The prospect of buying a new construction home can be exciting. Not only will you skip the tense process of touring an older home in search of the perfect property (or pondering the work you’ll have to put into an aging residence), you’ll also gain access to brand-new features, such as floors that have never been walked on and cabinets that have never been touched.
But before you buy a new construction home, or get too serious about building one yourself, you’ll have to take some essential steps.
Why New Construction?
Why would you choose a new construction home when they tend to be more expensive and take a while to build?
- Available inventory. Shopping for a house is perennially tough, but it’s even more difficult when general housing inventory is limited. If you’re in a market where houses are selling for far above listing price and there aren’t many reasonable houses to choose from (and where isn’t that the case these days?), building new may be your best option. You’ll get access to entirely new inventory and bypass the conventional route.
- Newer features. Some people just like to have new things. Shiny new appliances and unblemished walls might suit your fancy.
- Higher reliability (in many cases). Older homes tend to have more issues as they deteriorate. They may also have major issues you can’t even see. Though new construction homes certainly can have issues, as well, they tend to be more reliable than aging structures.
- A new neighborhood. A new house often means you’ll become a member of a new neighborhood. That offers the chance to participate in building an organic community from scratch.
Steps to Take Before Buying a New Construction Home
What steps should you take before buying a new construction home?
- Talk to a real estate agent. Make sure you talk to a savvy agent. If you’re working with a buyer’s agent, you won’t be responsible for paying anything. Their commission will be paid either by a selling real estate agent or the construction company responsible for your new home. Your real estate agent will be able to give you actionable advice and insights you wouldn’t discern on your own. He or she can also guide you through the process of buying a new construction home and introduce you to the best builders in the area.
- Explore the used housing market. Before you commit to a new construction home, take some time to look at the used houses in your area. You never know what might be available; you could find a relatively new residence that has everything you desire for a much lower price than the comparable new construction. If you don’t find any good fits, you’ll feel more confident about your decision to build new.
- Research builders. New homes aren’t constructed equally. Disreputable builders often cut corners and skimp on costs to maximize profitability at the expense of the buyers. Make sure you research your builder carefully and review any consumer complaints from people who have used the one you’re considering in the past. After even a few minutes of research, you should have a pretty good idea of whether a contracting firm stands by their creations, or they have a history of offending buyers and leaving them dissatisfied.
- Research neighborhoods. It’s also worthwhile to research the neighborhoods where this builder has been active, just as you would investigate the community in a used housing search. Look at nearby facilities and amenities, such as schools, workplaces, transportation options, and entertainment options. You should also explore whether there’s an HOA in place and the local crime stats and property taxes. The more you learn about the area, the better.
- Start saving for the down payments. Down payment requirements vary for new construction projects, so it’s wise to start saving as soon as you can. Your lender may only require you to put down 3 percent of the purchase price, but the builder may require an initial deposit before they are willing to break ground. The builder may require additional deposits throughout the construction process, which ultimately total upwards of 20 percent of the purchase price. Do the research and be ready for it.
- Understand the timeline. Make sure you understand the timeline for your new construction. Many new construction homes take at least six months to complete, and not a few require more than a year to reach complete build-out. You should also recognize the timeline isn’t set in stone; delays and setbacks could extend it.
- Review the standard floor plans and extras. Model homes are usually outfitted with tons of upgrades and optional features to make them look as attractive as possible, but these aren’t necessarily included in the standard floor plan. Before you move forward, make sure you understand what’s included in the standard build and the cost of the optional upgrades you desire.
- Analyze the warranties. Most new home builders include at least some warranties for their work. Review these in writing and make sure you understand what they cover. For example, your foundation may be protected for 10 years, but your concrete driveway may only be covered for a single year.
- Shop around for the best mortgage. Many home construction companies have in-house lenders designed to streamline the mortgage approval process for speed and convenience – but you’re usually not compelled to use this lender. Make sure you shop around with at least two other lenders to get the best rates.
- Consider negotiating. Don’t expect your home builder to budge on bottom-line pricing – but it doesn’t hurt to negotiate other items. For example, you might be able to bargain for a smaller deposit or a better mortgage rate.
Are you in the market for a new home? If so, it’s beneficial to work with a real estate agent who has your best interests at heart. That’s why Green Residential exists: We have all the experts you need to make the correct decision on your next property purchase. Contact us for more information today!
Michael is Green Residential’s Vice President. He helps to keep the team organized and running smoothly. Prior to joining Green Residential, he spent 12 years working at Cadence Bank in the mortgage loan servicing department, where he specialized in loan audits, modifications, and bankruptcy-related issues for the mortgage portfolio.
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