Do I need a realtor when purchasing new construction?
Yes! It is so important to have a realtor representing you when buying new construction. The sales agent at the community works for the builder’s best interest, not yours! And it does not cost you anything to have someone representing your best interests when purchasing new construction.
The new construction process
Buying or building a new home is a huge undertaking, with many questions to consider. We have put together a guide to help you decide whether to purchase a newly built home or to build with a contractor or within a new development.
- Is new construction for you?
- Choose your builder
- Select your options
- Prepare to close
Is new construction for you?
Obtain pre-approval or proof of funds
Builders or developments often work with particular mortgage companies and will offer discounts on closing costs for using their “preferred” lender. Whether you use the builder’s lender or someone else, you will need to get pre-approved for financing. If you are not financing, obtain proof of funds from your financial institution. It is good to get preapproved by a lender so you know what you can afford when starting to look at new construction options. Just because you get pre-approved by one lender does not mean you can’t get pre-approved with the builder’s preferred lender once choosing a builder. Builders use their own contracts that are similar to a regular sales contract but include additional terms specific to the building process, such as at what points during building the contractor gets paid, and what options you have to choose from. I will help you interpret the terms of the builder’s contract before you sign.
Questions to Consider
- How soon do you need to move into a new home?
- Do you like to work on home projects and do-it-yourself?
- Are you looking for something specific?
Weigh the pros and cons
Before you go all-in with a builder, it’s best to weigh the benefits and negatives. And this is going to vary based on your own individual needs and situation. Benefits include a completely new home with warranties in place for big-ticket items. Negatives include nonnegotiable pricing and the amount of time you’ll have to wait.
Choose your builder
Choose your homesite
There are three types of new construction: spec (short for speculation) homes, tract (or production) homes, and custom homes.
Homes “built on spec” means the builder has purchased a single lot and built a home on it not knowing who will purchase the home. Typically, the builder will list the home with a real estate agent to market and sell. Since the home is usually finished, or almost finished, when it goes on the market, the buyer does not have the opportunity to make changes in features.
Tract homes are homes built in a development where all the homes are built around the same time, or in phases, by the same builder. The builder has selected floor plans and uses the same features in each model. Often buyers can purchase a tract home prior to completion, in which case they may be able to make changes in the features within the builder’s budget or for an upgrade fee.
When the buyer purchases their land and then contracts a builder to build a home of their choosing, they are building a custom home. The buyer chooses their floor plan, or has an architect draw one for them, and chooses all of the features, sometimes with assistance from the builder or an interior designer.
Selecting your builder
If you are looking at a planned development, find out if there is one builder or if the developer allows you to bring in your own builder; most of the time a planned development has builders they use for every home in that community. If you are looking at building on a lot that is not restricted to a particular builder, it’s important to research builders in your area to find one that is reputable and stands by their work.
Unfortunately, some builders fail to deliver on their promises, cutting corners on materials, or even failing to finish certain details. Meet with different builders before you make your selection.
It’s important that they are organized and communicate well. Make sure the builder has someone that is communicating with you through every step of the build so you know when your choices must be made and when each phase will be completed. Check out your builder before signing anything. Find out if there are any complaints registered against them and ask for references from other homeowners. Find out if you can tour a model or a recently completed home and bring someone who can judge the quality of the workmanship.
Select your options
There will be a lot of decisions to be made throughout your build. Being prepared with your choices at each stage will help keep the build on schedule. Most builders have someone who will work with you to let you know what stage they are on and which decisions are coming due and when they need to be made. If your build is custom, you will need to do a lot of research into finishes, fixtures, colors, hardware, and appliances so you know what you want and what you can afford.
In a Custom Build
In a custom build, you can literally select every finish, from the roof shingles (or tiles or metal) to the wall texture, and the color of the window screens, though you may choose to defer to your builder’s wisdom and experience for some choices. It can be overwhelming, which is why you should invest some time prior to commencing to consider what you like and want in your new home.
In a Planned Development
In a planned development, you usually have option levels to choose from, the scope of which depends upon the price point of the home or development. You may be able to up or downgrade any of these items. You will need to discuss with your builder how changes to their options packages will affect your sales price.
Prepare to close
You will need to check on every phase of construction to double-check that everything is done according to plan. Even the best builders have miscommunications, mix-ups on orders, or problems with installations.
Even though your home is brand-new, you might still want to have a home inspection done. Sometimes an inspector will catch something that slipped past the contractor and code enforcement.
Closing day on new construction differs slightly from a pre-owned home in that there is often a “punch list” of items the builder is responsible for finishing up either on closing day or shortly afterward. This may include cleaning, touch-up painting, installing landscaping, or changing out locks. You should have the opportunity to go through the house with the builder shortly before closing to add items you notice to the punch list.