Review the Contract Before You Sign

Review the Agreement of Purchase and Sale carefully before signing it. Professional new home builders will go through the contract with you, point by point. This helps to eliminate errors or misunderstandings, and it is a great opportunity for you to ask questions. Here are some pointers for your contract review.

• Check for correct spelling of names.
• Verify the description of the home—e.g. lot, model, elevation (orientation on the lot).
• All attachments or schedules that form part of the contract must be referenced in the main contract document. This includes site plans, drawings, specification list, design and approvals process for customized homes, and so on.
• Make sure you understand what's included and not included in the base price of the home—particularly important if you have based your decisions on a model home with a mix of standard and upgraded features.
• Check that any extras and upgrades you have chosen are documented accurately (e.g. model, brand name, size, colour, price).
• If the price includes allowances—for instance, for lighting and kitchen cabinets—the amount should be noted in the contract with a description of what happens if you go over or under budget.
• How will you pay for the home? This must be noted in the contract. It may be as simple as "cash", or a description of your mortgage (amount, interest rate, term). If the contract is conditional on financing, this must be noted clearly, along with the number of days allotted for obtaining the mortgage, the process for notifying the builder. It should also be stated clearly what happens if the mortgage application is turned down (e.g. the contract is null and void, and the deposit will be returned in full).
• All other conditions, such as the sale of your current home or a favorable review of the contract by your lawyer, must be similarly detailed. That way, nothing is left to chance or misinterpretation.
• Payment milestones should be clearly outlined—e.g. initial deposit upon signing of the contract, additional deposit when conditions (if any) have been met, possible construction advances and amount due on closing (when you take possession of your new home).
• The builder (or sales representative) should issue a receipt for the deposit and a copy should be attached to the contract. The builder's refund policy and third-party deposit warranty should also be described in the contract—your protection in the unlikely event that the builder for some reason is unable to honour the contract.
• If the new housing tax rebate is assigned to the builder, it should be noted.
• Similarly, provision of condominium documents, including budget, if applicable, should be noted. This does not pertain to freehold dwellings where ownership includes exterior space.
• The closing date is the day you take possession of the home. Ask your builder to explain how possible delays will be handled.
• The irrevocable date is the date by which the builder must respond to your offer, failing which it is no longer valid.

As noted in Writing Up the Contract, consider having a lawyer review the contract before you sign it.