Guest Writer February 20, 2021
Sharad Gupta is the owner of Gupta Realty Group and is a member of the California.com Recommended Business Program, which highlights only the best businesses in the Golden State. To be featured, each business must be highly regarded, have a unique California story, and make a positive impact in their community.
When shopping for a house, you'll discover that most homes on the market are resale properties. While many of the options available are previously owned, one in four homebuyers chooses to buy a new construction home. Both new build homes and resales offer advantages, so before you make a decision, consider the following tradeoffs.
The Benefits of Purchasing New Build Construction
Many new homes come with a variety of perks that can include choosing which features are included, selecting cabinet colors, or picking backsplash tiles. In addition to the ability to upgrade materials, new home construction offers:
- An innovative use of space and style
- Greater energy efficiency
- New and modern appliances, materials, and aesthetics
The Benefits of Buying Existing Homes
Existing homes are typically more available than new construction homes and offer their own set of advantages, including:
- A lower average price
- Locations in established neighborhoods with mature landscaping
- Fewer problems from homes settling after the purchase of the home, since this has likely already happened
As you can see, there are advantages to both new and resale properties. Most buyers consider houses that fall into each of these categories before making a purchase. If you’re thinking about buying a new construction house, here’s what to contemplate before visiting a model home.
Advice That’ll Make the New Construction Home Buying Process Easier
1. Determine a Comfortable Price Range Before Looking at New Build Houses
Before you begin the home search, sit down with your agent and determine a comfortable price range for your new home. If you own a home, you’ll need to know its net proceeds to determine how much cash you’ll have to work with. You should carefully calculate each potential selling cost rather than simply estimating this number to set yourself up for success.
First-time buyers don’t have to worry about selling a home first, but they do need to figure out what size mortgage you qualify for with your current income. Understand how much you can afford for a down payment, then work out a monthly debt load so you can determine a comfortable price range for your home.
2. Know The Difference Between Seller’s and Buyer’s Agents
The sales agent in a model home represents the builder, not you, and is known as a seller’s agent. As a buyer, you can work with a buyer’s agent at no additional cost. The job of a buyer’s agent is to best represent your needs by being knowledgeable about home construction, warranties, financing, differences in pricing, quality, and even lot selection so you get the best value for your money.
3. There’s A Builder For All Types of New House Construction
Like all tradesmen, builders vary in their areas of expertise. There are builders who specialize in craftsmanship or innovative use of space, offer below-market financing, and specialize in customer service during construction and after move-in. Determine what aspects are most important to you, then shop around for a builder that will best address your requirements.
4. Get The Facts on Your Builder
Before making a final decision, it’s wise to check out the builder’s reputation and financial strength. You’ll also want to check out spec sheets on various home features such as floor plans, energy efficiency, lot availability, and delivery of your home.
5. Check Out the Neighborhood Surrounding The New Home Development
When you find a new home you’re interested in, learn as much as you can about the community. Consider how its location will affect your commute, see what it looks like during rush hour, and determine how you feel in the surrounding area after dark. Then, discover what amenities the neighborhood has to offer; investigate what financial reserves are set aside to build or replace existing structures and roads; and check with local land-use officials to see what else is planned or allowed to be constructed in the area, especially if there are vacant lots nearby. Next, review the rules for the homeowner's association, or find out if one will be set up.
6. Choose Options and Upgrades for Your New Build Home
Options and upgrades are additional items that can make your home stand apart from the rest of the houses in the neighborhood. Since real estate is an investment, you don’t want to overprice the home for the neighborhood, but the less expensive the base price of the house is, the less you have to worry.
Options are items the builder installs during construction—including adding usable space such as a sunroom or a powder room—which add the most resale value to your home. An upgrade, on the other hand, refers to selecting quality above the builder’s standard. This can include enhancing the carpeting, ceramics, detailing, kitchen fixtures, and appliances.
Whenever possible, take advantage of builder incentives, which offer free upgrades or credit off the sale price. Remember, you can add a deck, a finished basement, or landscaping later—sometimes for less money—so don’t let these touches distract you from otherwise good homes.
7. Be Aware That Your Newly Constructed Home Might Be Ready Sooner Than You Think
While they don’t typically advertise it, some builders have newly constructed homes available for immediate delivery—meaning they’re move-in ready within 30 days. Even if some builders are eager to sell, they'll probably keep that knowledge to themselves.
Immediate delivery homes are available for various reasons, including:
- The community where new homes are being constructed is nearly complete, so the builder proceeds to have the on-site-contractors build spec homes—houses built on speculation for sale—on the last lots
- The model home is for sale
- The contract on a home fell through
- The builder constructs these homes for buyers who either sold their previous homes or are relocating and need to move swiftly
These move-in-ready homes may be more desirable because some builders offer financing incentives or cost-free options. An immediate delivery home is an advantageous way to purchase a home if you need to move in quickly or need a physical space to walk through before signing a contract.
8. When Buying A Brand-New Home from A Builder, Make Sure to Negotiate
Many buyers take the sales price as-is without realizing that there can be room for negotiating price, upgrades, or options in the contract. Though this isn’t always possible, you have a bit of room for negotiation when a builder has completed a home but hasn’t sold it.
Premium lots present another potential point of negotiation. These lots are typically priced higher than the rest of the development, and they are sometimes saved to be sold last, but all lots cost the builder the same amount of money to develop. There’s no harm in inquiring about lot pricing or wiggle room throughout the contract, so be sure to ask. Some builders may even offer additional discounts or special financing to help close a sale.
9. Ensure The Contract Works in Your Favor When Buying A New Build Home
Pay attention when your builder is laying out the specifics of an agreement and make sure to protect yourself. You can have safeguards written into the agreement that can: place your deposit in escrow; detail your upgrades; allow you to check on your home’s progress at the construction site; provide a 30-day notice in advance of the closing date; explain what the fine print means in the builder’s and manufacturer’s warranties.
10. Determine Which Financing Package Is Best for You
Shop around for everything from rates to lender fees before settling on a financing option. Some builders—especially those working in high-volume communities and placing a large number of loans—can offer special financing packages. Since home loan lending is highly competitive, there are also many financing options to choose from aside from those presented to you by the builder. Additional costs such as appraisals, inspections, surveys, attorneys, and closing fees can vary as well, so don’t settle for a deal that doesn’t work for you.
11. Remember: Just Because it's New, Doesn't Mean it's Perfect
New build homes for sale are just that—they’re new. This typically means they’re built with modern, durable materials that are low maintenance in addition to being stronger, quieter, and safer than comparable existing homes. But nothing is perfect, even if it's new, so you should still consider hiring a reputable, licensed home inspector.
After the inspection, create a checklist to address any of the problems with the builder before closing. Many new home buyers use a real estate agent to help them negotiate the best price and terms with the builder. In addition to using a realtor to get the best price for your home, you may want to budget for items that you’d like to modify or add later on if they’re not deal-breakers for purchasing the property.
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