The role of developers
Recently many clients have been calling me to ask questions about Mattamy Homes. For those who don’t know, this is the largest privately-owned home builder in North America. Toronto Star recently published an article about how buyers were lining up for hours just to get a ticket to place an offer on the pre-construction project during the first phase. Buyers paid $995,000 for a 2,749 sq ft detached home and a similar model is selling now selling for $859,000 in Phase 2 Queen Commons.
I’ve received many calls asking ‘why did this happen’? My answer to this is developers essentially create the market and they chose price points. The reason to why this specific developer reduced prices could amount to various reasons. The company is well established and can afford to reduce their prices, this was probably more of a business or an economic decision. All developers rely on the promise to deliver, in regards to whatever they advertise such as special packages, deluxe deals, free granite countertops when you sign a contract during the first phase. From a business standpoint, they need financing retrieved from deposits to build the homes and then leave with a profitable transaction. This is where you would need a reliable real estate agent (like myself) to help you figure out your maximum price point, the actual value of the property and the level of risk you would be involved in. Once you’ve signed the contract high levels of risk falls on the buyer, developers can provide glowing promises that they might not be able to deliver on. Another factor that you need to consider is doing your own research!
Unlike developers, realtors have clients best interest at hand and are well informed about the local area. Tremendous amounts of research need to be done especially regarding their reputation. Make sure the real estate agent you hire isn’t working for the same brokerage as the builder. When you ‘drop by’ and provide information to another realtor, you might actually be signing with them. Now some of you might be thinking… “well it’s not really going to affect me, buyer representatives are just concerned about their commission”. I’ll admit this is definitely a factor, but it’s our job to look after your interest first! Like I mentioned before, we can tell you if the level of risk is actually worth it. Having an agent already affiliated with the developer that you probably don’t know that well can leave you not represented properly. Another common question I get asked is ‘what happens when I only sign with just a developer’? The answer to that is, the buyer is left with a very high level of risk and the developer pockets the commission.
Always remember there are plenty of opportunities, especially in this market to purchase a pre-construction home. When looking at it from an investment point of view, there is no need to buy the ‘latest and greatest’ – unless you really want to! Purchasing a model home at a discounted rate, or even investing in an older home by the same builder can give you the same result with some renovation. Once you contact me, by working together we can find you exactly what you’re looking for!
