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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