Thinking about brand new homes?

I have a new agent who’s not afraid of anything! She started working with a buyer just one day after receiving her license and, is now getting ready to sit down with a builder’s representative and prepare an offer for purchase. I have offered to be there with her, but she insists she will learn more on her own. Sort of feeling like the parent sending the child off to her first day of school, I prepared the following letter:

Congratulations in assisting your buyer get to the point of a comfortable decision to purchase a new home. This type of sale is quite different from selling a re-sale home. To help with a little more background perspective, I have listed some do’s, don’t’s and other considerations you may wish to review with your buyer before and during the completion of the contract for purchase. Many of my concerns and considerations I urge purchasers to think about are about issues or conditions that may affect re-sale at a profit.

This is not all-inclusive, but just what came to mind today. There are many, many things to review and consider when selling a new home. Here are some:

The Lot - You mentioned that he has already picked one out. Things to consider:

·       Always walk and look the lot over; let the purchaser get a “feel” for it. Don’t just drive by; you will miss seeing potential problems unless you get out of your car, even if it’s raining!

·       Is it level or is there a steep slope in the rear that could cause water collection/drainage problems?

·       Is there a natural spring or other run-off that may cause a “bog-like” effect?

·       Is it a corner lot with a limited back-yard? Most families prefer a good backyard for children to play. A small backyard is okay for a single person, but not a family. Small backyards do affect re-sale.

·       What does the lot have on the other side of each boundary? Does it back to another street, woods or another home? Be sure you know before the Purchaser makes a final lot selection.

·       Where is the closest storm drain collection area? It’s a great mosquito farm….

·       Never ever let the Purchaser pick a lot that will be in the vicinity of high-power tension lines.

·       Always try to find a good lot that will allow for a walk-out basement.

The House - It is helpful to offer suggestions when the Purchaser is making decisions about how the house is to be finished. Again, my focus is on re-sale, making certain that the Purchaser, to the extent possible and practical, finishes the home in a way that guarantees the most appeal to the most people when it comes time to sell. The Purchaser usually has a price ceiling they need or want to stay under, so most of the time, there are a lot of forced-choice decisions based strictly on the final cost of the home.

·        Brickfronts are always better than siding

·        Country porches or other porches you can sit on have a lot of appeal

·        Don’t let the builder do the deck or patio unless it’s already built into the “package” price. You can usually get a bigger one for half what the builder charges

·        Garages are good; 2-car is better

·        An regular garage exit door is very convenient (lawn mower,etc). A window in the garage is great.

·        Don’t go with cedar roof shingles unless that is all the builder is offering. Very expensive for upkeep or replacement.

·        Make sure there are hose bibs front and rear

·        Sometimes it cheaper to get an in-ground sprinkler system when the house is being built, before the sod is laid.

·        Hardwood on the main floor is better than carpet. If too expensive, at least do the foyer and half bath.

·        If there is a choice, always go with real hardwood. Many builders have shifted to a modified hardwood veneer that comes in sheet and is glued down. Very difficult to repair or replace. Never ever go with pergo.

·        If there is money to spare, one upgrade on the carpet is good. An upgraded pad is essential. It extends the life of the carpet and makes feel more expensive.

·        Carpet in the family room, basement and bedrooms is preferred. If someone has terrible allergies, hardwood their bedroom too. An electronic air filter is also good for minimizing allergies, but it may be less expensive not to get it through the builder.

·        Spend any extra money in the kitchen and bathrooms first. Any leftover can go for other upgrades.

·        In the kitchen - Upgrade appliances and countertops. Granite isn’t always necessary when a nice corian tile is available. Builder grade cabinets are usually okay. Hardwood floor or upgraded vinyl essential. Be careful about tile in the kitchen – must have “roughed-up” surface or can be very slippery when wet.

·        Sun rooms or Country Kitchens are great options.

·        Don’t go cheap in the family room – get a fireplace. Unless it’s already offered without extra cost, don’t get one in the master bedroom.

·        Go for the extra windows on the side walls. Makes a big difference in amount of natural light. Bay or box windows are nice if in the budget.

·        Bump-outs are great unless the house is already large enough.

·        Unless there is no family room on the main level or if they intend to make the rec room in the basement their primary TV watching area, no fireplace in the basement.

·        Unless the builder is offering a finished basement in the price, only have a full bath completed in the basement. Always less expensive to have another contractor finish the basement rooms.

·        Plan for ceiling fan connections – at a minimum - in family room and all bedrooms.

·        Carefully look over the cable TV, phone and electrical outlets. Much cheaper to be done by the builder than adding later.

·        If it is offered, go for the upgraded wiring/cable option.

·        Washer and dryer on bedroom level always a good option.

·        If in budget, cathedral or vaulted ceilings in bedrooms and master bath are great.

·        Always go for the luxury master bath.

·        Two-story foyers usually look nice, but are hard to clean and a waste of valuable bedroom space.

·        Don’t do the vaulted or cathedral ceiling in the family room. Wastes 2^nd floor space and hard to heat and cool.

·        Plan on overhead lights or ceiling fans with lights in all bedrooms.

·        Don’t ask for colored paint, it’s not going to happen.

·        If available, French doors are always better than sliding glass doors.

·        If lot is not available that provides for a walk-out basement, definitely go for a double-wide “walk-up” exit out of the rec room. Makes a big difference in natural light and re-sale. Don’t settle for a single-width walk-up exit unless that’s all that the builder is willing to do.

The Contract

·       Unless you are dealing with a small builder, he will typically have his own contract that is to be used with your Purchaser.

·       Most of the provisions are written in the builder’s favor and are not negotiable.

·       One of the more annoying features is that the contract typically gives the builder up to a full year – after the originally promised delivery date – to finish and deliver the property.

·       The earnest money deposit will typically made out to and held by the builder. Count on at least $5,000 and more often $10,000 to $20,000.

·       If your purchaser contracts for a fair number of upgrades or changes to the basic house – and if the loan is not approved – the Purchaser can count on losing that part of the earnest money deposit that went for those changes or upgrades they requested.

·       The sales agent is not the person who approves the contract. It will be sent from the new home site to wherever the corporate office is for review and approval. It can take 5 to 7 days to get a final approval.

·       In the current market, offers are possible. You are not stuck with the current asking price or how the house is scheduled to be completed.

·       Usually, the builder would rather give you upgrades or additional finished space than give up price or additional closing cost money.

·       If the house is nearing completion/delivery, the earlier close date you propose will usually result in more concessions from the builder unless they have already lowered the price to their bottom line to get rid of it.

·       In order to get the concessions and closing cost assistance, the Purchaser will typically have to use one of the builder’s lenders for a mortgage and the builder’s designated settlement agent. The builder almost always has a financial relationship with the lender and settlement agent. Sometimes, they own them.

·       Occasionally, the builder’s lender’s interest rate may be a lot higher than the going rate and you may need to cost out the difference and see if the concessions are worth the difference. Sometimes they are not, but until you do a side-by-side comparison you can’t be certain.

·       Sometimes the purchasers are required to increase the earnest money deposit several times before closing, like $5,000 at contract signing, another $10,000 at pre-drywall walk-through and another $10,000 when an additional phase of the construction process is finished. It’s all about cashflow.

·       The interim and final walk-throughs are all important and must not be missed. I have never been to a new home walk-through that did not have at least a half a page of things that needed to be re-done.

Well, that’s about all I can think of for now. I’m sure there are other things to consider and, as I recall them, I will send them along. Do call me with any questions. Good luck with the contract. I know you are an independent person, but let me know if you want company when you meet with the builder.

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I also sent this along to some of my other new agents. What else should I have included? Would you have made different recommendations?

Dave Rosenmarkle

Broker Owner

Highland Realty

(703) 538-2566

DavidRose@mris.com

www.HighlandAgents.com