No Fridge Magnets. No BS. No Such Thing as a Bad Question.
HOMEROOM
A Weekly Real Estate Advice Column from the BREL team
November 28, 2024
Dear HOMEROOM,
My neighbours just sold their house to a builder. The builder’s agent approached me to see if I also wanted to sell my house to him. The guy wants to tear down both houses to build townhouses in their place.
I’m intrigued, but I have no idea what I am supposed to do here. Their agent said he could help me find a new home, but should I get my own agent or talk to a lawyer first? I don’t want to miss out on a good opportunity but worry about being taken for a ride.
– Builder-Baited
Dear Builder-Baited,
You’re right to be feeling both intrigued and uneasy. Selling your home to a builder can mean a big payday, but it can quickly turn into a cautionary tale. So let’s break this down:
1. Get Your Own Agent. Period.
Here is what you must remember: the builder’s agent has a fiduciary obligation to the builder, not you. Their job is to protect the builder’s interests, negotiate the best possible deal for them, and minimize the builder’s risks—not yours. It doesn’t matter how nice, helpful, or professional they seem; their legal duty is to their client.
You deserve the same. That’s what your own agent brings to the table. They’ll:
- Work solely in your best interest.
- Ensure the offer is fair and competitive (spoiler: builders love starting low).
- Negotiate terms that suit you, like timelines for moving out, flexibility to find your next home, or even higher compensation if your property is key to their development plans.
- Help you navigate the process so you don’t leave money—or protection—on the table.
Trying to go it alone or relying on the builder’s agent is like entering a legal battle with the other side’s lawyer—it’s a losing strategy. Protect yourself with someone who’s got your back.
2. Consider the Costs
Selling your home is one thing; moving is another. A potential windfall from selling to a builder can look a lot less appealing once you crunch the numbers. Here’s what to consider:
a. Your Current Mortgage:
Do you still have a mortgage on your home? If so, find out if it’s portable to your next property. If it’s not, you could face significant penalties for breaking your mortgage early. These penalties can vary, but they’re often thousands of dollars, especially if you’re locked into a fixed rate. Call your lender or mortgage broker for clarity.
b. The Market for Buyers:
What’s happening in your market right now? Are home prices high? How long are homes staying on the market? If you sell at a premium but have to buy at a premium, the financial gain may not feel as sweet. Your agent can provide a market analysis to help you determine whether now is a good time to buy.
c. Costs Beyond the Purchase Price:
Buying a new home involves more than just matching the purchase price. You’ll also need to budget for:
- Land Transfer Tax: In Toronto, this includes both provincial and municipal taxes, and it’s not a small number.
- Moving Costs: Packing, movers, storage (if needed)—it all adds up.
- Bridge Financing: If the timing of your home sale and new purchase is off, you may need temporary financing to cover the gap.
- Legal Fees: You’ll need a lawyer to handle the purchase of your new home and the sale of your current one.
- Deposit for the New Property: Sellers typically require a deposit, which means you’ll need access to liquid funds—often 5-10% of the purchase price—before your current home sells.
By laying all these costs out ahead, you can decide if selling and moving is financially feasible—or if you’re better off staying put for now.
3. Talk to a Lawyer Before Signing Anything.
When a builder is involved, the paperwork often comes with more fine print than a phone contract. You’ll need a real estate lawyer to:
- Review the agreement and flag anything sketchy, like clauses that let the builder back out without penalty.
- Ensure you’re protected from liabilities during and after the sale.
- Handle the transaction so it doesn’t come back to bite you later.
4. Don’t Let FOMO Rush You.
Builders thrive on urgency, and they will make you feel like you’re one wrong move away from losing a golden ticket. Don’t fall for it. Take your time to gather the facts, run the numbers, and explore your options. A good deal today will still be good next week if it’s really worth it.
Selling to a builder could be a fantastic opportunity—but only if you play it smart. It’s your home, your investment, and your future. Make sure the deal works for you, not just the guy with the blueprints.
Oh, and one last thing: feeling a little suspicious is okay. Like dating, real estate is one area where “too good to be true” is a red flag, not a compliment.
Good luck!
the BREL team
No BS. No Fridge Magnets. No Such Thing as a Bad Question.
HOMEROOM delivers straightforward advice and guidance from the BREL team. We’re using our deep real estate knowledge and experience to answer your burning questions.
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