5 Things to Be Aware of When Buying a New Construction Home in Garland, TX
Buying a new home can be a very exciting feeling. However, there are still a lot of things that a buyer needs to be aware of about buying a new home vs a pre-owned home. Pre-owned homes are pretty much built and ready to go. All the accessories have been determined by the previous owner, the size of lots and style of brick for the exteriors.
On the other hand, working with a new home builder, a lot of choices are personalized by the buyer such as appliances, floor plan, cabinets, flooring and even paint color.
So exactly what is a builder? A builder is a person or group of investors who buy a large lot of land, and then subdivide those lots into individual residential lots that are then sold by the builder’s sales representative.
Once a lot is sold, the builder assigns a contractor or superintendent who then hires and oversees the work being performed by individuals in different trades, like a plumber, electrician, air conditioning specialist, etc.
Tip #1 Do I Need to Get Pre-Approval From a Lender First?
One important step to remember is to get pre-approval for a loan before you start searching for a home. Why? Because a loan approval will allow the buyer to know exactly how much they can afford to purchase, and what money they will need for a down payment. The lender will also be able to inform you if your loan amount is enough to cover any additional upgrade cost you may want to add to your loan amount or require you to pay for the upgrades out of your pocket in case the loan amount is not enough to cover the cost.
In other words, having an approval letter ahead of time will show the builder that the lender has verified income, credit, assets and other needed documentation in reference to the borrower.This information will also let the buyer know how much money they will need to have at closing. That's why it’s important to have a loan approval first before beginning the home search process regardless if it's pre-owned or new because without the approval letter you can’t even submit an offer on a home.
Builders usually prefer buyers to use their lender due to the relationship they have with that particular lender. By using an in-house lender, the builder is able to watch the file unfold and make sure there's nothing in the way that will prevent the buyer from closing on the loan. Also, getting a buyer approved thru a builder will allow the buyer to be introduced to incentives that can help the buyer lower their cost. Incentives that builders usually provide are seller concession, additional upgrades, even paying for the title policy, but most of the time it's a challenge to get the builder to give an incentive to the buyer if they are not using their lender. Regardless, in reality, a buyer can use whatever lender they chose to use, but keep in mind the builder might not be as generous to provide incentives if the buyer chooses not to use their lender.
As realtors, we can provide you with a list of lenders so you can shop around for the best rates. Each lender upon your request will provide you with A Good Faith Estimate. The GFE will lay out the estimated cost of your mortgage fees and must be provided within 3 days of applying for the loan. It's always a good rule of thumb to get at least 3 Good Faith Estimates and use this information to compare it with the builders lender to see who's giving the best rates. Then this information can be used to negotiate terms with the builder.
Tip #2 Am I Getting the Floor Plan I Want?
Picking a floor plan is another advantage for buying a new build. You get to pick the layout from several different floor plans that fit your families need.The most popular floor plan is an open concept. This plan allows the kitchen to be combined into one space which allows more interaction among family and friends.
One thing I learned when we bought our home from the builder is to make sure the floor plan you see is the one you get. The builder was explaining the floor plan to us and the one I had seen was not the one he was making the plans for. I then told him, “I want the exact floor plan we actually saw,” he then said, “oh, okay, I’ll make sure you have the same swing as the model.” Something that simple can cause a big hiccup. So if you like the shift of the floor plan you see, make sure you emphasize that to the builder. Don’t assume they know, because once you sign off, it will probably be a pain to correct.
Tip #3 Will I Get the Upgrades Like I See in the Model Home?
When a buyer finds the builder they are willing to work with the sales representative will help them pick out a lot and write up an offer. Before signing any contracts understand that the base price is just the starting point for the home.
Remember the model home usually comes with all the bells and whistles. So when a buyer views the model home, they assume that's what they are getting. Please note that the model is showing its product at the highest level. A lot of things seen in the model home are upgrades.
Remember not to submit a purchase offer until you know exactly what upgrades you would like to have. Make sure the builder provides you with a list of items that are considered upgrades vs items that are standard. Standard items mean they will come with the house without any additional fee. It's important to prepare a list of items that you would like to have upgraded to the home so the builder can generate an estimate of cost. This way you will have some sort of idea of what you are up against before you commit to a contract. Once you sign a contract and have agreed to the upgrades, changing your mind can cost you money. Be sure you know exactly what upgrades you are getting before you sign off with the builder and make sure you have a copy of the changes that the builder agreed to make as well.
The worst thing that can happen is for a buyer to agree on a certain flooring and the builder put in something totally different.Thats why documentation is very important to ensure all parties are on the same page. Reason being, if you sign off on the upgrade request and don’t have a copy of the changes, and later on find out that’s not what you ordered, you don't have any documentation to prove your case and the flooring that the builder said you agreed to will have to stay unless the builder is nice enough to change it out at no cost to you.
Tip #4 Do I Need a Realtor to Make an Offer?
It's always best to hire a Realtor when making an offer on a home. A lot of times buyers think that since it's a new build, Realtors can’t assist a buyer. That’s not true. Buyer representation works the same regardless if it's a pre-owned or a new home purchase. For instance, purchasing a new home, the builder is represented by the sale representative and the sales representatives job is to sell houses in that particular subdivision and get the best deal for the builder.
By the same token, the Realtor represents the buyer and will work to get the best deal for the buyer not only for new build homes but the Realtor has access to all pre-owned homes as well. The commission works the same on a preowned home, the seller pays the buyer's commission, and a new build, the builder pays the buyer's commission
So buyers are never responsible in most cases for paying the commission. It can get real tricky if you don't have a Realtor representing you because the contracts are very lengthy and if you don't understand the jargon you could be at risk of losing a lot of money. Not to mention, some builders don’t allow an “option period” like it's done with a pre-owned home. An option period in the Dallas-Fort Worth, TX area provides the buyer to pay the seller a dollar amount usually $100 for a number of days. I’ll use 10 days for this example because that's what we usually put in our contracts.The option period would allow the buyer the unrestricted right to terminate the contract for any reason and still get their earnest money refunded and the only monetary loss is the $100.
For instance, a contingency clause must be inserted that notifies the builder that you would like to request a couple of days to think about whether or not you would like to continue with the contract. Of course, the biggest fear when signing a contract is not knowing the following:1) How many days after I sign the contract can I get my earnest money back? 2) Will the inspection clause be written into the contract that allows me to get an inspection, and negotiate repairs if needed? Remember the sales person represents the builder they are looking out for the builder's best interest.
Tip #5 Do I Need to Get a Home Inspection?
Even though the house you are purchasing is brand new, that is no reason not to get a home inspection. A home inspection will give you a peace of mind knowing the items that were put into your home were done correctly.
Keep in mind that the city has certain guidelines and permits that must be completed in order for a property to get clearance but the city is not responsible for mistakes that were not done properly by the builder. The city is only concern with items that involve the safety of the house and the property inspection is done to make sure the mechanics like electrical, HVAC, plumbing, and other safety issues were done properly and if not, the builder need to be notified of the things that are not up to code.
As a buyer you are purchasing a new house so why not invest money for a home inspection to make sure it is done properly. Sometimes builders will not acknowledge reports from third party inspectors, but if it's not up to code they will have to correct it.
Therefore, as Realtors, we can help you arrange the inspection and most of the time will provide you with a list of inspectors that are regulated thru TREC (Texas Real Estate Commission) to choose from. However, its imperative that the purchase contract has an inspection contingency. This contingency will allow you to get the property inspected and present any items that need to be corrected to the builder and if the builder refuses, you can back out of the contract.
So when preparing for your property inspection you would want to have two inspections. The first inspection should be the dry wall which will cover items like electrical wiring, & plumbing, heating ventilation, and air conditioning ducts and the second inspection should be the entire house. Our inspector usually charges $200 for dry wall inspection and $375 for the entire house depending on the square footage.
Typical items normally checked during an inspection:
HVAC (Heating Ventilation Air Conditioning)
Optional systems (like irrigation, swimming pools,etc.)