Hurry Up . . . And Wait

So, you’ve finally purchased a new home. Saved your pennies until they were dollars. Did the appropriate research  to find an ideal neighbourhood with the right amenities. Worked through dozens of floorplans with a litany of builders. Negotiated the best deal possible. Borrowed enough money to get a queasy feeling in your stomach. Went back to the sales centre and signed the purchase agreement which is now approved and then – nothing. First nothing for days, then weeks and maybe a month or two.
After all that hard work by the buyer, there is kind of a natural expectation your builder will put every one of his  staff and resources into building your home. After all, it’s a big deal – right! Well, most builders follow very formalized  building processes and as hard as it may be to believe, they generally are working on more than one or two homes at a time. Check with your builder to determine what their specific building process is, but generally they follow similar  steps. Those days and weeks when apparently nothing is going on with your house are indeed a busy time, in which  the lot is being secured from the developer and registered if in fact the builder did not own the lot. I break the process  down as follows and it might help in understanding why building a home can seem so slow, when in fact it’s probably not.
Stage 1 – The Paperwork 
The first part of building a home is preparation to build. This includes finalizing details of the home structurally and  aesthetically. The home plan needs to be plotted onto the lot, a permit needs to be obtained from the city and all the  trades need to be scheduled in advance to make sure they are available in an organized and cohesive manner. One major issue that happens here is obtaining the city permit. This is generated by a fairly small department that only has  so many staff and during very busy periods (like spring or when the economy is booming) it can take extra weeks to get this vital piece of paper before any field work can begin.

Stage 2 – The Structure 
Your first big day will be when they dig the hole to pour the foundation, generally a month or two after the sale is finalized. This is your first tangible sign that one day you will actually have a home and if it happens to be pouring rain (remember last summer) then this step may be delayed for a week or two. Eventually they will pour footings and foundation walls and then – you guessed it – you wait for the concrete to set. This could be two weeks or more. The next sign of life is a framing crew creating floors, walls, stairs, ceilings and roof etc. This is an especially fun  experience as your home rises from the ground (phoenix like) and becomes real. It is a time of tremendous pride for the owners. At this time you want to visit the site every day to watch the progress, but don’t. Framers will be moving  around doing work on a few homes at a time so there will be some waiting periods for sure. Next are the windows and doors and then a period of waiting as the “specialists” arrive. These include electricians, plumbers, furnace installers, insulators and drywallers. You may have to wait a bit on each of them as they’re in high demand and depending on the timing and scheduling proficiency of previous steps they may be double booked by this point in construction.

Stage 3 – The Finish
Following structural work, comes the interior and exterior finishing. Again, handled by specialists. Painters, flooring  installers, carpet installers, tile setters, cabinet and countertop people, and finishing carpenters. Each follow the  other in a timeline often impacted by some inconveniences that may add a day or even week to the finishing of your home.

The point of this article is to allay fears that “no activity” on your home for a few days or even weeks, is not something to stress about. It’s almost predictable. Don’t call and harass the builder. Often, whatever is occurring is beyond their control and it is in their best interest to finish your home as fast as possible – because that’s when they get paid. Building a home is a complex transaction and some patience and a clear understanding of your builder’s process is a really good way to mitigate stress during those endless waiting periods.
The Art Of Negotiation?

Okay, you’ve done your research and finally found that perfect home or condo. You’re feeling all nervous. Is this the right home for me? Can I afford this? What if (fill in the blank with your basic insecurity here)? Dozens of questions are flying through your mind making it all seem a bit overwhelming. Time to take a step back and chill. Yes, you are making a big decision and yes the fun is over for a while as now it’s time to negotiate your deal. And, the art of negotiation is extremely important in real estate.
Every transaction is different as every deal has different dynamics whether it’s a new or resale home. You have different seller motivations, business structures, sales processes and management styles – and you as the buyer are largely on your own. So, remember one very important rule – the upside of your future return on the property you are about to buy will be largely determined by how you negotiate the deal NOW. Of course, the vendor wants a full price cash deal. You on the other hand have lots of complications that make up this transaction. There could be conditions on the deal you need, availability of financing and the amount, terms of financing, possession dates, inspections. Lots to consider. This is where your homework needs to pay off.
A real estate deal is predicated based on one of two things – the motivation of the seller or the desperation of the buyer. As a buyer understand one thing. There is always another piece of real estate and another seller. You must set your conditions in stone and stick to your guns, regardless of how hard that may be when you think you’ve found the perfect home and investment. Try to understand the seller’s motivations. Is it a builder with too much inventory? How is the market? Understand your leverage in the transaction and build that leverage through “slow” pragmatic examination of the home and your own set of circumstances. Remember, when you’re the buyer – there is no deal without your money, so the ball is always in your court.
Here are some rules that I have found work well in any negotiation:
  1. Set your parameters in stone with a thorough understanding of pro’s and con’s of the transaction. Everything that can be quantified in dollars – do it – so you are clear of the true costs of the transaction as it impacts what you should pay for the property.
  2. ASK for everything you want. If forced to concede on something than get something else in return, no matter how small.
  3. Use appraisals and information to build a reasoned “value” for the property – the price is just what the vendor WANTS, it does not mean it’s what the property is worth.
  4. Know how much time you need to negotiate and use it. The deal does not go anywhere without you. Time is a great ally in a real estate deal. Let it work for you. Walking away and coming back is just fine. There is always another property.
  5. Have clear in your mind absolute DEAL BREAKERS and stick to them.
  6. Find out everything you can about the seller, their motivations and current position.
  7. Negotiate fairly with reasoned terms to maintain credibility with parties.
  8. Evaluate counter offers and listen for details to determine next steps.
  9. Try to meet with the seller often in the negotiations to establish commitment to both your best interests.
  10. A lot of the above requires you to get and evaluate many facts and details, organize a purchase plan that is financially based (not emotional), and then stick to your guns. That is hard and actually the worst feeling in the world will be walking away from a failed negotiation. But, trust me there is no better feeling than getting a deal on your terms and profiting from it in the future. Wait for that deal. There is always another property and another seller to deal with.
The Right Builder Is Not Your Buddy – They Are Professionals!

So, you are looking for a new home and you’ve done your planning. You have mortgage pre-approval. You’ve decided what key features, needs and wants are important to you and your family. You have identified the region and communities that provide the convenience and amenity features to suit your lifestyle both today and in the future.
Now, it’s time to hit those showhomes and find the perfect design and builder. There’s a fine line in choosing the right home and the right builder. Obviously the right plan has the proper room count, space and key features to fit your budget and lifestyle needs.
And, the right builder will have the home layout, price, building process, selection offering, construction and engineering expertise, warranty and service coverage, customer support, communications programs, professionalism and financial stability to complete the job – the way you expect it. As you can see, that’s a mouthful and it requires you to be actively engaged in the purchase process and leave nothing to chance.
You should shop for your builder as carefully and with the same diligence as you do the home plan. Treat it like you’re interviewing them.
When visiting showhomes you want to engage in conversation with the Sales representative. It is important you feel comfortable with this person as they will be your “advocate” and first line of builder communication throughout the process. Their level of knowledge and expertise, in the community, builder, planning process, support programs, permits, construction and related industry knowledge will provide you with the degree of confidence necessary to maintain good working relations while your home is being constructed and finished.
Ask lots of questions about the community, future plans for it, the builder, and the builder’s process. Look for knowledge gaps and make sure responses make sense to you. If they don’t, that’s a red flag that something may be problematic after you sign the purchase agreement. Find out how long the builder has been in business? How many homes they build per year? Do they offer a home warranty program and who is it with? A good builder will have no hesitation passing along past customer referrals. Call a few and check to see how satisfied they were with their experience and see if they recommend the builder.
Inquire about after sales programs, the time frames for follow up inspections and attention to deficiencies should any arise after move in. And, get everything in writing. If it is not written down, it is irrelevant after the fact. This is your home, and to the degree possible control a successful outcome by creating clear expectations on both sides before signing anything. Ask questions, questions, questions. Then document, document, document. Only then do you sign on.
You may want to visit all your builders showhomes to examine the quality and attention to detail standard across all products.
Also, inquire about design flexibility – how willing is the builder to deviate from floorplan specifications, their standard features versus upgrades, as well as what brand name products they use. Some brands offer excellent customer support and warranty programs while others may not. This can be important three to five years after you have purchased and the builder’s service program has ended.
Viewing showhomes gives you a close look at the builder’s construction, finishing details, use of space and function. However, show homes are often outfitted with “upgraded” features that cost much more than standard items. This is a common point of misunderstanding for new home buyers. Ask to see a home with standard finishes if that is what you’re buying. You may be less impressed. Most builders have completed spec homes, built to much simpler standards then showhomes, that are ready to view.
It takes just a little time and a few questions for you to move forward with ease and comfort, confident that you have chosen the right builder to build the right home for you.
Make Sure You Know What You’re Getting – SPECIFICALLY

I was visiting some show homes with one of my daughters a short time ago as she has entered the market for a home. Like any 20 something, she is inexperienced in the process, but having grown up around the real estate business, she is more aware than most first time buyers. That being said, it was interesting to watch the NEW home process through her eyes and reality. What became clear quickly is how unprepared buyers are to evaluate the “value” of the new home they are viewing, and how poor builders are at presenting their product. Of course, there are show homes and sales staff, but I noticed a great deal of confusion in articulating clearly what exactly you get IN and ON your new home. In the industry they are called “specifications”, and, you need to pay attention to them properly to understand what you are getting in your home. (It’s likely not exactly what you are seeing in the show home.)

Builders create show homes to achieve certain things. First to merchandise and showcase their product. Second to exhibit their craftsmanship and attention to detail. Third, to let you imagine yourself in the home. And, fourth to provide an idea of what you get for your money. People, being “visual” (and generally not very good listeners) tend to believe what they see. However, since the show home is designed as a marketing showcase it likely includes “UPGRADES”, which you don’t get unless you pay for them. In an average show home, even at the entry level, that number can be in the thousands. So when you are looking at the base price of a new home you need to know what base “specification” is included to make sure you understand what you’re getting. Here is where it gets tricky. Some builders provide excellent “specification” handouts for their base specifications and some provide very poor ones. Be aware! It is your responsibility to understand what you’re buying. Once the contract is signed, your new home’s contents are for the most part fixed, except for “expensive” changes if you want to make those later. I was shocked that the builder we were visiting did not even offer a spec sheet. To me this was very, very suspect. Especially when working with inexperienced buyers. My daughter and I were left to our own devices to visit the show home and try to decipher what was an upgrade, and what was not, based on some talking points the Area Manager gave us. BRUTAL. Now really, do you think we could understand what was included in the price? My advice – if the builder won’t give you a good listing of what’s standard in their homes, turn abruptly and walk out. If you don’t understand what’s going into your home how can you possibly evaluate the price value. The fact is you can’t, and chances are there could be a problem with what you finally see your new home.
So when shopping for a home, particularly when building, make sure early in the process you understand what is in your price. Specifications apply to construction materials and features from thickness of basement walls and floors, width of sidewalks and driveway, to the finishes, components, décor and programs that give your home style and your purchase convenience. A good specification sheet addresses exterior construction and interior construction materials, finishes and fixtures and often builder programs to help you through the process. Most builders only provide complete “specification packages” once you sign a sales agreement, but good builders always provide a reasonable specification handout on your first visit. In fact, that handout is important as it allows good builders to differentiate themselves and gives credence to their pricing. So understand the basic specifications you get for a standard price and what you will need to add as upgrades, to get the look of that amazing show home or show suite. It is a detailed question that must be asked and should be clearly explained to avoid unpleasant “misunderstandings” after the sales contract has been signed.
It’s A Little Work That’s Worth A Lot!

While this may sound a bit “extreme” to the average home buyer, trust me, it’s important. A well defined and innovative development plan, executed professionally, in a high growth area can yield “thousands” of extra dollars in equity when your community finally reaches completion. Public amenities, schools, leisure centres, parks or recreation development and even commercial and transit construction can have dramatic positive (and sometimes negative) impact on a property. And, often these do not exist at the time of purchase.

When you finally decide on your home plan and work through all your exterior detail and interior décor selections, the final outcome of the product and the benefits you will enjoy are well understood. However, buyers often ignore the “living environment” around their home which can lead to unexpected outcomes that could have been avoided through a little homework before you signed the sales contract.
Evaluate “PRICE” Carefully

So you’ve made the decision to buy a home. Statistically you’re one of about 9% of greater Edmonton households that will purchase a new or resale home this year. It’s a big move regardless of what you buy so here’s a few things to think about.
New VS. Resale
Let me state clearly that I work with clients in the new home industry, but I will try to keep my bias in check. Because I have purchased both types of homes (a few times) I think I can remain objective.
Price is generally the reason people start searching in the resale market. And, at first that appears logical. In general, resale home prices range from 15% to 20% less than new homes of similar size and style. However, that’s not always true in today’s market conditions. A large amount of new lot supply and an increase in new “value priced” condos has kept a lid on prices and made it possible to buy a “new” home for as little as 5% above resale prices – certainly in the entry level segment. Virtually a dead heat when it comes to price. A key consideration is that you must pay GST on a new home while you do not pay it on a resale. However, the rate of GST is subsidized modestly for homes under $450,000 so
the impact is lessened somewhat.

You should also consider the hidden costs of buying used. First – you will have to fix all those items (no matter how small) that impact a resale homes safety and performance. Leaking faucets, running toilets, drafty windows and doors, inefficient furnaces, hot water tanks in need of repair or worse, creaking garage doors, worn out appliances, and a litany of other “can’t see until you move in” kind of things.
Second, there’s personalization and décor changes or upgrades. Musty old carpets with a few stains, scratched or damaged hardwood, chipped or discoloured paint, broken railings, casings and light fixtures, and of course out of date counter tops, cabinets, etc. These items collectively can add from $25,000 to $40,000 to the cost of a used home almost immediately. All of a sudden that great price disappears faster than those big savings you thought you had.
And, In The Future
At the end of all this inconvenience and expenditure you are still essentially living in an older inefficient home. The technology integrated into today’s homes, particularly regarding energy and water efficiency, can save you about $700 PER YEAR over
an average sized used home. And, that’s at today’s resource prices! Since 2000, oil prices have risen over 400%, utility rates have gone up 115% and it’s reasonable to assume this trend will continue in the future. So, purchasing a new home built to the highest sustainable standard is not only “smart” for your family and the planet, but is essential for the
health of your budget.

Many Alberta builders have embraced sustainable building practices that could save you thousands of dollars over the life of your home. So, the battle rages. New or used. It really depends on the product you find and the price you can negotiate. Just remember to think through all the costs associated with the sale and compare them prudently. Only then can you make the perfect home purchase for your budget.
Location. Location. Evaluation?

One of the most important decisions in the new home purchase process is choosing the community or development you will live in. It matters because the “future development” of a community or its surrounding region can pay BIG dividends for you at resale time through equity growth. In some rare cases it can also hurt property values at resale. Of course, you also have to live here so make sure the development plan is consistent with the quality of life you’re aspiring to.

Development Companies Create Communities, Builders Create Homes

The general working relationship in a NEW community is for a land development company to assemble the land; purchase it: master plan and engineer the infrastructure; obtain approvals; coordinate services and heavy construction; determine home styles and the quantities of each; configure the commercial mix, if any; articulate lifestyle amenities; and finally, select builders to help market and build the homes. The select builder group is therefore independent of the developer and is assembled to sell lots, construct homes and provide direct customer service.

“You may have to dig a little for some information but the effort will be worth it. Remember, it’s the buyers responsibility to understand implications of their community’s future development…“

This means buyers have excellent access to detailed and accurate information on future development plans for the community and its surroundings prior to purchase. You may have to dig a little for some information but the effort will be worth it. REMEMBER, it’s the buyers responsibility to understand implications of their community’s future development, though most showhomes will have an overview of this information.

After the showhome, the Development & Planning Department, or other civic or provincial, services offer a treasure trove of detailed data and information on your community and everything around it. On a macro level you can obtain copies of local and regional economic growth patterns and job creation data through Economic Development agencies or Statistics Canada. And finally, use on-line resources to chart and map crime statistics, population patterns, and income stratification to truly understand how the future may unfold for your community. It’s also advisable to review where business development initiatives are targeted as that inevitably means population growth will follow.
Get The Greatest Economic Force Working For You.

This article is dedicated to Mark Love, CSG’s founder, first president, mentor and friend. And to the memory of Janine Couglin and family – CSG’s second president and friend.
My name is Jim Malner and I’m a real estate addict! I admit it. I love the business. I love looking at show homes, condo developments and I love talking about it. For 25 years I’ve worked as a real estate marketing consultant for over 50 of western Canada’s largest and most successful builders and developers – ranging from single and multi-family products to resort developments. As the president of Consumer Strategies Group (CSG), Alberta’s longest serving real estate consulting firm, I’ve witnessed three booms, four busts – of various magnitudes – and had the privilege of working on some incredible (and some not so incredible) projects. This industry experience, according to this magazine, gives me some perspective to share monthly real estate insights that might help you make better purchase decisions or just learn about the business.
My response is usually it’s never a “bad” time to buy! Timing and opportunities can always be “good or bad”. However, if you’re looking for your first home “the earliest date possible” is the right time to buy. 
The reason: real estate creates wealth, it’s loved by people seeking financial security and it works based on the proven “time value of money” economic theory.
Over time it is very difficult to lose money on real estate purchased as your personal residence. The forced “savings effect” of a standard mortgage, tax advantages for capital gains, and over 200 years of economic data indicate that owning your home is the best investment you will make for your lifestyle and your future. While economic windfalls or turmoil may swirl around you, owning your home is the easiest way to increase wealth over a reasonable time through “equity creation via forced savings” and “capital appreciation,” due to economic growth and inflation.
Let’s look at today’s environment. If you’re trying to time the “bottom” of our latest down cycle – you missed it. Statistically, it probably occurred in mid 2009. Since then, prices have fluctuated and settled at about 9% lower than peak 2007 levels. Today, it’s fair to say, real estate prices are flat (fluctuating a percent up or down) depending on homestyle. At the same time job creation and real wages are rising again. Only recently have interest rates risen from ridiculous lows and people, the driving force behind real estate consumption, are again moving to Alberta. Just like the previous four recessions, real estate prices will move past previous highs, because these factors form the foundation for a renewed positive cycle. So, I would say “the right time to buy is NOW.”
What should you buy? Well, that’s up to you and your personal situation. Today, Edmonton’s condo market presents great opportunities for first buyers. For instance, The Royal Bank reported February 25th that Alberta is again the most affordable place in Canada to own a home, and condos are by far the most affordable – requiring on average only 27% of income. A surge in new townhome and duplex building has also placed “price pressure” on these home styles making them another great option if you want more space and a yard.
So, don’t sit and wait. The faster you buy, the faster you get the “time value of money” and “equity growth” working for you. And, as history has repeatedly shown, it’s the easiest way to a better financial future and a comfortable lifestyle.