As a buyer, what do you need to know about new construction? While there are many reasons for buying new construction, the popular responses are no one has ever lived in the home so buyers are not dealing with previous owners’ choices and issues; and, buyers have the opportunity to personalize aspects of the home from the beginning instead of going back and retrofitting, updating, or rehabbing. However great the benefits of new construction are, there are a lot of considerations! Where do you begin?
First and foremost, and I cannot stress this enough:
Find a great agent who has experience selling new construction and is not affiliated with the builder.
Model homes are typically staffed with real estate agents who have established relationships with the builder. These agents will represent the builder’s best interest in all transactions. It is important for buyers to have someone advocating for their best interests as well. Buyers agents will represent the buyers’ -- from researching and advising regarding available communities, to structuring an offer designed to be most appealing to the builder, to making choices that can affect resale value.
When buying from a builder instead of a homeowner/reseller, buyers have the ability to research.
This is the buyer’s opportunity to visit developments and chat with homeowners who have worked with this builder. Go to the source and discuss with owners what they liked and did not like about their experience with this builder. Search online for reviews, testimonials, and news about the builder and the community. Keep in mind, all builders will have both happy and unhappy customers in their past. Instead of assuming all compliments and complaints are objective, look for repeated trends of concerns or accolades, as this will give buyers the best, most reliable information.
Before making a decision on location, besides researching communities online be sure to check with the city and see what is planned for the surrounding area. Builders put the responsibility on the buyer to be aware of neighborhood or community dynamics related to other development in the area such as amenity centers, traffic planning, the development of neighboring parcels, etc. This is called “Buyer Beware”. Additionally, many new communities have homeowner associations that will impact your new home. Buyers’ agents should assist buyers in gathering all information available regarding the community during the decision-making process.
Once decisions about where to build and whom to build with are made, it is time to begin negotiating the contract.
All builders are reluctant to set a precedent for negotiating prices since future buyers may expect similar discounts "and this can negatively impact" the value of the neighborhood going forward. Buyers’ agents should help buyers determine if there is a particularly effective way to approach the offer. For example, what upgrades or features could be included "at no additional costs?" Another consideration is asking the builder to pay closing costs. Builders are more likely to negotiate these items because they are less obvious ways to provide value to buyers while not impacting the average price of the neighborhood going forward.
Along these same lines, what buyers see in the model home is not necessarily what buyers will get.
More often than not, the model home reflects some standard materials and fixtures as well as significant upgrades most desired by the buying public. Builders are trying to create “wow” factors in their models hoping to capture buyer interest and clients. When touring model homes, have the buyer agent help discover what will be included, what alternatives are available, and at what price changes/upgrades can be made.
Because materials and labor costs change, it is extremely important to spell out in the contract how the home will be finished and the corresponding pricing.
As buyer’s selections are made, it is important to update the contract preferably with addendums showing selections and photos wherever possible. Buyers’ agents will request timelines included in the contract showing deadlines for decisions and completions throughout the process. They should also request a plan and consequences if construction is not completed on time. Likewise, builders will want verbiage included addressing any delays on the part of the buyers. As all builders and agents will explain, verbal conversations are not binding; if it isn’t in writing, it isn’t happening. The expectation is that everything will be in writing and signed/initialed by all parties.
Most new homes come with a builder warranty.
As in everything, all warranties are not created equal; so, it’s important to know what is and isn’t covered, by whom (builder or third party), and for how long. For some items, the manufacturer of the product is responsible. Items like windows, roofing, and appliances often have separate warranties; and, the builder will refer all issues with those components to the manufacturer. All of this information should be disclosed in advance and information included in your new home closing packet from the builder with contact information and registration information available.
New homes are not necessarily problem-free.
Agents familiar with new home construction often recommend hiring an independent inspector to verify everything is safe, in working order, and up to code. Although municipalities require new home permit inspections throughout the building process, an independent verification by a qualified inspector is more comprehensive and money well spent.
New homes offer the latest in design, style, comfort, and quality. The items above are just a few important considerations for buyers considering building. New construction buyers appreciate the option of selecting a floor plan that fits their lifestyle, offering the right space "in the right place!"
If new construction sounds like an option for you, contact a professional realtor for advice; you will be glad you did!