Wondering what exactly goes into a purchase agreement and offer to purchase when buying a new home? In this episode we explore the elements of the purchase agreement, the process of buying a house, timeline for purchasing upgrades and more.
Prefer to listen?
Transcription:
Karl Yeh:
Hello, and welcome to another edition of Homebuyer's School. This is Cory McDonald, Community Manager with Brookfield Residential. In this episode, we're going to answer the question:
What goes into the actual offer to purchase, or contract to purchase?
Essentially, if I like a house and gone through the walkthrough and all that kind of stuff, and I want to buy it, so what are my next steps?
Cody McDonald:
Really good question, and there's a big difference between buying a brand new house versus buying one that's previously been lived in or a resale home.
Typically, when you're buying a resale home, the realtor that's involved, they have their own realtor agreement, which typically is about a page to three pages and is quite a quick, "Here's my offer, here's what's included in the home," and then submitting that offer.
I'm going to focus a little more on the brand new build because that's what I have a little bit more experience in.
But it's maybe a little bit more thorough, and sometimes, it can be a little intimidating just the amount of paper that goes into a purchase agreement through a new home build.
Basically, we want to make sure that all parties are very, very comfortable with what's expected of them purchasing the home.
With a new home builder, it's typically about 10 to 15 pages of a purchase agreement. It's stating in sometimes quite boring language.
I had somebody once call it legalese.
It was written in legalese, some sections, but we want to be very, very clear and very transparent as before locking somebody into a purchase of a brand new home:
- what they're getting into
- what's included in the home
- what they can expect for insurance
- what they can expect for building times
- what goes into being a homeowner
- if there is homeowner's association fees
- if there's condo fees associated with the home as well
A lot of that also ties into what is expected from the city and what you can expect from services from the city, so it is a fairly length document.
The process of buying a brand new home is:
- You would come in on, say, day one to write the purchase agreement, typically taking about an hour to maybe two hours sometimes of your time because we want to be very thorough in educating you on the paperwork.
- From writing the purchase agreement, most builders will give a 10 to 14-day window of what we call a condition removal period.
It gives you time to read over everything that you've just written, so there's zero questions after being locked into the agreement of what's expected of you and what you can anticipate from that builder as well. - After the 14 to 10-day window is when you would sign the condition removals, and that's finalizing the sale, and that's giving you that timeframe.
Basically within that window, though, any deposits you would've been given would be fully refundable if something does come up, if you don't agree with something in the purchase agreement or you find a better home somewhere else, then you can still cancel at that time, but we want to make sure that it's very, very clear right off the bat what you're getting into with the purchase.
Karl Yeh:
You have 14 days to really go over that agreement and really think it through to make sure that you're, I guess acceptable to everything that is in there, and at any time ... Well, I guess it depends on builder to builder to builder-
Cody McDonald:
Correct, yeah.
Karl Yeh:
... if you can cancel out or so on, right?
Cody McDonald:
Basically, within that window, you actually have to be able to get your money back, if, and a lot of ...
This is where it gets very legalese.
Depending builder to builder, it sometimes can be written only if financial funds aren't available.
So just being very, very careful reading what you're signing that sometimes if you change your mind, that that doesn't matter.
It's only if you fail financing can you get your money refunded-
Karl Yeh:
Your, okay.
Cody McDonald:
but there should be a condition removal period where you're not completely locked into the contract.
Karl Yeh:
That time period depends on the builder to builder, 14 days, right, so-
Cody McDonald: Correct, yeah.
Can you go into detail what exactly is in the contract to purchase or purchase agreement?
Cody McDonald:
Absolutely, and from my experience, again, builder is builder is going to be slightly different, but typically, there is a genetic purchase agreement, and this is that 10 to 15 pages of the actual contract that you're signing off on.
In addition to that, it could be part of that purchase agreement, but there's sometimes some extras that you're signing off on at that time as well.
If you're adding any additional options or upgrades, usually a list of what you're adding extra on to the home is given there too, so again, you know what additional costs are being added at that time.
Comparatively, there should be a list of what standard specifications are included, so legally, the builder is saying:
"This is how we're promising to build the home so that we're not changing our mind halfway through and ruining the customer purchasing experience."
On top of that as well, it could be additional information as far as if there's site visits, if you're able to see the progress visits of the home, or sometimes depending on the stage of construction that you're buying at, if there's a possession request, if you wanted to request a specific date to move into your home, a lot of those would be packaged into the offer.
Again, this is a pretty lengthy list of paperwork that you want to go over in quite detail, and that's why it typically takes sometimes an hour to two hours to sit down and go over everything completely.
Karl Yeh:
If you wanted to, say, include another upgrade during that 14-day period, would that be builder to builder, or that would be, usually you can't do it?
Cody McDonald:
Yeah, and again, it's all circumstantial. If it's a completed home and you want to change the-
Karl Yeh:
Like add another bathroom, yeah.
Cody McDonald:
... floor plan upstairs, yeah, that's usually something that you can't modify at that time, so a lot of it is, is time-sensitive, a lot of it is based on the builder as well.
I know some builders are not, they don't do a lot of red ink on their blue print, so they're not custom home builders, whereas some other builders have a little bit more leeway or a little bit more freedom with that too.
There is a little bit of difference between the builder in that regard as well.
Karl Yeh:
But is it a general rule that you can't really change over the home when you've, in this 14-day period when you're actually set, like-
Cody McDonald:
Yeah, and again, I'm only going to go off of my experiences.
I haven't worked for every builder out there, but for, my experience is that if it's early enough in the construction process, you can still add upgrades to the home as long as it's meeting the deadlines for the building.
If you've reached X state of construction, these are the timelines for what upgrades we can add to the home, so if we haven't even started framing, yeah you can upgrade your backslash, you can upgrade the tile, you can upgrade a lot of these aesthetic features to the home as well.
Karl Yeh:
If the home hasn't been constructed yet, you have a little bit more option, but as it gets closer to the actual, if the home is already constructed, you have limited options.
Cody McDonald:
Exactly. A part of this that will play in builder to builder would also be the builder's willingness to do those repairs.
Maybe in the last little while, when the economy wasn't fantastic, I think builders might've been a little bit more lenient with maybe doing some of those things.
Karl Yeh:
Maybe if you really wanted to do a lot of customization, probably look at buying a house during a downturn?
Cody McDonald:
Yeah, absolutely, if you can time it perfectly to, and then especially when you sell your home. If you can sell when it's a seller's market, and manage to buy, somehow, when it's a buyer's market. .
.. if you can work that out perfectly, then you should write some books, and then figure out how you can sell that information to make tons and tons of money.
Karl Yeh:
Well, that's great. Well, that was super helpful today. I really got a lot in terms of knowing when the actual offer to purchase is. Anyway, that's the episode for today. We'll catch you next time.
Your turn:
Let us know if you have additional homebuying questions that we can answer by submitting them in the comment section below.
Homebuyer's School publishes new content weekly so subscribe or check back regularly for the latest information, strategies and tips from homebuying experts.
About Cory McDonald:
Cory McDonald has been working for Brookfield Residential for over 5 years and has had the opportunity to sell in several beautiful communities around Calgary and Cochrane. He has experience selling everything from starter town-homes to move-up homes within the company. Cory originally grew up in Calgary and after a short stint living in the greater Vancouver area, he returned home for a better quality of life to raise his family.
