Guide to New Construction
Although most home sales are existing properties, one out of every four homes purchased are new construction. Which is better? The answer is, of course, up to you.
Both re-sales and new homes offer advantages. Existing homes are generally less expensive; are closer to established shopping, transportation and recreational centers; and enjoy established neighborhoods. New homes offer innovative use of space, energy efficiency, and choices of upgrade options.
To help you understand how new homes differ from existing homes, here are ten pointers before you visit your first model home.
1. Know Your Numbers. Before you set foot in a model home, know how much you can afford. If you currently own a home, you will need to know the net proceeds from the sale to determine how much cash you will have available. Not a guesstimate, but a real analysis that includes every likely selling cost. If you’re planning on taking a mortgage, you will need to complete the mortgage pre-approval process to know exactly how much you can afford.
2. Be Represented. The sales agent in the model home represents the builder, not you. If you don’t have a professional real estate agent working on your side, you are not being represented. Most builders require that you and your real estate agent register together at the first visit to a model home in order for that agent to be able to represent you.
3. Know the Builder. There are builders known for their craftsmanship, others for their innovative use of space, below market financing, or customer attention during construction and move-in. Others are known for their economical methods of keeping their homes affordable. Check out the reputation and financial strength of the builder.
4. Keep a File. Gets a specification sheet on the home that presents the features covering everything from floor plans to energy efficiency ratings, and from immediate-delivery inventory to lot availability. Keep a copy of the floor plan and spec sheets in a file for when you sell your home.
5. Learn the Area. Learn about the community, transportation options and recreation activities. If there is vacant land surrounding the sub-division, learn what is proposed in the adjoining area. Read the homeowner’s association rules if you would like to add a hot-tub, pool or gazebo in the future. Consider carefully your commuting routes and times.
6. Choose Your Options Carefully. The higher the base price of the house, the more upgrades and options you can add without overpricing for the neighborhood. Make the most of builder incentives, which are typically credits for upgrades. An “upgrade” means selecting a higher quality carpet, floor covering, kitchen cabinet or counter top above the builder’s standard offering. An “option” is an item that the builder adds to the house during construction. Options such as a fireplace, third car garage or expanded living space add the most resale value but cannot be easily added later. Some improvements can be added later, sometimes for less money, like a finished basement, deck, or high-end landscaping.
7. Negotiate with the Builder. Many buyers don’t realize there may be room to negotiate, even if it is for upgrades or options. You have the most negotiating power if the builder has a completed an unsold home. Builders may offer incentives or special financing to help close a sale. Some premium lots are prices higher and saved for last. But typically there is no difference in what it cost the builder to develop one lot versus another. Ask about lot pricing, especially toward the end of a construction phase.
8. Make Sure the Contract Works For You. Be certain the agreement with the builder includes some safeguards for you, such as placing your deposit in an escrow account, itemizing your upgrades, allowing you access to the site to check on construction progress, and final acceptance of the house. Make sure you know whether there are any costly Special Assessments planned for your new home.
9. Financing Options. Some high-volume builders offer special financing packages. Some may even require that you use their lender to qualify for certain incentives. But using the builder’s financing is not your only option. Mortgage lending is highly competitive. Everything should be compared to determine the best approach for you.
10. New Doesn’t Mean Perfect. New home builders typically use modern materials that are durable, low maintenance, stronger, quieter, and safer. But new doesn’t mean perfect. Consider hiring a home inspector and use what you learn to create a builder punch-list to fix major items before closing or at least to get money put aside from the builder to fix them later.
All new construction is built to Energy Star standards which include energy-efficient building techniques and features such as more effective insulation, high-performance windows, tight construction, more efficient heating and cooling equipment, and Energy Star rated lighting fixtures and appliances