How to Buy a New Construction House

How to Buy a New Construction House

New construction is a very appealing option to many buyers in today's market.  It can be a little less expensive, especially in this market, to buy as apposed to a re-sale.  Why?  Because many builders can afford to reduce their prices and still make a profit whereas home owners who bought their home 3-5 years ago may not have the equity to drop their price as needed. 

BUT.........

....there are several things you need to consider and questions you need to ask before you sign on the dotted line. 

1.   Am I Comparing Apples to Apples - by this I mean, are you making a proper comparison with the re-sale and the new construction house.  Don't be fooled by the new construction ad that is equivalent in square footage and to the re-sale home but has a much lower price.  More often than not that is a base model home that will require much more financing to possibly get the house to what you would like it to be.  i.e. granite counter tops, wood floors, crown molding, etc.

2.  Are the Neighborhoods Comparable - with this I am not talking about who lives in the neighborhood but rather what does the neighborhood look like.  Many times a builder will come though and wipe out most if not all of the trees and then start building spec. homes.  Most people want at least a little vegetation around them and older established neighborhoods are the ones that often offer this.  Also, what are the amenities offered?  Parks, walking trails, tennis courts, and community pool are all things you may or may not find in new construction areas.  Always ask the question, "What is my HOA dues paying for?"

3.  What Construction Phase is the Community in?  Many neighborhoods build several phases over an extended period of time.  It is important to know about how long the builder has until he completes the community.  Why?  Because it may determine how long you will need to stay in the home before you are able to sell it.  If you are one of the first homes built in a neighborhood that will take 5 years or more to complete, plan on staying the duration.  The last person you want to compete with when selling your home is the builder who can build the same plan for less money.

4.  Don't Eat up Your Equity Before You Move In!  The trap many buyers fall into is the lure of the really low priced new construction home only to find that when all the upgrades are added into the home they have paid much more than they originally wanted to pay.  Set a limit on the amount you plan to use for upgrades and stick to them.  Also note that there are many things that you may find cheaper to purchase from an outside source.  i.e., kitchen appliances.  In addition ask to tour the design center before making a purchase.  Many new construction companies will have no problem with you doing this.  This will give you an idea of what to expect.

5.  The New Construction Agent is Not on Your Side!  The agent that works for the builder is usually a nice person and although they mean you no harm, they are not your buddy and they are not working for you.  Their job is to lookout for the builder.  If only there were a way for you to have representation and not have to pay for it...hmmm.....oh wait there is a way! 

Find your friendly neighborhood Realtor and ask them to go with you to ensure you are properly represented, and in most cases it is at no cost to you.  Most builders will gladly pay our service fees so that you are properly represented. Most have one catch - you must either mention that you have a Realtor at first meeting or bring your Realtor with you at first meeting.  Don't be fooled by the widely propagated myth that you will get a better deal without a Realtor.  The only thing you will get by not having a Realtor is a lot of headache and quite possibly a higher mortgage payment every month.

For more tips on buying a new construction home or a re-sale home, contact Michael Johnson with Carolina One Real Estate.

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