Tips When Buying New Home Construction from a Builder
The Model is More Than Likely NOT What You Will Get
The features in the model home doesn't necessarily include what are standard features in the home you pick. Most of the time the model home displays a combination of basic materials, furnishings and fixtures, along with a variety of premium features. It is recommended that you understand what is standard and what will be an added cost. Don't forget that those extra you choose can end up costing more than what they quoted you at the beginning.
Tip from Experienced Buyers: Make a list of the features that are included, and if available, a list of the upgrades you're considering and their associated costs.
5. Check out your builder.
Visit other 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.
6. Guarantee are .
You're often buying a home that is not completed. What guarantees do you have the home will be ready on time? Your purchase agreement documents should specify a completion date. However, many builders add provisions that make the completion date dependent on permit approvals from the municipality or availability of building materials from suppliers. There can also be additional charges if you're unable to close on time if your lender isn't ready.
7. Get the home inspected.
Although buying something brand new has its perks, new homes are not free of all problems. Contract a licensed home inspector to be certain that everything is safe and adheres to local building codes. An unbiased verification with a professional inspector is money wisely spent. Unlike a resale home, if the buyer is not satisfied with the results of the home inspection and the builder will not fix potential issues, there is NOT a provision in the sales contract so the buyer can walk away scott free and recover their deposit.
8. Know What is Covered Under Warranty
As you might have guessed, not all warranties are created equal when it comes to what the builder gives you under warranty. You need to be certain of the number of years your appliances, finishings, plumbing, electric and so forth is covered. Lots of builders use an independent warranty company (Whirlpool, GE, Samsung, etc). You might find a separate warranty or guarantee for certain products from the manufacturer as opposed to the builder correcting any problems directly. Details should be readily available from the builder about what is covered inside and outside by the policy.
9. Know the Neighborhood.
Speak with the city to be aware of any planned developments in the neighboring area. If your master bedroom, living room or office has a great view of the hills, canyon, beach, or lake, will that view still be unobstructed in five years? The responsibility is really the buyer's to research the dynamics of the immediate neighborhood including the development of neighboring parcels, traffic, and nearby shopping and schools. Another potential impact can be the homeowners association.
Do your due diligence on Lenders.
Don't just go with the builder's lender because it is convenient. You need to get the best loan that is right for you, in terms of payment and costs. Although, some builders make it mandatory that you apply with their preferred lender. However, once you are all set to make an offer, you've probably already discussed financing options with a lender. Why does the builder require you to also get pre-approved with their lender?
To begin with, it's an assurance that know you are qualified from their lender, even though you may use another lender. Furthermore, in some cases, it be the most cost effective way to go as they may attempt to match the rates of your lender.
If a real estate agent is representing you, have them compare the terms from builder's preferred lender terms with other preferred lenders they work with. Profit margins for builder are not generally high, so sometimes their affiliated business arrangement has perks such offering buyers a .25% higher interest rate.
The requirement to apply with the builder's lender is especially accurate for projects that are in phase one or two of the development. When no other lender has offered financing in that particular development yet, it may be hard to get approved for a mortgage from another lender than the preferred lender.
Your Earnest Money Deposit is Held by Who?
Depending on the builder, they may include a paragraph in the contract that they are to hold your earnest money deposit, not escrow. Be careful of this, because this clause is solely created to keep you from canceling the contract if you are dissatisfied during the building phase. In the event there are things you take issue with or if the builder is going through a serious financial predicament, the money could be gone forever. It is strongly suggested that a neutral third party hold your earnest deposit unless you have faith in the builder and they are a large national builder.
Be wary of promotional materials.
Promotional literature is just that; it's designed to entice you to purchase. It presents the builder, the homes, and the neighborhood in the best possible manner. Negative information isn't included, so it's your job and that of your agent to find out anything that could present an unpleasant surprise at closing or after the sale. READ EVERYTHING THOROUGHLY. Look for vague or ambiguous statements, and make certain you understand what you are purchasing.
Review the builder contract thoroughly
Larger builders often have their own contracts drafted in their favor. Be sue you understand the contract and if not, always ask for an explanation if you don't fully understand. Are there certain restrictions on a walk-through, third party inspectors, and other questionable items?
What you want should be written in your purchase offer
Remember, anything not expressly written in the contract will not be enforceable. Simply getting the A okay from the builder's sales agent is not enforceable. The builder's only responsibility is to fulfill only those agreed terms and conditions written in the contract.
Use your own Broker/Agent
ALWAYS use your own Broker/Agent; doing so will help guarantee that you get represented the way you want. Keep in mind that the sales reps at a new home construction community are actually representatives of the Seller – which is the Builder or Developer.
Your best representation will be from another agent, who ONLY represents YOU the buyer from your standpoint. As the buyer's representative, your needs will now have a priority and no conflict of interest will arise.
Don't forget to get a licensed Broker or Real Estate Agent before you start looking at new homes. Typically the policies at a community call for your agent to be present with you at the first showing and each subsequent showing. If they're not, the community sales rep will be your agent for that project even if you are unaware of how it works. If your realtor, comes along later in the process, it is almost certain they will not get paid – or receive a significantly lower commission if the community sales rep initially registered you.