10 New Construction Buying Tips: How to Buy a New House

Tips for New Construction Home Buying:
Get your own agent and lender:
Buying a new construction home is like any home purchase: you need a team looking out for your own needs. After researching, interview and hire your own agent, and apply to multiple lenders to find the best deal. Remember, the listing agent works for the builder, not for you. They’re trying to accomplish their own goals, not help you make the right decision. Most importantly, be sure to contract with a Broker/Agent before you start looking. Most often the community will require that your agent be present at every showing. If not, you may be working with the site rep even if you didn’t intend to do so. And your agent may not get paid either or will be paid a significantly less amount because the site rep was the person who registered you.

Research the builder and neighborhood:
Before buying a new construction home, it’s important to visit the community you plan on moving to. You should get to know the surrounding area and talk to other homeowners in the neighborhood. Areas that are growing rapidly, with newly constructed roads or other forms of transportation, will improve the home’s value in the future. You’ll also get an idea of the types of venues and amenities the neighborhood offers when you’re looking to spend time around the community. Look for: school districts, commuting time to work, restaurants, grocery stores, recreational spaces (parks, gyms, swimming pools, etc…), and entertainment options.

Don’t expect price reduction:
It can happen, but most likely it won’t. You have to remember that the builders have established prices that they think best make their product marketable with an expected profit margin. Lowering the price of a house drops the comparable value of other houses in the community, which brings the entire suite of houses down in price. Usually, a pre-sale home will be a bit higher in price than a home that the builder built as a “spec” house (one that was made to attract buyers to the site). Also, very often homes that have not sold for a long period of time will not drop in price. These homes will actually go up in price at a new home development, which supports the builder’s position that materials and labor costs increase.

When selecting upgrades keep resale value in mind:
It’s a good idea to keep the future value of your home in mind when selecting upgrades for your new home. Certain upgrades will substantially improve the value of your home in the future. One area that’s hard to go wrong with is your kitchen. Every realtor will tell you that the kitchen is one of the most cost-effective places to upgrade. It’s viewed as the “heart” of the home and homebuyers give its appearance a great deal of importance. Another area to upgrade would be the ceiling height. It’s an upgrade that will make your home feel much larger and grand to potential homebuyers in the future. It’s also a structural upgrade that will be difficult to change after your home is constructed. Although, you need to be careful about over-improving. There can be a negative impact on your home’s future value if it’s upgraded significantly better than any other house in the neighborhood. You’ll end up pricing your own home out of the neighborhood and will eventually need to reduce the price in order to find a buyer in the future.

Make sure everything is in writing:
If you’re working with a credible builder there’s a good chance they will honor what they say, however they could forget the promises they made you. Anything that is verbal is not a guarantee, that’s why you must have everything in writing so that it’s a binding agreement. (Definitely need to add more if we can)

Make sure you know what’s covered in the warranty:
Most of the time builders will have a home warranty they can give you, however, it’s not abnormal for a builder to have a third party involved in a home warranty. Coverage for new construction homes differs from builder to builder. You’ll want to make sure you have a proper perspective of what is covered by your builder or any other companies that are involved in the construction of your new home. Sometimes you can negotiate the warranty into the deal or add anything to cover what isn’t normally covered in the warranty. Besides reading the fine print of a builder’s warranty, make sure you know the timeline of completion for your new home as well. The times will range based on the builder, especially given the supply-chain issues that have been killing the industry since the start of the pandemic. Make sure that the builder lays out a timeline for you so that you can follow along and keep them accountable.

You’re not buying the model home:
When you’re looking for newly constructed homes, you’ll most likely tour a model home at some point. These homes function as interactive showrooms that are beautifully outfitted with premium upgrades. Their purpose is to display the uniqueness a builder offers by allowing buyers to see the design potential of a home. Before you get lost in a model home’s beautiful design, it’s important to remember one thing: model home compositions aren’t reflected in sales prices. That’s because most prices are established on the homes featuring “builder grade” options. Luckily, the design options of a model home are usually extremely flexible. Just like buying a new car, you’re able to decide which upgrades you want to add to the vehicle.

Make sure the house is inspected:
Once your new construction home’s construction begins, make sure to visit the building site to clarify that everything you want is included. Most qualified home builders will do a good job building your new home, but it doesn’t hurt to check in on things every now and then. If the inspector finds anything unusual, you can go back to the builder to have them fix whatever they did wrong. Your realtor can tell you whether the items found by the inspector are worth mentioning to the builder or not. Some things in the report will be minor, while other items could be crucial to the construction of your home and need to be taken care of before closing. Although, you can’t expect that the builder will give you a contingency for a home inspection like you usually would find with a resale home.

Expect changes:
Everyone starts out thinking all of the choices that have been made will be made. That all the finishes have been chosen and the idea that the new home will look just like the model. Although, realistically suppliers run out of or change products or prices during the time of construction, which affects the appearance of your home. Builders usually reserve the right to switch out materials and finishes, most of the time leading to surprises. Try to tour a finished home and ask lots of questions about the things that the builder might substitute.

Add an extra month to the expected completion date… maybe two:
As part of your pre-sale purchase, the builder will provide an estimated date of completion for the construction of your new home. What’s imperative to remember is that the estimate is just an estimate of when the home will be finished and ready for move-in, as long as everything goes according to plan. Besides cost, another factor to consider when choosing a customization option is timing. On average, the construction of a home can take at least five to seven months, depending on the size, but it’s not uncommon for it to take almost a year when delays happen during the process. Realistically, plans don’t work out explicitly on time. In my experience, I’ve found it best to add about an extra month or two to the whole timeline that the builder originally gives you. Make sure to include the builder’s date in your contract, but keep expected delays in the back of your head.

If you’re thinking of buying a new home or potentially want to learn more about the building process contact us so we may help!