Buying a new construction home can be an exciting prospect, but it also comes with its own set of considerations and potential pitfalls. Whether you’re a first-time homebuyer or an experienced real estate enthusiast, understanding the ins and outs of purchasing new construction is crucial to making a well-informed decision.
Denny and Monica highlight some of the negative aspects of buying new construction and what to look out for when getting into a presale.
This episode will focus on the negative aspects of buying new construction. A lot of moving parts in construction, how to economy affects building costs, deficiency walkthroughs, Lower Mainland developers, and how nothing is ever perfect.
Read the Transcript Here
Hi everyone, I’m James Garbutt. And I’m Denny Dumas. And this is the Garbutt Dumas Real Estate Podcast.
Denny: New construction. This is a big topic in Greater Vancouver in the last decade and on the surface it feels, I don’t know what the right word is but like, it has this image of being perfection.
You are picking a really reputable developer like a Bosa, like a Concorde, like a, well WestBank has had its issues, I don’t know why that was the next name that came to mind, Polygon has been great in a lot of projects. Mosaic does good stuff.
But the reality once you get towards completion can be different and there’s definitely mixed experiences, even with really reputable developers. So I think the point of this podcast is just to kind of shed some light on what actually happens towards the end of a new development project and as a consumer what to be prepared for, because Perfection doesn’t exist. And there’s always going to be deficiencies. Some developers do a really good job of taking care of those prior to the completion date, and others will glaze over things as quickly and as un-smoothly as possible.
Monica: Construction is major. There are so many moving parts to construction. It’s absurd. You go from a structure being there to being knocked down to the earth being dug up and to something being reframed and thrown into the sky. It’s insane the amount of work that goes into new construction.
There are 1000s of people that work on these sites, different trades, different people, different from different backgrounds, from different expertise levels. It’s crazy. It’s absolutely nuts. What’s what happens from day one to day 2000 of a building and it’s also really interesting to see the types of personalities that purchase new construction.
Over the years I really got a kick out of the types of clients that I have that decide to purchase new construction. It’s usually people that have extremely high standards of what they believe construction should be like. Sometimes those standards need to be evaluated and the edges have to be round out a little bit because like you said, there is no such thing as perfect, and I find that a lot of people that purchase older homes that just really dig the nice floor plans and they think that they’re charming and they liked different things about it and they’re cool with you know, putting their spin on it and repainting and doing stuff those personalities are completely different than the type of personalities the purchase new construction.
And we’re finding now the different, like seasons of the economy and different seasons of things that have happened in the world, really affect how the products of new construction are rolled out. We saw in 2008-2009 which is around the time, like Suter Brook and Newport was built you know, so they’re dealing now with problems that were, that surface because of how construction went during the recession, because of how difficult it was then and because they had to pivot and some of the new construction was sold at this price and then the exact same unit like a month later was sold significantly less. So there’s a lot that goes on there. And right now, what we’re experiencing is many projects that have completed this year, were all being built during lockdown. So we’re experiencing delays, construction cost changes, due to supply chain shortages and due to interest rate changes. So we’re seeing absolute and utter chaos in completions in new construction right now.
Denny: As you can tell this is not a promotion for new construction or pre sales. This is more just an eye opening to the realities of what to expect when you purchase new construction towards the completion date because the first thing is, that I want to really shed some light on is the completion date.
A lot of consumers they write a contract today, let’s say and in the contract,, it’ll say estimated completion date, November 2026, three years away. There’s also a date in there that is the outside date, which is usually 12 to 18 months after that estimated completion date. And what people don’t understand is that it is difficult to get even like an approximate idea of the month of the completion date until you really know the completion date. And that usually you don’t get a notice of completion until probably anywhere from two to four weeks before the completion date.
So this adds a little bit of stress and some difficulty scheduling things like insurance and your mortgage and appraisals. Often as realtors that represent a buyer on a new construction project or on a unit we get a call from an appraiser being like “Can I get access?” And it’s such a silly question to ask because we’re like, well, the building’s not done yet.
Monica: We don’t have keys. No one has keys. There are no locks on the door. Actually just go ahead and try.
Denny: Just put on a hardhat and pretend you belong there. But completion date is something that a lot of consumers don’t understand that they’re, you don’t really know the date until like a couple of weeks before mortgage brokers as well. When we’re dealing with mortgage brokers, our client is working with a mortgage broker to set up their mortgage for this new construction project and the project is six months away. And we get an email from a mortgage broker saying okay, let me know the completion date.
Monica: They email us every month. Can you tell us the completion date? Can you tell us the completion date and it’s like everyone is going to know, we’re all going to get a notice, we’re all going to find out at the same time when the completion date is coming up. And my favorite thing is also “Hey, my notary really needs to know because we have to schedule the appointment because she’s going on vacation in August”. Maybe find a plan B notary. I don’t know. We don’t know.
Denny: It’s difficult. I mean, it’s not really, it’s not a developer issue that they’re just not being straightforward with us because there’s, like Monica said there’s so many moving parts. Like let’s say the countertops, you know, don’t come in on time or one of the appliances is on backorder and it takes an extra month or two to get the fridges or the inspector from the city is delayed a week or two and doesn’t come to do an occupancy walkthrough and for a couple more weeks, like there’s so many moving pieces leading up to completion that they’re invariably or like in most of the time there are delays.
Very rarely does a project complete on time. Usually we are telling our consumers to budget for an extra six to nine months. Like often they’re very delayed. But you don’t know until the last second which can be very frustrating and stressful at the end but unfortunately it is the reality.
Monica: Yeah, so some big things that we try to educate our buyers on that are purchasing new construction. Number one is the timeline. The timeline is uncertain and it’s absolutely not in stone. So if it said it was going to complete September 2023 also get your head wrapped around that you might be moving in spring 2024. Like that’s just timeline is a major one that you have to educate your clients on when it comes to new construction.
And the other thing is, is like the condition of the unit. There’s a reason why there are deficiency walkthroughs. There is a reason why you get to do another one a year after you move in. There’s a reason why there’s warranties. There’s a reason why all of these safety nets are in place and it’s because there are so many things that can go wrong and oftentimes they do and it doesn’t mean that there’s anything actually wrong with the property. It just means that these buildings are alive and their characters and they, you just have to get to know them and it takes time.
Denny: More detail on the deficiency walkthrough because these are really important. A lot of people come through and this is, this is a really exciting and emotional time for people that are moving into these new projects. And there’s the expectation that this is going to be a perfect brand new, spotless condo.
It’s still a construction site. So as Realtors we are super surprised and we do like dozens of these walkthroughs every year. We’re super surprised if we are not putting up 100 pieces of green tape. There, I remember I think was Polygon townhouse. Like maybe two or three years ago, and I think I maybe put up like five or six pieces of green tape and it was just like really minor drywall or paint deficiencies and the consumer expects that’s what the deficiency walkthrough is supposed to be. But the Realtor is like hilariously surprised that we were only there for 25 minutes, usually it’s like an hour and a half.
So understand that going into a deficiency walkthrough, the expectation is that there will be lots of deficiencies and we’ve had really bad ones where you think this is an exaggeration but I probably putting up five to 600 pieces of green everywhere. But like each developer will do different see walkthroughs at a different stage.
Some do them very well where they actually have a team like a customer service team go in and do their own walkthrough, put up tape, have contractors and painters and things come back. Do all of those items and then bring the consumer in. Others because of delays are behind in projects and they just want to move quickly, will have consumers come in too early and that’s where Realtors are frustrated with the developer that they didn’t take the extra week or two to make things look a little bit better.
And your reputation as a developer is extremely important in the Realtor eyes. Because the next time we see your project and a client is talking about potentially buying a unit here versus some other buildings in the neighborhood, we are now bringing up these stories of you know, they’re a middle end of the road developer, they do a decent product, their finishes look good. You’re not gonna have issues here but the deficiency walkthrough is gonna be a nightmare. So be careful.
And just be like, understand that going in, the deficiency walkthrough, it’s gonna be 90 minutes, we’re going to put up 800 pieces of green tape. And they may or may not do all of them. It’s just it’s not going to be a perfect unit. And that obviously has a little bit of a negative connotation to the developer to the building versus a great experience like a Polygon. Now we’re walking through a presentation center where the buyer we’re saying oh man, their customer service is fantastic. They put together a really good product. It was as close to perfect as possible. And now a buyer has so much more confidence going into a building like that.
Monica: Yeah, and it also can vary in projects like I had a fantastic walkthrough at one of our Electronic Ave condos that one of my clients purchased, like it was great. I honestly think two pieces of tape it was, it was so good. It was a great walkthrough. And then I had another person that bought like four units in the building that told me that they were just like, completely disastrous.
So it just is what it is. And it depends on what floor, maybe they hadn’t done the pre walkthrough or the pre deficiency walkthrough with the customer service team on that floor and our floor had and it just is what it is.
If I could say one thing to developers, if anyone’s sitting out there in the depths of development, do the walkthrough if you can, if you can, if you can do it before the client sees it, it changes everything. It changes their mindset. We try our best to prepare our clients that it’s not going to be perfect but big major flaws like making sure if they paid extra for extras, make sure those extras are in the unit when we see it for the walkthrough.
Make sure it’s the right color scheme, just to have some eyeballs on it before going in because I’m saying these things but they’ve happened to us in the past I’ve showed up. It’s been the wrong color scheme. I’ve showed up, client paid extra for an extra large island, it was a small island. Showed up, there wasn’t a hot tub. Showed up there wasn’t air conditioning and we’d ordered air conditioning like there’s been some major upgrades left in the past. So yeah, if you could do a pre deficiency walkthrough developers, please do it. But if not, you do, we have to warn our clients. You have to let them know that. It’s not going to be perfect but we’re going to try our best to get there through the deficiency walkthroughs.
Denny: Flooring is really common too. A lot of times developers will offer an upgrade to put the laminate flooring throughout the bedrooms for an extra 2500 bucks and yes, your client has paid that or has agreed to pay it in the contract. And you get into the deficiency walkthrough and it’s carpet in the bedrooms and now the client is pissed. And you’re like, it costs them, the developer a lot of money to rip out carpet and put the laminate floors in or offer some sort of discount or whatever to make the client happy but it happens pretty commonly. And so I guess our point from this is as a consumer going into a deficiency walkthrough, understand it’s not gonna be perfect, understand there will be deficiencies and understand that hiccups happen and it’s part of our job as Realtors to find solutions for those hiccups.
Monica: With new construction, I would say this is definitely one of the many but a really important reason to have a Realtor on your side as a buyer in new construction. Because I’m dealing with a situation right now. And like they had a lot of lapses in this one product that we bought and my client, she works, so she couldn’t be there on Tuesday when someone came back to do the floors again because that did happen yesterday. And I had to go back in and let’s because now she has possession already. So we have the keys. So the developer no longer has the keys. So I had to go back, unlock for them, let them in. They called me when they were done at that day, at the end of the day. I had to go back and lock up for her because now she still lives in the city. She hasn’t moved yet.
So these are reasons why it’s really important to have a Realtor and I’m able to contact the developer every day and stay on top of them and it takes a big amount of stress off of her plate because otherwise it’d be hard dealing with it while she’s working. While she has a lot of things going on in her life while she’s moving. So yeah, with new construction you need to have an advocate.
While I was there yesterday waiting for them to let me in or waiting to meet the person that I need to let in. There was a man standing in the lobby. John. And he’s standing there and I noticed he’s been there for a while and I’m like, Are you waiting on someone? And he’s like, Yeah, I’m looking for so-and-so this woman that works with a developer who I was also waiting on. And I asked him what his name was and he gave me his name. So I was like, Do you want me to call her like, have you been waiting? He’s like, Yeah, it was two o’clock by the way. He was supposed to meet her at 10am.
There’s moving trucks there and deliveries and all kinds of stuff. Again, complete and utter chaos. So I message them and I’m like, Hey, I’m here in the lobby. We’re gonna call this guy John. John’s here. He said he’s gonna meet you and there’s nobody here to meet him and he had nobody to get a hold of. All he had was an email from the developer. He had no phone number or he had nothing.
And he didn’t have a Realtor because he’d bought it at the presentation center. He’d been receiving these notices like everyone else and was told to show up at 10am. Somewhere apparently, he had been sent something saying that his time needed to change but he’s a working guy like he’s working. He gets a bunch of emails, so somehow this poor soul missed it and he could have rescheduled with his moving truck. But he was pretty upset. And he was like, Who are you here? Or which number are you? And I was like, Well, I’m here for my client. She’s on the sixth floor and he was like, I should have hired a Realtor. This happened yesterday and I was like, yes, you should have hired a Realtor. Why didn’t know and it was kind of funny, but in a tragic comedy sad way. He’s just sitting in the lobby for hours. Four hours. That was yesterday.
Denny: That’s not a good experience. Other not so good experiences. And it’s really just being prepared for this: The developers, once you have signed a contract and put your deposits in there communication in most cases sucks.
So if you let’s say towards the end, you are getting a mortgage and you need to add a parent to a mortgage or to the contract. You, it may take 3,4,5,6 weeks and I’m not joking to hear back from a developer, get paperwork from them and actually get these completed. This is not something that happens overnight. If you are thinking about assigning your unit, often developers will just straight up say no, but it’ll take them a week or two or three or four to get back to you to say no.
Or they will send you the paperwork and then you have to fill it out, send it back to them for signatures, that could take another week or two. They’re, I understand they’re busy and they have a lot of things on the go at a time but just understand that their communication is not like Monica and I’s communication, that if you send us a text you get a reply within 15 seconds. It is not like that with developers, these are, these conversations will last weeks likely. So just being prepared that if you need to make an adjustment on a contract in that time before completion, or if you’re thinking about assigning your unit. Be prepared for that to take a little while.
Monica: And just a little advice just from experienced Realtors who have dealt with this before if you get an email from the developer saying hey, we have two extra storage lockers. Let us know if you want one. You have to respond to that immediately. If you want an extra storage locker, you are responding to that email the second it hits your you’re calling your email and you’re doing everything because there are 100 other people that got that email too, and everyone wants a storage locker. So if you’re getting that email and you’re at work, do not wait for lunchtime to respond to it.
But if you have a Realtor, you can let the Realtor know hey, I want a storage locker if they become available in the next few weeks because they said they might can you make sure they know I want a storage locker because then we can respond for you because that’s all we do, is we sit there all day waiting for people that email us and call us and text messages. We can respond and get that storage locker for you.
My client was able to get two storage lockers when only two were left because we were the first people to respond. And she didn’t even know about it! My client didn’t find out until the following Monday because she was out of town. And they emailed us on Friday telling us that there was two storage lockers and I emailed them right away and said yep, we want both of them. That was like, it was send us the contract, we will take them both.
So it’s really important in new construction to have representation. I can’t drive that one home enough guys, doesn’t have to be me, but needs to be a Realtor. Tt should be me.
Denny: I got two more things. And both of these are our big shocks to consumers when they happen often unless they’re prepped for them.
So one is buildings settle. So once you move into a building, that first year or two, the building will settle. I don’t know half an inch a quarter three quarters of an inch and as a result of drywall will split there you’ll see little hairline cracks going down your drywall, drywall tape on the ceilings will start to peel. nail pops, nails will come through the drywall or the ceiling and you’ll see nails.
These are really common in any project throughout Greater Vancouver. This does not mean that the quality of construction is poor. This is common. This happens all the time. So understanding that in that first year. The reason that you’re allowed to ask the developer construction team to come back after 12 months is to repair these settling items.
Second thing that consumers don’t know is when you make a list of all these items for the first year that you’re living there. You call the developer 11 months after you moved in so that you can arrange this deficiency walkthrough for them to come back and make these drywall repairs these, whatever repairs you’ve noticed is: they will patch, they will sand, they will not paint.
So yes, they’ll come back and repair all these cracks. But you’re going to be responsible for painting so if you don’t want to paint two or three drywall cracks you like, it may be something where you just decide not to do it because you don’t want three big patches in your condo. But I’m making sure that like a lot of consumers have no clue. And developers do not do a good job of noting this. The contractor will come in one day, they’ll patch all the holes. They’ll wait for it to dry. They’ll leave. They’ll come back the next day. They’ll sand and on the way out they’re like oh, by the way we’re done and consumers are sitting there going what the hell? Not I got six white patches all over the place? You have to paint them sorry. Sorry guys.
Monica: It’s true. And one really interesting thing I learned several years ago was and this goes back to like the building settling, is that the higher quality of precision and construction, the more likely there is to see settlement changes.
So if you have a type A personality developer and everything is super zipped up. There’s more opportunity for you to notice the changes. So don’t think that if you see changes in the building that that means that it’s a crappy developer, oftentimes the highest quality developer means the most likely to notice that you know, there’s a tiny bit of shifting just FYI because I think a lot of people think that that means that it’s low quality and it doesn’t often mean, means it’s high quality construction.
Denny: Anything else?
Monica: That’s it.
Denny: We’ve got multiple podcasts on like the pros of new construction, investing in new construction, the positives or the opportunities in new construction and negotiating with developers and slower periods and the ideas of not having to pay a mortgage for two or three years while you wait for hopefully market to improve. But we want to shed a little bit of light on
Monica: The ugly side.
Denny: The ugly side of new construction as well.
Monica: The Dark Side.