Purchasing a Newly Constructed Home
A lot of people aren’t clear on what the difference is between purchasing a newly constructed property versus an existing property. First of all, you are buying from whoever constructed it, not the man who called it home. What can you expect? There are many things that are different in the purchase of a new construction, here are a few things you should take into consideration.
Find an excellent agent.
Be sure it’s somebody who has expertise in new construction and is not connected with the builder. Model homes are generally staffed by a realtor that has a relationship with the builder. It’s essential for you to get an agent to represent your best interests, from advising you on how best to structure your offer to be most attractive to the builder to making decisions that could impact your home’s resale value. Some new constructions have site registration policies which require your agent to attend your first few inspections to the worksite.
Be creative during discussions.
Builders do not like to drop their costs.
Instead, consider requesting the builder to cover closing costs or perform updates at no extra charge. Builders are often reluctant to set a precedent for negotiating costs since future buyers at the development may anticipate similar discounts. Consequently, builders are often more inclined to negotiate “on the rear end” since closing costs and updates are a less obvious way for them to sweeten a deal.
Get everything in writing.
Do not sign anything until everything has been negotiated, agreed upon and written into the contract. If you’re contemplating purchasing a home that’s not yet complete, it is extremely important to spell out how the house will be completed, who is in charge of the mobile job management, what is going to happen if construction isn’t completed on time and the deadlines for decisions which will happen through the process. Verbal conversations aren’t binding, so everything significant have to be placed in writing and signed by all parties.
What you see is not necessarily what you get.
The fit and finish of the model house does not necessarily represent what’s standard. Often the model home reflects a mixture of standard materials and fittings, in addition to a couple of upgrades. When touring the model house, be certain to learn which is which. The main thing is to know precisely what you will be getting, what is available and, of course, what it will cost. Bear in mind that costs can vary. The price quoted at the beginning might not be exactly the same when you choose to move forward.
Do your homework on the builder.
Visit other developments and speak with homeowners. Search online for reviews, testimonials and information. Bear in mind that lots of builders will have both happy and unhappy clients in their past. Start looking for trends in reviews and be sure any concerns are covered in the purchase agreement documents.
Obtain a guarantee.
You are often buying a house which is not completed. What guarantees do you have the house will be ready on time and that a solid quality management system is in place? Your purchase agreement documents should specify a completion date. But many builders add provisions which produce the completion date reliant on permit approvals in the municipality or access to construction materials from suppliers. There may also be additional fees if you are not able to close on time if your creditor is not ready.
Get the house inspected.
New homes have problems also. Hire an inspector to make sure everything is secure and up to code. Although most municipalities require new houses to pass license inspections, an independent verification with an experienced contractor is money well spent. Oftentimes, the builder enables buyers to conduct an independent review and consent to fix code compliance problems but don’t include a provision that would enable the buyer to walk away and keep their deposit if they aren’t happy with the result of the inspection.
Find out what is covered.
Many new houses come with a warranty from the builder, but not all warranties are created equal. Know what is and is not covered and for how long. Many builders use a third party warranty company. Sometimes, the maker of certain goods, like windows, might have another warranty or guarantee and the builder may refer all problems with those elements to the manufacturer rather than tackling any issues directly. The builder should be able to provide details on which portion of the residence is covered by which coverage, so make sure you get all these details as pre-sale advice, not after settlement.
Look to the future.
Check with the town to see what is planned for the surrounding area. For those who have an opinion, will it still be there in five decades? Most contractors put the responsibility on the buyer to be conscious of community or neighbourhood dynamics associated with other development in the region such as traffic planning, the growth of neighbouring parcels, etc.. Lots of new communities also have homeowners associations that could affect your prospective new home too.
Do your homework on creditors.
Do not automatically use the builder’s lender. Shop around for the loan that’s ideal for you, not them. Some builders need you to get pre-approved with the builder’s preferred lender. By the time you’re prepared to generate an offer, you likely have already spoken to a lender of your own. It may come as a surprise once the builder requires one to also become pre-approved with their creditor.
Why would they do this? First off, it is reassuring for the builder to hear about your credentials from their lender, even if you don’t end up using them. Second, it can sometimes be the most cost efficient alternative. Much like using the financial arm of an auto company, they are usually willing to offer more competitive rates and fees.
Furthermore, in some instances, the preferred lender is the only option. This is especially true for jobs that are in the first stages of development. If no other creditor has entered this development yet, it may be hard to get a loan from any lender for the property acquisition.