Helping your kid buy their first home? 3 tips for buying pre-construction

In today’s real estate market, saving for a down payment is a major hurdle for young adults who want to buy their first home. A recent survey found that to get their foot in the door, one-third (35%) of first-time homebuyers had financial help from the “Bank of Mom and Dad” or other family members. According to Tarion’s 2024 New Home Buyers Report, Gen Z (born between 1996 and 2012) home buyers are beginning to enter the market: nearly one in ten (8%) Ontario consumers who plan to buy a new or pre-construction home in the next 12 months are young adults in this age bracket, an increase of 5 percentage points over the past year.

The journey to homeownership can be exciting. But with pre-construction homes, the process can be more complex and comes with different potential risks. The good news is that in Ontario, most newly built homes come with a warranty that’s provided by the builder and supported by Tarion, an independent consumer protection organization established by the provincial government. The new home warranty program exists to help give homeowners the peace of mind that they’ll get the well-built home they were promised, but it works best when you understand the role you play in getting the coverage you’re entitled to.

If you’re helping your child buy a pre-construction home, signing a cheque is a great way to help. But it’s not the only way. You can also support this next big step with tips and information about the builder’s warranty.

Here are 3 steps that all consumers should consider taking when buying a pre-construction home.

1. Learn what the warranty covers - before and after the home is completed


The warranty provides deposit protection in case the sale isn’t completed, up to specific limits based on the type and sale price of the home. In general, if the builder can’t deliver your new home and doesn’t return your deposit, you can submit a claim to Tarion for compensation.

If construction is delayed, you may be able to claim up to $7,500 in compensation from the builder to help cover expenses like extra moving or storage costs. This coverage applies if your possession or occupancy date is delayed beyond the extended completion date that’s specified in the Addendum in your purchase agreement.

After you take possession of the home, the builder’s warranty provides up to seven years of coverage against construction defects, and you have the most coverage available in the first year.

Most of the time, homeowners and builders are able to resolve issues on their own, but if challenges arise, Tarion can offer guidance on the warranty claim process and step in to help resolve a claim.

2. Confirm all upgrades in writing
The builder’s warranty includes coverage for upgrades like hardwood floors and customizations like a fireplace, but only if these extras are documented. Make sure any upgrades or add-ons are clearly described in writing and get your builder’s signed agreement to any requests. Keep these documents on file so that if any issues arise once the home is completed, you can share them with Tarion if you need to make a claim.

3. Get legal advice before signing your purchase agreement 

The purchase agreement and the Addendum contain important details about your purchase, including everything that’s included in the price of your home. This serves as the record for what the builder’s warranty will cover, so it’s especially important that you know exactly what you’re getting. It also includes information about how and when the sale may be delayed or terminated.

Purchase agreements can vary from builder to builder, but a real estate or condo lawyer will know what to look for so that you can make an informed purchase.

Help your 20- or 30-something enter this new phase with confidence
A home is one of life’s biggest purchases, and it helps when you know what to expect in the process and what to do in case of surprises along the way. From before you sign the purchase agreement until long after you get the keys, Tarion is here to help with resources and guidance about the builder’s warranty and the claims process.

More information is available at Tarion.com.