For many people, buying a brand new custom home is absolutely the best way to go. But much of the time, these plans fall by the wayside, and this is not the route that ends up being taken. There are a few simple reasons for this. Firstly, many prospective purchasers mistakenly believe that custom homes built by small builders are necessarily prohibitively expensive. Secondly, there may be some confusion about the ease of financing such a home. Purchasers may think that they must purchase a lot in order to do so and this would certainly make financing difficult for the average purchaser.

Fortunately, through years of experience working with small custom building operations, I have pretty much been able to learn the "ins and outs" needed to make buying a new home almost as easy as buying a re-sale home... more on this later.

I find that perhaps the singular most common reason for the interest in buying a custom home is in order for purchasers to have a home on a rural property. It may surprise you to know that new construction is often cheaper than buying a re-sale home when it comes to country properties. I have sold countless brand new homes on 1 acre properties (or thereabouts) for well under $200,000 since I started in real estate in 1988. These properties have strong re-sale value due to their excellent value at the time they are first built and sold to the original occupant.

What the banks and CMHC like to see is an offer that is pretty much structured like a re-sale offer. In order to accommodate this, we arrange for the prospective purchaser to select a lot. This lot may already belong to a builder - or it may not. If the lot does not belong to a builder, then I work with my purchasers to select a suitable builder. It is then arranged that the builder will buy the lot and sell the lot - soon with a home newly constructed - to the purchasers. This means that the price on the purchaser's offer - say, $175,000 - is the total price for the house on the lot in "turnkey" condition. Well, septic, walkway, driveway, etc. are all included. One advantage of this approach is that there is a contract - sanctioned by the bank - that specifies a certain price for a specific home. Unlike hiring a contractor to build on your own lot, cost overruns just aren't in the cards. The deal is the deal. Banks respond well to the straight forward nature of the contract. The builder in this situation is also obligated to provide an Ontario New Home Warranty Program. This provides warranty coverage for 1 year on just about everything, 2 years for water entry and 7 years on the structure. Peace of mind, for sure.

It is necessary to add a few things to the Agreement of Purchase and Sale that would not ordinarily be included in a re-sale contract. I like to include floor plans and elevations with the Agreement. I also attach as complete a list as possible of the materials and labour going into the house. Finally, I attach a survey of the lot. All this, together with the normal mumbo-jumbo of legalese that makes up any standard offer, and we're "off to the races". You've bought a house!

I hope this "bare bones" outline of how to buy a custom home from a small builder has been helpful.