Buying A Home with New Construction
You’d think buying a newly-constructed house would be more simple than buying one previously owned for decades. In some ways it is—you get choices on flooring and number of bedrooms, you might even get to choose your layout. But new developments come with their own set of potential pitfalls. Here’s what you should know before buying new construction.
- Research the neighborhood. Look at neighborhood forms online, visit the area at different times of the day and if you can, interview people who have already moved into the development. What do they like? What don’t they like? How’s the traffic and the cell service? Did anything go wrong when they negotiated with the builder?
If the development is being built in a currently undeveloped area, check with the local municipality to see what’s being planned. If they want to build an off-ramp behind your backyard, you might want to consider a different lot.
- Square footage and location are more important than upgrades. You can always put in granite countertops and solid oak hardwood floors later. But you can’t pick your house up and move it, nor can you usually add square footage without drastically reducing your backyard. So if you’re on a budget and you have to decide between a bigger house, nicer lot, or better upgrades, go with more square footage or with the lot that’s bigger, quieter, or has a view.
Model homes are usually a mix of standard finishes and upgrades. So when touring the homes, make sure you ask which of the features come standard and how much extra the others cost. Another thing to keep in mind: the cost they quote during the tour may not be the final cost once construction starts.
- Hire your own real estate agent who has experience buying new construction. The builder may try to pressure you into hiring its preferred closing agent, but the contracts to purchase new construction are more complex than the standard purchase contract and there are a lot of moving pieces. So you need someone who represents your interests. If you can, hire an agent familiar with the particular builder from which you’re buying. Each builder has things it’ll negotiate on and if your agent has worked with this builder before, they will know where you can save money.
- Shop around for lenders. Similar to closing agents, builders typically have a preferred lender they’d like you to get a loan from. The builder may throw in a few extras such as offering to pay closing costs, and that might sound like a good deal, but unless you shop around, you have no idea if it’s a deal at all.
- Review the builder’s warranty. A builder’s warranty is like an insurance policy for the homebuyer. It states which defects the builder must repair and how long you have to make a claim. The warranty will also state its guarantor.
Ideally you want a builder’s warranty guaranteed by a third party because if it’s guaranteed by the builder, and the builder goes out of business or bankrupt, you have no recourse.
- Make the purchase contingent on a home inspection. Home inspections aren’t just for existing construction as new homes can have just as many problems as old ones. You want to hire your own home inspector and attend the inspection so that you can learn about the house. Then, if the inspector finds major problems, you don’t have to purchase the home.
You might think you have nothing to worry about with new construction. In fact, that might be why you’re buying a new home, because you didn’t want to have to research and negotiate and order home inspections. Unfortunately, you have to do all of those things if you don’t want to miss something and potentially end up with a home that’s a money pit in the future.