New Construction

Hire Your Own Buyer’s Agent.

Using a Realtor to purchase a home is FREE! That’s right! No matter if it’s a pre-owned or new construction home, you as a buyer, do not pay your Realtor’s commissions. Buyer’s agent commissions are paid for by the Seller or the Builder. 

Many builders will not allow you to hire your own agent if you wander into the new homes sales office without representation. If you visit a builder’s home construction site without an agent, you might be hosed, because later the builder could refuse to pay your agent.

What is a builder’s agent?

When you buy a new construction, the home’s builder is considered the seller, and the agent representing the builder is called the builder’s agent.

“The builder’s agent will always have the builder’s best interest in mind.” After all, the job of the builder’s agent is to get the highest price for the homes the builder is selling so the agent is not going to be as eager to negotiate down.

Let your agent introduce you to the builder, and you’re covered.

  • The builder’s sales agents are paid to represent the builder, regardless of what they may tell you. Many will use high pressure tactics to persuade you to sign the contract. Due to the high volume nature of brand new home sales, lots of builder’s agents are paid less than a traditional commission; some earn a salary plus incentives, so turnover is important to their livelihood.
  • Your own agent will represent you and be your fiduciary, and he or she is required to disclose the positives as well as the negatives about the transaction. Builder’s agents don’t discuss drawbacks. Your own realtor is required to put your interests first.
  • If your contract contains a contingency to sell your existing home before buying, hire your own listing agent to list your home. Be aware that buying before selling is not always in your best interest, because hard bargaining often goes out the window when you’ve emotionally moved out of your home.

Don’t Automatically Use the Builder’s Lender

  • Builders often prefer their own lender because the builder will be kept fully informed of your personal progress; it’s one-stop shopping for a builder. But a builder’s lender might not offer you the best deal. Moreover, the builder may own the lending company. Ask if there is an incentive to use the builder’s lender. Sometimes you will get a break.
  • Consider alternate sources to find a lender. Your own bank or credit union might offer you very attractive rates and terms, based on your banking history with that institution. Your agent may refer you to his or her private list of wholesale lenders.

Obtain Legal Advice Before Buying a Brand New Home

  • Before you sign a purchase contract, you might want to talk to a real estate lawyer. Standard purchase agreements are designed to keep everybody out of court, but they don’t necessarily contain language that protects the buyer. The laws in your state may require the involvement of a real estate lawyer.
  • Ask questions about removal of contingencies and your cancellation rights. Make sure you understand your liability and commitments.
  • Find out if the materials used by the builder contain chemicals that are hazardous to your health. If your contract contains a warning about health issues, it’s probably because this is a valid concern and other buyers have gone to court over it.

Verify Options and Upgrade Prices

  • Determine which options and upgrades you want. Bear in mind that for many builders, the profit margin is highest in upgrades. Some builders can sell a home for almost bare construction cost because they make the bulk of their profit in the upgrades.
  • Find out whether your lender will lend on all the options/upgrades you have chosen. If your lender will not finance 100% of your selections, you will be required to pay for it in cash.
  • Ask about cancellations and whether you will be held liable for items the builder cannot return to a vendor.
  • Some contracts give the builder the right to choose your upgrades if you do not submit your request within a certain period of time.
  • To save money, consider which upgrades you could purchase and install yourself after the escrow closes. However, realize that some upgrades such as CAT-V ethernet, DSS satellite, or security wiring inside the walls are easier to do before construction.

Check Out the Builder’s Reputation

  • If a buyer has a bad experience with a builder, the word spreads rapidly throughout a community. But you won’t know if a bad rep is an isolated experience or if the builder repeatedly brings bad publicity to itself without checking and verifying the public records for lawsuits.
  • Talk to the neighbors and scrutinize the construction quality of surrounding homes. Is the builder consistently building identical or larger homes in the area or is construction lagging and homes shrinking in size?
  • Find out whether the builder sells to investors. Some builders require all their homes to be owner occupied. Others eagerly sell as much inventory to investors as profit margins will allow. If the market suddenly dips, investors are typically the first to bail and, besides, part of the reason you are buying in a new subdivision is to be surrounded by other buyers just like you, not tenants.

Hire a Home Inspector When Buying New Construction

  • Always, always, always get a home inspection when you buy. And hire an accredited individual to perform the inspection—not your dad or your buddy contractor. Get a real inspector. Be there for the inspection and ask questions, because a new home can contain defects. The HVAC system might be too small or the plumbing could be installed backwards. Construction workers make mistakes. (And let’s not even talk about the mustard-stained McDonald’s wrappers stuffed in wall cavities.)
  • If the inspector calls for further inspection by another professional contractor, find out if the inspector is telling you there could be a serious issue or if the inspector isn’t licensed to address that issue.

Have Your Earnest Money Deposit on New Construction Ready

When purchasing a home that has been previously owned, the earnest money on new construction is typically 1-2% of the sales price. When purchasing new construction, your earnest money deposit is usually 5% of the sales price. The builder typically mandates the amount as a part of their contract.

If you are able to customize the home and decide to add additional items outside of the initial contract, an additional new construction deposit will likely be required.  This new construction deposit could range from 25%-100% of the option purchase price depending on when you are adding these options (before or after set deadlines).

Be Prepared to Wait

Delivery can range – it could be immediate or more than a year. Make sure you understand the delivery timeframes and be prepared for these timeframes to be extended a bit. Almost every new construction project hits delays.

The Fine Print

Many builders use contracts that are much different from the area real estate board contracts used in a re-sale transactions. These contracts mostly protect the builder, not the buyer. So be sure you really read through the fine print. If you are buying from a smaller or relatively unknown builder in your area, we sometimes recommend that a real estate attorney reviews the contract as well so there are no surprises. We often encourage our clients to add certain addendums to the builder contract for added protection, as often, builder contracts don’t include any contingencies! We know how to negotiate these addendums so it protects the buyer but done in a way that the builder will not reject (as can often occur with a buyer attempts to write a contingency on their own).

Builder Warranties – Fine Print Continued

You’ll also want to pay attention to the builder warranties – we can guide you through what to look for to make sure you’re covered if something goes wrong in the first few years.  

Standard Options and Upgrades

Model homes are stunning and usually include many upgraded features – which is great! But these upgrades mean more money out of your pocket. It’s important to understand what features come standard with the base home price. The on-site sales agent will give you a list of standard options and a new construction upgrade price list

Home Inspections

Just because you are buying a new home doesn’t mean it isn’t going to have defects.  In fact – we’ve yet to see a new construction home (or re-sale for that matter) have a completely clean home inspection.

Depending on the builder, they might allow the contract to be contingent on a final home inspection by a licensed home inspector of your choosing. This is important because without an independent inspector YOU hire to make sure everything is done to code, is safe and in working order, the builder’s inspector will just make sure it was done to the satisfaction of the builder.  While these inspectors are very good, there are often issues requiring attention that only an outsider will spot.

Final Walk Through & Punch List

Whether you have an independent inspection or not, don’t skip out on the final walk through with the builder. The walk through is done a few days before settlement and a representative from the builder (and from our team) will attend the walk through with you to be sure the house is in good order. It’s important that you make a punch list of cosmetic items you would like corrected (nail pops, scuff marks on the walls, chips in cabinets, light fixtures, and more).  

If you had a home inspection, now is also the time to make sure those issues are resolved. You’ll likely have the opportunity to walk through the house again before settlement and after the items have been fixed by the builder to make sure they were done to your satisfaction.

 

“The best seat in the house belongs in your dream home. Let me help you find it.”

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