Real estate is a very hot market in Alberta. October boasted a record amount of home sales in Calgary, says the Calgary Real Estate Board (CREB), with the city reporting 2,186 home sales last month, an increase of 24% from the same time last year. Many people selling their homes have reported several viewings on the very first day of listing, with bids coming in within 12 hours of the “For Sale” sign going up. As buyers scramble to find suitable houses in a market where the inventory isn’t lasting very long. CREB says that October’s numbers are actually 35% higher than long-term averages, and with 23,848 homes already sold in 2021 the year is already on its way to breaking an all-time record high.
Sales in Fort McMurray have increased 41% since last year, and Lethbridge is boasting a boom in home sales of 52% higher than long-term trends. Such a market puts buyers in a bit of a precarious situation, however. Buyers are having to spend more on properties than they would have historically due to there being far fewer options available, and are also putting down bids so quickly they may not have had a chance to fully assess the property. Unfortunately, as well, new home warranties are not providing the protection people need when making the largest purchase of their lives.
New home buyers relying on legislation requiring warranties
Home sales numbers are broken down into types of homes being sold – such as detached single-family abodes, townhouses, and semi-detached. One piece missing from the data is just how many new builds are being sold, but it’s safe to assume the number is also high. Many buyers prefer the idea of a new build as it would stand to reason that with new appliances, new fixtures, and completely new construction, there should be fewer problems – at least to start. Regrettably, this does not seem to be the case. As CBC Edmonton recently reported, new homes in Alberta are showing signs of significant defects, and are being abandoned by warranty providers.
Alberta has existing legislation that was specifically designed to protect buyers of new homes from slapdash building practices. In 2014, the province introduced the New Home Buyer Protection Act, which provides “home warranty coverage on all new residential homes, including condominiums, manufactured homes and recreational properties.” The Act stipulates that builders are required to ensure the home is enrolled with a new home warranty provider, and that the warranty meets or exceeds all requirements set out in the legislation. Before selling, real estate agents must confirm a home warranty exists, otherwise they could face penalties.
Very little protection from shoddy building practices
The CBC Edmonton article interviewed a home warranty advocacy expert, who stated that they have been very busy representing clients who are victims of careless construction and are finding their new home warranty is not providing enough protection. One family’s brand-new home began leaking through the ceiling so severely only a few months after they moved in that their floor shifted, and they have been waiting months for repairs to begin. In the meantime, another serious leak has started.
The New Home Buyer Protection Act requires new home builders to guarantee their solvency, and when an insurance claim is made and approved, the warranty provider is responsible for making sure the builder carries out the necessary repairs. When a builder refuses to make the repairs, they are dropped by their warranty provider. The problem is, however, there is nothing stopping the builders from just moving on to a different warranty provider. In order to maintain their client base, warranty providers are simply refusing claims, leaving new home buyers in a very precarious situation.
Another problem is that builders that are in trouble financially (or ethically), can easily file bankruptcy or shut down, only to quickly reopen under a different name. That makes it very difficult for home warranty providers to chase down those actually responsible for problems with new homes.
How to protect yourself when purchasing a new home
Alberta has an online public registry of residential builders, which lists builders and whether or not they have ever had a penalty imposed on them. Experts say the total amount of information available is not enough to make an informed decision, however. Another option is to check the Better Business Bureau for any complaints against the builders, and to ask your real estate agent (who should be your choice, not the builder’s) about any known difficulties with the area and its properties. You can also look into other projects the builder has completed and see if any of those homeowners have posted anything online to raise red flags.
Be sure to get a thorough home inspection
Just because a home is new doesn’t mean is doesn’t have serious flaws. Always have your real estate agent specify that the sale is contingent on a satisfactory home inspection done by a professional home inspector of your choice.
Home inspectors in Alberta must be licensed, and should show their identification before starting their work. There are a number of ways home inspectors and financial advisors (who may also act as home inspectors) may obtain certification, but each must attain a license from the Government of Alberta, be bonded, and carry errors and omissions insurance. Also be sure to check their references.
Home inspectors concentrate on the following when they visit your property:
- Any potential fire hazards (such as fireplaces, electrical wiring that has not been updated and roofs in disrepair) and safety in the form of the presence of fire detectors and the ability for people to exit quickly.
- A possible replacement value calculation. Replacement value is the amount it would take to rebuild your home from scratch to match its current worth.
- The condition of your plumbing, heating and electrical systems to inform you of any necessary repairs or upgrades.
- The state of the home’s envelope.
- Cracks, leaks, or weaknessesin your foundation.
- Whether or not you have adequate insulation to help prevent mould.
- The integrity of your roof and roofing materials.
Lane’s Insurance for your Alberta home insurance needs
Once you have done your research on your builder, passed your home inspection, and ensured any necessary repairs have been made before you sign on the dotted line, it’s time to start searching for your home insurance. At Lane’s, you will be partnered with a home insurance specialist who will be your personal contact for all things pertaining to your policy. Insurance brokers are your allies in the home insurance industry. Contact us at our Calgary office, Edmonton office, Banff office and greater Alberta offices.