5 steps to buying a New Construction Home

By
Real Estate Agent with Peoples Choice Realty Services bk3007059

By popular demand, I have re-posted the entire series. I appreciate your comments, and I would also be honored, to be followed by you.

 

Overview

There is a large influx of  buyers into the market this year, and New Home Builders are gearing up to fill a need for housing in the Tampa Bay Market.

Buying "New Construction" is a bit different from buying a previously-owned home, you will be the first one to live there, so rather than dealing with a  previous owner, you will work directly with the builder and his representatives.

As with buying any home, you need to secure financing before you even begin house hunting. Get pre approved by a bank or mortgage lender.

Decide how much money you want to put down, and don't overlook the extras like property taxes and insurance, and remember, window treatments, landscaping and many other items that you may not even think of, are going to put a further drain on your available capital..

If you're considering buying a New Construction home, follow my Blog and I will provide you with the five steps to guide you through the process.

 

Step 1  The Decision

Now that you have your financing in place, it's time to make a decision. What type of new home do you want to pursue.

There are three types of new construction, Custom, Semi Custom and Spec.

Custom is when you buy a lot, find a builder and get your true dream home. This is a special type of project, not for the faint of heart, and is better left for a blog or two, all by itself.

Spec is a home in a subdivision, which is built by a builder, with many of the most desirable features already added to the home. They are also called inventory homes, and you can usually close quickly on this type of home. The only draw back is, you can't have it exactly the way you want it.

Finally, we have the semi custom, with this, you can usually pick the lot, the style and all the finishes you want or need. This allows you to move around interior walls, have four bedrooms instead of three. And get that kitchen or fireplace, that you just know you just can't live without. This type of home, generally takes from six months to a year from initial deposit to move in.

One thing to keep in mind when buying a new construction home, is that, you are a modern pioneer, you and your neighbors are clearing the land and building from scratch. There may not be a complete infrastructure of stores, restaurants and entertainment close by.

But the rewards of watching the area grow around you is an experience every American dreams of, the little trees you plant, the landscaping, the yard, as well as the many interior designs and touches grow in your memory and will be there years later, when the kids are moving out to look for their new family homes.

Well, it's time to make a decision, what type of home will it be?

 

Step 2  Don't do it on your own.

If you have a buyers agent to represent you, the agent can do a lot of your legwork before you even look at a model home. They can research the new home developments in your price range  and consider the distance to your work, schools, local entertainment and places of worship.

Check on the HOA, deed restrictions, and find out when the Association will be released by the developer.

Check out the different lots being offered, the lot premiums and most importantly, the location of the individual lots, not just the dot on a map.

And now a cautionary tale. of a real buyer, in the Tampa Bay area.

I had a customer, (I sold his house for him), who thought he would be just fine buying his New Construction home on his own. He went through the entire process and closed without any problems. He and his family moved into their fabulous five bedroom home on a cul de sac and conservation lot. After a few days, they noticed a lingering, foul odor, after scouting around, they found, on the other side of the beautiful green belt behind their home, was a fully operational pig farm. I do not have to tell you, he was not happy. I know all about this, because, I sold this house too, at a small financial loss, but a very large emotional one.

It's always good to have an "disinterested" third party to act as a buffer between you and the builder, to point out things you have not even thought of.

Your agent will also review your contact with the builder and in some cases, refer you to an attorney, when the contract seems to be more than a simple "boiler plate", and needs to be reviewed by an experienced Real Estate specialist.

The best part of using a Buyers Agent for a new construction home is, the builder will pay your agent. Funds are put aside to pay for your representation, if you do not take advantage of this, the builder keeps it. No, they will not give it to you, or reduce the price.

You must hire your agent before you contact any new home builder, once you talk to them without an agent it is very hard to bring one on board.  

Once again, Don't do it on your own.

 

Step 3. What do you get for your money?

When you buy a new home, some things are included and some are not.

Some builders include almost everything, including window treatments and appliances.

Other give you very low end floor coverings, flat paint, Formica counter-tops........

But wait, you can go to the "Design center" and pick out your upgrades.

This is the step that can really cost you money, it can increase the final price of your home. from $200,000 to $240,000. And many times you can get the same upgrades, at half the cost, by doing it later.

For example, you can get tile floors and granite counter-tops for a big savings, if you get them after you buy your home.

The real trick is knowing what is "important" during the building process, for example, having extra electrical outlets installed, will cost you a great deal more if you have them put in later, while getting a paver patio will be an item to do later.

One thing I have found, that needs to be done during construction, is hardwood flooring on the slab level, the slab can be poured so a high quality, thicker wood can be recessed, and meet the same level as carpeting and ceramic tile, giving it a clean professional look.

The trained eye and the past experience of a Real Estate professional, can prove to be a very valuable asset during this portion of the sale process, and remember, the builder will pay for a buyers agent to represent you.

 

Step 4. Inspections

When you buy a New Home, there are different types of inspections you should do.

If you are buying an inventory home, you should have an independent home inspection, at your cost, performed by an inspector of your choice. Preferably someone with a background in home construction. This will encompass all of the home and it's many components.

If you are building from scratch, you should have a "phase inspection", this is conducted just like it's called, in different phases of construction. Such as the slab, framing, trades (electrical, plumbing, HVAC etc), insulation and drywall, well you get the idea, a lot of phases. How many times you have the inspector come out, is contracted with the inspection company, and can be pricey if you are very though. But you have to remind yourself, that this is probably, the biggest purchase in your life, do you want to trust the builder, or have it checked out, for your peace of mind.

Most builders encourage inspections, but remember, it must be performed by a professional inspector, not by Uncle Bob, or a neighbor, "who knows about houses". If something does come up, you can have it corrected, and you will have a chance to inspect the property again, prior to closing, to make sure all repairs  have been completed. This is referred to as the Final Walkthrough.

One more thing, most builders are proud of their work and will provide a warranty on their homes. This can be done with a builder provided warranty for defects in workmanship and backed by a manufacturer's warranty on materials. Or you get a third party warranty such as 2-10, Old Republic and American Home Shield, to name a few. This is more of an insurance product, but since the home is new, the prices are very reasonable. This can be provided by the builder, or you can purchase one yourself.

So, more decisions, this is why buying a New Home is so pressure packed. Remember, keep calm and everything will workout. and a buyers agent can be a big help in keeping things in perspective.

 

The Closing.

Well we made it! Time to close the deal and own your Home.

Let's review and get things ready for the closing. Your mortgage should be approved and the funds wired to the Title Company handling the closing. You should get an estimate of the required funds from the Title clerk and in most cases, you need to wire the funds to the Title company's account.

You still have a few loose ends to take care of, you need your homeowners insurance policy in effect for the day of closing, paid in full. This includes wind, flood and liability riders that are required by your lender. Also, you need to have your utilities turned on, especially if you are closing on Friday, (it's not cool to have no electric or water over the weekend). You can have your cable and security system turned on after you move in, but it pays to schedule this ahead of time, (because it's not cool to have no Wi Fi or TV for any length of time). 

OK, you have everything ready, what now? Well, you need to do a final inspection of the home to be sure you are happy with the condition. If something does come up, we can have the builder put it in writing, as to how the problem will be taken care of, in a timely manner. This can be as small as a paint touch up, or a garage door opener that was somehow overlooked. This is the best process for this, since you still get possession of the home, and the items are usually taken care of that day, or very quickly there after.

It is wise to have the closing papers reviewed by an attorney, this can be done in advance of the actual signing, if the closing documents are provided for review. Don't sign anything that concerns you, until it is explained to your satisfaction. At the closing, you will receive a Title policy binder, insuring the property is yours and insuring against all prior claims by others. You also receive your home warranty papers that insure against any defects in materials and workmanship. The deed will be recorded and you will get a copy of this and your Title policy in the mail, in 4 to 6 weeks. Only thing left, is to get your keys, and shake everyone's hand.

There, that wasn't so hard was it? Just kidding, it is one of the most stressful things you will ever do.

But remember, a buyers agent can keep everything in perspective, you can yell at them, use them as a buffer between you and the builder and they can help you find answers throughout the process. We've seen it all, and don't hold anything against you.

One last thing, although buying a home is essentially the same throughout the United States, this blog is written with Florida in mind. Some items may be different in your State, but, contact a local buyers agent and they can update you on local laws and customs. To find a buyers agent, Google your local Realtor association and check their membership list for an agent near you.

If you have any questions, feel free to contact me, and I will be glad to answer them for you. 

Tampageorge2@gmail.com

 

Comments (2)

John Pusa
Berkshire Hathaway Home Services Crest - Glendale, CA
Your All Time Realtor With Exceptional Service

George - These are very valuable tips for buying a new construction home.

Jun 03, 2015 06:28 AM
Michael Dagner
Brokers Guild Classic - Denver, CO
Your Denver Homes Realty Expert

Hi George, you laid it all out there and make very good points.  No reason to go it alone!

Jun 03, 2015 12:36 PM