Purchasing a New Construction Home
If you’ve spent some time checking out the real estate market but can’t find a previously-owned home that reflects your needs and personal style, you might be considering purchasing a newly built home. Buying a new home is an opportunity for a fresh start in what could be your dream home. New construction, however, isn’t as simple as looking at a floor plan or model home and signing off on it. There are definitely pros and cons. The key is preparing for the unexpected twists and turns that make new construction different from buying a previously owned home (also referred to as a resale home). Here’s a look at what to consider about new construction that will suit your needs and budget, and my recommended steps to help your planning go more smoothly.
The Pros and Cons of Buying New Construction
Whether you’re heavily involved in a custom build or love a home being offered by a local builder in a new development, you’re more likely to get exactly what you want in a new home without the inconvenience of a major renovation. New appliances and included features like the latest fully wired smart technology and modern energy efficiencies are compelling! The downside is that you will likely pay more for a new home than a similarly sized older home when choosing upgrades in flooring, carpeting, and countertops. The costs can indeed climb, and builders are not known for their flexibility on pricing.
Types of Newly Built Homes
Your role in the construction and design of a newly built home can range from purchasing an available lot and helping to manage the entire project to buying a townhome, condo, or single family home in a neighborhood planned and constructed by a builder with limited options. There are three major categories of newly built homes:
• Custom. If you can afford the time and money to custom build your home, you’ll have a say in just about every aspect of the planning and construction. This can include hiring your own architect to design your unique home.
• Semi-custom. You’re likely buying into a higher-end neighborhood owned by a developer and will have some leeway on what the home will look like. Your choices will be more limited than a complete custom build, but you will have more say than if you were buying a production home.
• Spec or production. Time saving, prebuilt home where you can likely choose limited features like paint colors, tile, flooring, and appliance upgrades.
Steps for Purchasing New Construction
• Get Pre-Approved From At Least One Lender. Mortgage pre-approval is what the lender is willing to offer you based on financial circumstances and specific terms, including credit, employment status, income, assets and/or tax returns. Once pre-approved, you’ll receive a pre-approval letter; however, you’re not limited to that one lending option and can still obtain a loan from a different lender if you find a more favorable option. It’s always a good idea to shop around.
• Hire a Real Estate Agent. If you’re considering new construction, you will want to have a representative looking out for your interests. The builder’s salespeople are looking out for the builder. Be sure to confirm that the builder will pay the fee for the buyer’s agent – they most likely will. A Realtor is very valuable when looking to buy spec or semi-custom homes, where you’ll be negotiating with a builder’s sales representative. If you’re working on a custom home, an agent with new build construction experience could assist with negotiations on financial details, timelines and other contractual issues. I’m happy to assist you in either situation.
• Expect a Realistic Timeline. As a general rule, the more custom the home is, the less reliable a completion timeline becomes. If a builder says they’ll build it in six months, don’t believe it! They may be able to if absolutely nothing goes wrong, but that’s simply not realistic. There’s also a ripple effect if you’re trying to sell your current home and coordinate that timing with the new build or if you have to temporarily live somewhere in-between. It’s important to work with the builder, your Realtor, and the lender to determine how to manage the situation.
• Research Builders and Neighborhoods. There are plenty of ways to find out about a builder’s track record via online reviews, Better Business Bureau ratings, as well as from an experienced realtor. Builders can range from locally-owned operations to major national corporations. Neighborhoods can differ too: it’s always a good idea to drive around the neighborhoods that most interest you and look at the amenities, talk to current homeowners, and review homeowners’ association rules and costs, if applicable.
• Review Your Options. There are often several options available when building a custom or semi-custom home. There will be waves of interior and exterior items to consider, from the type of roof and siding to the size and design of the kitchen. The choices for production or spec homes are much more limited, but will still affect the final price.
• Schedule Inspections. Throughout the building process, the builder will conduct inspections. However, I always recommend having your own independent inspection to make sure everything is built as promised, and is in good, safe working order. Be sure to also review and sign your home warranties so you know what it covered and for how long.
• Final Walkthrough. This is exactly as it sounds. It is the last time you’ll walk through the home before officially taking the keys and signing off on its completion! By this point inspections, repairs, and re-inspections should be fully completed. It’s in your best interest not to take possession of the house until all punch list items are resolved and you have no lingering concerns.
• Closing Time! At last, the process is complete and it’s time to close! Your Realtor and lender will guide you through any action items on your part up to closing day. Be ready to respond to emails and gather necessary paperwork to maximize efficiency. This gorgeous home is now yours!
There you go. It is indeed a process, but one so many have embarked on and are so pleased they have done so. I welcome the opportunity to help you in your new home search!