Let's Talk New Construction!


Okay, so finding exactly what you want right now is difficult.  I have been going over the statistics for existing home sales and they are still strong.  Even with the slight rise in interest rates (as of writing this 3.1% was average, that’s the highest it has been since June of 2020). But still, existing homes are scarce, and this is for several different reasons.  So, having a talk about new construction is a good thing, we have had this talk before – make sure you are able to make decisions etc.  But let’s talk about what that contract looks like between you and the builder.

We have all heard the horror stories about starting out building your dream home and having it turn into a nightmare.  Well, here are some things that you and your Realtor can do to prevent a nightmare.

Choose wisely Grasshopper! Not everyone can get a General Contractors license, because they cost money and you must be able to qualify for a bond and insurance. However, you really don’t need to have a lot of experience to get a general contractors license. In Alaska, you must have your Residential Endorsement.  This allows a builder to work on residential homes.  For some reason, in Alaska, you can work all day long on a Skyscraper, but need extra classes for a 1300 square foot house on a ¼ acre lot.  Two separate licenses.  You can go to the state of Alaska website and pull up the Professional Licensing page and make sure that your contractor has a valid license before you go into contract.  Also, check out other homes they built and, if possible, talk with the buyers of those homes.  Are there any chronic problems with construction or the warranty period afterward?  Choose Wisely!

Timing is Everything! Especially in Alaska.  Right now, in the throws of breakup, there are road restrictions that prevent heavy equipment from being able to be transported.  In other words, you may think Spring is the perfect time to build, and for the most part it is, but depending on when these road restrictions come on, your builder will not be able to get the equipment to your lot to start construction.  Now, if he has several homes in one subdivision, he can take his equipment there and leave it and get the work done while the restrictions are on – he just cannot put them on a trailer and drive them across town.  This is when you see the signs that say 50% Axle Load on the road.  It’s to let heavy equipment operators know that they can only carry 50% of their normal weight.  That huge backhoe for clearing trees and digging a foundation and the septic system, isn’t going to be able to travel on a 50% Axle Load road until the restrictions are lifted.  The reason why I am saying this is because you as a buyer, of a new home, want to know when your house will be complete and this, unfortunately, is an anomaly that makes it difficult to pinpoint that date. 

Busy Beavers!  This will be a busy building season, because right now there is somewhat of a housing shortage.  So, builders are in high demand.  That means subcontractors are in high demand as well.  There are only so many specialty contractors out there, and all the General Contractors use them.  This means their schedule is tight!  Your contractor that you went into contract with may have been promised by the subcontractor that everything will be done on time, but the subcontractor has a couple of employees that leave him high and dry, this puts everything behind, and the schedule is all messed up.  Sometimes, a foundation contractor get’s in there and get’s the job done early, but the framers aren’t scheduled to start for 2 weeks.  This can be frustrating for buyers – “what’s going on with my house, no one has been there for 10 days!”  It’s in the scheduling.  Expect things to take a little longer this year.

Money Money Money! Unfortunately, things are going to be a little more expensive this year too.  Not only have lot prices increased, but materials have really gone up in price.  In fact, some builders are not even taking presold contracts this year, they are building the house and then putting them up for sale because it’s too risky right now to sell a house when the costs of materials are rising so quickly. 

A Contractual Caveat… This year I have sold 2 new construction homes because the buyers had been in too many multi offer situations and they didn’t want to do that again.  They felt that this way, they would know what they are paying for the property right up front.  Well, not exactly.  Some builders are having to put caveats in their contracts that state “between the time that the contract is written and when the construction actually begins, the buyer is responsible for the increased price of lumber and other building materials.”  Let me give you an example: You sign a contract with a builder February 1st. It’s supposed to start construction May 1st.  The builder gives the realtor a copy of the lumber package on February 1st.  The cost is $45,000.  On May 1st, the same lumber package is priced again at the same lumber yard and the price has increased by $3600 overall.  The Buyer will need to add this $3600 to the purchase price making their new home now cost $303,600 instead of the original price of $300,000.  No one likes that, but it is the true cost and builders will not be in business next year if they have to absorb that cost. 

So, with all this going on, my advice, prices are going to increase, but so are values.  If you need a new house, buy one, new construction is a viable option, and everyone loves a new house.  Make it yours and enjoy the very interesting journey of new construction. 


Comments (2)

Shayne Stone
HomeSmart - Fulshear, TX
"Your Rock Solid Choice Realtor" RETIRED

Great information!  Thanks for sharing and have a wonderful day!

Apr 27, 2021 12:25 PM
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Even looking at new construction in our area, there is a lottery for the lots.

Apr 27, 2021 03:23 PM