home construction as well as resale. Additionally, REALTORS® need to understand when buyers are considering new home construction and help them navigate the process.
Contracts confusionAlthough most new home builders use a REALTOR® to help them market their properties on the MLS® system, most of the time the final purchase contract used is not an AREA standard purchase contract. One of the main reasons for this is that the new home warranty provider required in Alberta has the documents they want to transact on. This means the buyer will be contracting with a document that is not as balanced as the AREA standard purchase contract, and both the client and the REALTOR® need to read each contract carefully to understand potential pitfalls. Especially in situations where the original offer is being transcribed onto a builder contract, it needs to be reviewed with a fine-tooth comb to ensure nothing is missed.
Investor speculationOften investors look to contract on one or more properties in a condo project or neighbourhood that has just started to hopefully get the best price and have the opportunity to sell it for a higher price once it has been constructed. There has been a growing trend of speculation buyers who sign a purchase contract with a builder for a new construction build or pre-construction condo and then try and sell the contract itself before they need to close on the property. This practice is misinformed because many, if not most, builder contracts include clauses that refuse assignment of the contract, give the builder the first right of refusal on the property, or otherwise force the buyer to close on the property or lose their deposit(s). REALTORS® representing such clients must offer triple value by (1) reading the contract, (2) encouraging their clients to read the contract, and (3) encouraging their clients to seek legal advice before proceeding.
Active representationAnother benefit of discussing new-construction homes at the initial buyer's consultation is the ability for the REALTOR® to actively represent a buyer client in the show home and ensure that the buyer has the independent advice to make a good decision with all available information. Otherwise, the very real possibility of buyers shopping in showhomes without their REALTOR® and getting into a contract without complete market information is always looming. By actively helping your client through the process, you will be able to meet them for show home tours, register as their REALTOR® with the builder, and ensure the independent advice provided to the buyer is compensated by the builder. Builders recognize the benefit of having a REALTOR® introduce their clients to quality builders and generally enjoy working cooperatively with the real estate community.
Working with buyers is a unique experience every time, and buyers benefit greatly from having all the information available to make an informed decision. New construction properties are a great way to introduce additional options to buyer clients, especially in markets where resale home inventory is low. There are few things more satisfying to a REALTOR® than knowing you helped a buyer get the perfect property to enjoy life in.
Provincial Practice Advisor
Bryan has many years of experience in the real estate industry including over 10 years as a former broker in the Edmonton Region.
Email: email@example.comPhone: 403-209-3619