3 things to know about buying new construction

Kerri Rushing
Published on June 28, 2017

3 things to know about buying new construction

Buying new construction is often an appealing option because it allows you to have a fresh start on your home. You won’t have to face some of the typical concerns of overdue maintenance, updating worn-looking areas, or repainting that bright purple room. You will also have the chance to customize some aspects of the new home, which is always exciting.

But before jumping into the process, it is important that you take the time to learn the ins and outs of buying a newly constructed home. A lot of the process is similar to buying an existing home, but, if you’re considering a new home, it’s critical that you understand some of the differences – critical to both your sanity and your pocketbook.

1. The builder has an agent and a lender. . . do you?

If you’ve ever visited a new home community, you no doubt noticed that you are immediately corralled into the builder’s office prior to viewing the model homes. The greeter inside this office is typically a licensed real estate agent, employed by the builder or developer. His or her job is to not only let you know all the fabulous features the homes and the community offer, but to peel off those potential buyers who aren’t working with another agent.

While it’s often legal for one agent to represent both the seller (in this case, the builder or developer) and the buyer, and this “dual agency” situation seems like a handy solution for you, be wary. Dual agents are prohibited from representing one party exclusively so you’ll receive only limited representation. In other words, you don’t have someone working to protect your interests!

Clearly, this puts you in a bad situation, giving the builder the upper hand during the entire negotiation and construction process.  Your best bet? Enter the situation with your own representative! With an agent working for YOU rather than the builder, you will find yourself in a much better bargaining position throughout the process (and even better, the builder pays this expense as part of the seller’s expenses).

Similarly, whether or not you should work with the builder’s preferred lender may take some research. Often that lender will be able to save you money on your mortgage, but the only way to know for certain is to obtain quotes from other lenders and compare them all. Again, this is an area where having your own agent can really help, as they can point you toward trusted professionals that can give you good advice and comparisons up front.

2. Research is a bit more challenging

The initial steps in the house hunt, after seeing a lender, include deciding where you want to live (at the neighborhood level) and in what type of a home. When the neighborhood is brand new, you’ll be presented with several challenges not present when purchasing an existing home. Keep the following in mind when researching homes and communities:

  • Even new homes can have problems. Visit the existing home areas of new communities and do stop and chat with any residents you see. Ask about their experience with their homes and with the neighborhood overall.
  • Ask the builder’s agent about the Homeowners Association (HOA) and how much the monthly fee will be. Ask to the see the HOA documents, such as the CC&Rs – the covenants conditions and restrictions. Run them by your attorney if there is anything you don’t understand.
  • Determine if Internet and TV service will be available in the community as of your expected move-in date.
  • The Better Business Bureau is a valuable resource. Use it to research the developer/builder.
  • Visit the city planning office to determine what they have planned for the area surrounding the community.
  • If noise bothers you, check the neighborhood’s proximity to busy roads, the airport flight pattern and the number of young people residing there.
  • Although it is great to be one of the “founders” of a new neighborhood, keep in mind that if you move in before the neighborhood is complete you’ll be forced to live with the dust and noise of construction work for a while.

3. New home upgrades can be confusing

As you tour the model homes, unless you purchase identical upgrades, your home will not look anything like the model. In fact, it will be a bare shell, with the least expensive flooring, appliances and fixtures. Find out exactly what comes with the basic home price. With that in mind, you can add upgrades and keep within your budget.

Typically upgrades performed by the builder during the construction process are more expensive than if you hire someone to do them later on. The advantage of having them done during construction, though, is that you can roll the costs into the loan.

Let’s take a look at three of the most popular builder upgrades.

  • The lot — The one upgrade that you can be assured will hold its value is land. After all, no more land is being created. A larger lot, or a better-located lot, is worth the money it costs.
  • Structural upgrades — Creating a three-car instead of a two-car garage or adding an extra bathroom are popular upgrades because of the expense homeowners would incur if they saved these upgrades for later.
  • Plumbing and electrical — Anything that will help save money while you live in the home is worth considering. For instance, a super-efficient HVAC system and tankless water heater are worth considering as upgrades.

Think about your wants and needs and whether it would be costlier to add once the home is built. Any time a wall needs to be opened you can expect a huge mess that costs lots of money.

4. The construction process

Here is one more bonus tip for you: building your new home will generally take several months, and there are plenty of opportunities for problems to occur. Delays, errors, it can all become overwhelming. This is another time you really want an expert in your corner. The builder is going to help you work through some of the problems, but always with their concerns (and profits) at top of mind. A good agent will keep this process in line and serve as that second set of eyes, helping you monitor the entire build process to YOUR satisfaction.

These are just the highlights, so call us to learn more about this exciting (but complicated) process before making the plunge. You – and your pocketbook – will be glad you did!