Are you thinking about buying new construction? The idea of buying a brand-new house is appealing to many homebuyers. What is not to love? You get a brand-new home that no one has ever lived in. You get to choose your floorplan, your appliances, your colors…everything!
Buying a new construction home offers many advantages when compared to buying an existing home, but there are many things to consider. For some, the process of site selection, choosing appliances, finishes and fixtures, flooring, etc, etc, etc can seem very daunting. For others, the decisions involved with new construction are similar to a child making the Christmas wish list.
There is a lot at stake when you buy any home, and it is a financial decision that can affect your life for decades to come. It is, therefore, understandable that the prospect of buying a new home is daunting to many. Though the more you understand and learn about the process, the easier it becomes.
To help simplify the new construction home buying, here are some things to keep in mind when considering new construction:
You Are Not Alone…!! Unless You Want to Be Alone
First things first. You are not alone in going through this process unless you select to be alone. There are several misconceptions related to using a buyers agent and new construction.
Misconception #1: I don’t need a buyer’s agent. The builder’s agent will represent me.
Nope! The builder’s agent represents the builder. They are an employee of the builder.
Misconception #2: I don’t need a buyer’s agent. It’s new construction. What can go wrong!
Plenty! And the things that go wrong can cost you thousands of dollars!! There are lots of things to consider when building a new home and an experienced buyer’s agent can help guide you through the process.
Misconception #3: If I don’t use a buyer’s agent, I will pay less for the home.
Not going to happen. The commission that would be paid to your agent will get back to the builder or the builder’s agent. There is nothing that says that you will get any type of discount for not having a buyer’s agent.
When buying new construction homes, it is vital to work with the right professionals, which means real estate agents and lenders. This will help you create the right plan to buy your new house, ensuring you don’t spend thousands of dollars more than you really need to.
An experienced Realtor will help you find the right community and house, but there are many things that you should research yourself. This will help you avoid a costly mistake or find yourself living in a subdivision that you aren’t thrilled with.
The builder will pay your agent’s commission, so why wouldn’t you get the help of an experienced professional? They will be focused on your best interests and make sure you get the best deal on the new house.
Thoroughly Research the Builder When Buying a New House
It is a very good idea to do ample due diligence researching the builder before committing. One of the most important things is feeling confident the builder is going to deliver as promised.
Your real estate agent should have some experience with the builder. If not, your agent can seek out information from other agents. We belong to several agent groups that often share “best and worse” experiences that include prior new home construction transactions. A good real estate agent will help you find the right community for you since they will know the area better. They will be able to locate the homes that meet your criteria in the right areas.
Other sources to try:
- Make sure you spend the time speaking to a few past customers to get their feedback on their experience. Check with the Better Business Bureau to make sure there are no complaints or bad press about the builder.
- Check and see if they are a member of The National Association of Home Builders, a well-respected organization.
- Do a Google search as well to see if you find any negative news.
- You can even go further and contact residents to get more information on the development. Using social media in this way should allow you to connect with people currently living in the development who are willing to give you details on the community. All of this will give you a better understanding of whether this is the right neighborhood for you and your family.
Check Around for the Best Financing Options
With any new home purchase finding the right mortgage is important. The difference between the right home loan, and for that matter, the right mortgage lender could mean thousands of dollars to you.
Most national and regional builders will require you to get a pre-approval from their preferred lender or in-house lender. The purpose is to confirm that you financially qualify. It is important to remember that you are not required to use the builder’s lender!
It will be crucial to understand the financing options from the get-go. The builder’s lender may be offering the “specials” like reduced closing costs and other financial incentives, but oftentimes another lender may offer similar or better terms, so shop around! When using your own lender, it is crucial to research to find what options are available to you from multiple mortgage companies. As many as 3 or more is ideal for making sure you get the best deal possible when you’re looking to buy new construction.
This is an important stage that you shouldn’t avoid since you could end up spending tens of thousands more than you need to. A fraction of a percentage difference in the interest rates charged can add massively to the cost of your home loan over 20 or 30 years. Go with the best option you can find.
Holding Builders to Their Promises
If you’ve done your research, you should be working with a reliable builder. However, you should still make sure any promises or agreements you reach with your builder are written down. Getting things in writing makes sure to avoid misunderstandings or mistakes and ensures things aren’t forgotten.
Verbal assurances, unfortunately, don’t guarantee anything and aren’t binding. If you are working with an experienced real estate agent, this shouldn’t be a problem with agreements signed.
You Aren’t Buying the Model Home
While you might tour one or more of the builder’s model homes, you need to remember that these homes contain all of the upgrades and best amenities available. The model home that the builder uses to sell new homes will be fully upgraded to attract buyers better. Basically, they are “eye candy.”
You need to be aware of what the new construction you are buying contains and doesn’t. You aren’t being shown the base model of what the builder offers, and if you want the features found in the model home, you will have to pay more. What types and sizes of cabinets are standard versus an upgrade? Same with appliances? What type of flooring is standard versus an upgrade? The list goes on and on.
Unless you are working with a full custom builder, your choice of upgrades might be limited. Many builders have streamlined the process of selecting upgrades and only offer pre-selected packages.
No matter what is available, remember the more changes you want to make, and the more features you add, the overall cost of the home will increase. So if you want a new feature added, make sure you know how much it will add to the price.
Are Home Inspections Needed with New Construction?
Even if you trust the reliability of your builder, mistakes can still be made. Though the builder will need to have followed the building code during construction, there can still be issues.
Having a home inspector come in and make sure the builder hasn’t forgotten things or made mistakes is important. This can save you potential headaches down the line and is worth the initial expense.
Home buying is normally the biggest financial decision you’ll make, so you want to make sure it is up to the standard you expect. The home inspector will review the work carried out by the builder, giving you a report on their findings.
If the inspector finds some things that need to be addressed, you can go back to the builder to have them fix the issue.
The Final Walk-Through
You will also need to complete a final walk-through of the home before you sign the documents at closing. This will be shortly before closing, so you need to be available to have your final check of the home.
The final walk-through will generate a punch list to give to the builder for any unfinished items. Quite often, there will be touch-up painting that needs to be done and other minor issues. The builder should provide a list of any punch list items, along with an estimate on when these items should be completed.
New House Warranties
If you are happy with everything so far and are ready to buy, there is still the issue of the builder’s warranty. The builder might have their own home warranty, or it could be provided through another company, but whatever the case, you want to be clear on the details.
The builder warranty will spell out exactly what they will be required to do when repairing and maintaining.
You need to understand what the warranty covers and what it doesn’t. If you aren’t completely satisfied with what the warranty offers to you, it could be possible to negotiate on the details. Your Realtor should help with this so that you get the level of coverage you believe necessary.
Builder warranties are standard for a new construction house and something you should expect. Most of them will cover your home for at least a year. Some of the National builders will be for much longer.
Keep a list of any items during the first year in the home, e.g., nail pops, issues with appliances, roof, HVAC, etc. so that they are available when you schedule your follow-up appointment with your builder. It is also a good idea to schedule a home inspection prior to the meeting with your builder. Many inspectors will even provide a discount if you use them for your initial home inspection, as well as for the 11-12 month follow-up.
The Future of the Community Matters
When choosing where you want to live, the prospects for the neighborhood should be considered. Is the area heading in the right direction?
While this can be difficult to assess, you should think about safeguarding the value of your home.
- Does the area have the amenities you need?
- Are businesses moving into commercial areas nearby, or are things heading in the opposite direction?
- Checking the crime rate can also show if things are improving.
- What are the builder’s plans for the development?
- Will there be an HOA for the neighborhood?
- Are there going to be protective covenants in place for the properties being built?
- What percentage of the community will be available for rental units?
Weighing up these factors should give you a better understanding of where the community is likely to be in the future.
A better and more desirable community will improve the ease and price you get for your home when you eventually sell. But before that, it will give you and your family a better living experience.
Wrapping Up Buying New Construction
While many of the things you need to consider when buying newly constructed homes are similar to purchase from a homeowner, there are extra and different issues.
Negotiations are one area that is going to be different with new construction. You will also need to check out your builder to ensure they provide the sort of service you expect when buying a new home. The neighborhood is another factor you need to research before you commit to buying your home.
If you take care of these factors and the other issues we’ve highlighted, you should have a more successful homebuying experience. Your newly constructed home can then become a place that will be filled with happy memories for you and your family.
Hopefully, you have found these tips on buying new construction to be useful. If you plan to buy a new home in my area and need assistance, please reach out.
Other Resources from our Blog
Pros & Cons of New Construction: Link
Things to Avoid When Applying for a Mortgage: Link
Home Buying Myths that Need to be Busted: Link
Mortgage Q & A with Luke: Link
About Log Pond Realty
Home is where your story begins. Home is where hopes and dreams are born, memories are made, and lives are lived. We would love the opportunity to assist you in writing your new story.
We service the Triangle region of North Carolina including Raleigh, Cary, Apex, Holly Springs, Morrisville, Fuquay-Varina, Durham, Chapel Hill, Wake Forest, and Garner.
Contact us 919.589.3576 | firstname.lastname@example.org
Source: Max Real Estate