Most homebuying advice is aimed at people who are buying an existing home. But what if you’re in the market for a new construction house or condo? Buying a newly built home provides some exciting options that may not be available to you when purchasing an existing home, such as the ability to choose the exact kitchen cabinets, flooring, and even floor plan you want. But it also creates some additional challenges, including making sure your builder is reputable, the community is sound, and ensuring that your home will be ready when you are. Imagine being the very first person to live in your new home. But is purchasing a new-construction home the right path for you? Here are a few factors you should keep in mind.
New Homes May Not be Listed in Your Local Multiple Listings Search
Unlike a regular seller who lists their home with a real estate agent, homebuilders often have their own sales employees. So, they probably do not list their properties on the multiple listings search; therefore, the newly constructed homes will not show up in your multiple listing search. They do this to have more control and to cut costs. Builders usually advertise online, in the paper or even with circulars and billboards. So, if you’re interested in a newly built home, work with your real estate agent. Since the seller typically pays the commission, it costs a buyer nothing to be represented by a real estate agent, and many builders are happy to work with agents. An agent who regularly deals with builders and knows the local communities will provide lots of helpful information.
What You See Isn’t Always What You Get
New homes are often sold before they’re built. A builder will get financing lined up and will map out a construction and sales process. They will try to sell as many homes as possible before they are even built. To accomplish this, they will build model homes and allow buyers to go in and review floor plans, fixtures, and finishes while the homes are under construction. The fit and finish of the model home doesn’t necessarily represent what comes standard. Often, the model home reflects a mix of standard materials and fixtures, as well as a handful of upgrades. When touring the model home, make sure to find out which is which. The important thing is to know exactly what you’ll be getting, what’s available and, of course, what it will cost. Keep in mind that costs can change. The price quoted at the start may not be the same when you decide to move forward. When you are ready to move forward you’ll likely have to put down a deposit, from a few thousand dollars to 10 percent of the purchase price.
Do Your Research on the Builder
Visit several developments and talk to homeowners. Search online for reviews, testimonials, and news. Keep in mind that many builders will have both happy and unhappy customers in their past. Look for trends in reviews and make sure any concerns are covered in the purchase agreement documents. Be aware that even if there are 100 homes in the community, they won’t all be available at once. Home builders tend to release the homes in phases. If the first five homes sell quickly at the asking price, and the market continues to do well, the builder can raise the prices on the second or third phase.
The First Buyers May Get the Best Discounts
Early in the sales process there could be room to lower the price. But with the reward, there is potential risk. By being an early buyer, you’re committed to the project. A home builder, especially early in the sales process, wants to get a few homes under contract quickly. If the builder can announce they have 10 homes under contract in a few months, the project can seem more desirable to future buyers. Also, builders like to go back to their lenders with positive news about the project and their investment. To do this, they need early buyers to sign contracts.
Be Creative During Negotiations
Builders don’t like to drop their prices. Instead, consider asking the builder to pay closing costs or perform upgrades at no additional charge. Builders are often reluctant to set a precedent for negotiating prices since future buyers in the development may expect similar discounts. Consequently, builders are often more likely to negotiate “on the back end” since closing costs and upgrades are a less obvious way for them to sweeten a deal. Very few homes sell for the same price, most buyers pay different amounts for essentially the same house. This same picture will be found in every new housing development in the country. Just like the person sitting next to you on an airplane, you and your neighbor are unlikely to have paid the same price.
Get Everything in Writing
Don’t sign anything until everything has been negotiated, agreed upon, and written into the contract. If you’re considering purchasing a home that is not yet complete, it’s very important to spell out how the home will be finished, what will happen if construction is not completed on time, and the deadlines for decisions that will occur through the process. Verbal conversations are not binding, so everything important must be put in writing and signed by all parties. Builders often use customized purchase agreement documents in place of standard forms commonly used in your area. Ask your agent to get a copy of the builder’s documents to review in advance.
For many first-time buyers, new construction could be a great idea.
Tom Reese has 20+ years experience in helping his clients sell their homes for a price that sells and makes them a profit. Tom has helped his clients buy and sell property in every neighborhood in Northern Kentucky and Cincinnati.
About Tom Reese
Helping my clients attain their dreams has been the foundation of my success. With my strong attention to customer service, I have earned my clients continued support and referrals. Put my enthusiasm and dedication to work for you!
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