Monday, April 6, 2015

Out with the Old and In with the New! The Essentials of Buying New Construction in Today's Market


If the word “custom” and the phrase “brand new” sound like music to your ears, buying new construction is probably the right choice for you! While it might sound like a lot of work, if you are in the right situation, it can be the perfect fit. However, just because a new house is shiny and never been lived in, does not mean that new construction is without it’s obstacles to overcome and checkpoints to hit. We’ve gathered up some major points that we consider the foundation to buying new construction: 



 
1. Do your homework:
Just like searching for a home on the market, you want to research different areas of town to see where you would like to plant your roots, but researching your potential builder can be just as critical. It isn’t hard to find out if a builder has a bad reputation, but if you don’t ask you won’t know. Bad news spreads fast, so driving around the neighborhood you are interested in is a great idea. You might be able to catch a homeowner working in the garage or taking the dog out who will most likely be enthusiastic about sharing their experience building their home. The most effective way to research a lousy builder is to verify in the public records for lawsuits against a particular builder; you can easily check for any liens because if subcontractors aren’t getting paid, houses aren’t getting built.  Another avenue for researching a potential builder is go take a trip to previous work the builder has done and ask around to see if the homeowners are still satisfied and if their houses are standing the test of time. Also, once you decide on a builder, get the scoop on the HOA, if there is one. We suggest knowing the laws of the land before planting roots - especially if those rules are expensive and strict!
2. Don’t feel forced to use the Builder’s Lender:

Just because a builder has a lender all set up for you to use, does not mean that you have to use them. Builders prefer their own lender, because they can keep a close eye on your personal progress. However, this lender may not be able to give you the best deal, especially if the builder owns the lending company! Just like financing any other type of house, there are many options: credit unions, mortgage brokers, banks, etc.

3. Verify Option and Upgrade Pricing:

When looking at new construction, buyers may have an option between a semicustom home built as part of a development (built on spec) where the buyer can choose finishes and upgrades and other final touches or the option of having an entirely custom home built to a specific design. Builders bank on the upgrades, literally! For the most part, builders profit heavily from the upgrades due to the high profit margins. Also, buyers will want to confirm that their financing will cover any upgrades they choose to have done. If the lender will not finance all of the upgrades, the buyers will have to pay cash on top of their loan and down payment. It may be smart to look into a builder’s cancellation policy as well. Buyers may change their mind and be held liable for items the builder is unable to return.  We recommend asking as many questions as it takes to understand what features are standard, and which ones will cost a little extra.                                         

4. Hire a Home Inspector:

This is a rule of thumb for any substantial purchase, always get the product inspected…and a newly built house is no exception. Hiring a LICENSED home inspector is a non-negotiable in our books. Many think that because the house is new, that everything was installed correctly - however, this is not always the case. Everyone makes mistakes, and it is important to catch them while the seller is still on the hook, or in this case, the builder. It isn’t hard to go and fix a poorly installed pipe or missing insulation, but it is hard to get the other side to correct these items after keys and money have changed hands.
5. Hire an Agent

If you haven’t picked up on it by now, buying new construction isn’t any easier than buying a lived in house on the market. There are loopholes and legal traps that are easy to fall in if you don’t buy a house every day. Working with an agent usually won’t cost you anything, just be sure to let the builder know at the beginning that you have a licensed Realtor assisting you and the seller will almost always pay the commission. Also, if a builder’s agent asks if you would like their representation, remember they are working FOR the builder and may not always have your best interest in mind. Your agent will be able to walk you through until closing is over and you are the owner of your dream home!



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