How To Buy A New Construction Home
Buying a new construction home is much different than buying an existing home in an established neighborhood. There are many important tips that new construction home buyers should be following, but they often do not.
Certainly many of the steps to buying a house are similar when buying a new construction home and an existing home, however, there are some additional tips that buyers need to be aware of. For example, the financing for new construction homes is different than the financing of an existing home.
Greater Rochester NY new construction homes are currently being built quite frequently because of the shortage of existing homes for sale in the area. It’s important whether you’re buying new construction in Rochester NY or buying one in San Diego that you understand what the most important new construction home buying tips are.
In this article you’re going to find out what the top 10 new construction home buying tips are. If you’re planning on buying a new build, you must recognize these and follow these tips to ensure the process is smooth, enjoyable, and successful.
Decide Whether To Build A New Home Or Buy Existing
The first tip to follow when buying a new construction home is to first determine if that’s actually what you desire. Deciding whether to build a new home or buy an existing home can be a difficult decision for some buyers. Certainly if you decide that buying an existing home is a better option, the other 9 steps discussed in this article will mean nothing to you.
What are some of the questions and considerations you should make when deciding whether to buy a new construction home or buy existing? Below are a few of the most important things to ask yourself when deciding which is the best for your situation.
- Do you want full customization of the home you purchase?
- Does resale value matter to you?
- Do you have time to wait for the build time?
- Do you want to live in a developed or new neighborhood?
- Does energy efficiency and smart home technology matter to you?
If you’re looking for full customization, maximum energy efficiency, and an undeveloped neighborhood, buying a new construction home is likely the best fit for you. If you’re looking to move into a home quickly, live in a developed neighborhood, and don’t mind updating a home, buying an existing home is likely the best fit.
Bottom line, before you decide to buy new construction, you need to know without a doubt that it’s what you desire.
Find A Real Estate Agent With New Construction Experience
A very common question from new construction home buyers is, “Do I need a real estate agent to buy new construction?” The answer is technically no, you don’t need a real estate agent to buy new construction. There are however many more reasons to having a real estate agent when buying new construction than not having an agent.
Buying a new build without an experienced real estate agent can be a very costly mistake. It’s important to understand that in most cases the builder pays a buyers agents commissions, so why wouldn’t a buyer want their own representation?
Finding a real estate agent with new construction experience can be done by knowing how to interview real estate agents when buying. Buyers who know what questions to ask prospective real estate agents will be able to determine whether or not an agent is going to be the best fit for their new construction home purchase.
What many new construction home buyers don’t realize is that the representatives who work in the model homes in new developments are representatives of the builder. This means that they’re looking out for the best interest of the builder and not the buyer. Having a real estate agents representation when buying a home is vital, whether it’s the purchase of a new build or an existing home!
Understand The New Construction Process
It’s very important for new construction home buyers that they fully understand the process. There are a lot of moving parts when it comes to building a new home.
A few of the steps in the new construction process include site prep, foundation pouring, the framing step, electrical installation, municipality inspections (ex. Certificate of Occupancy), and a variety of other steps. Each builders time frame will be different and it’s important that buyers fully understand the process of building a new home before starting.
Check out this fantastic step by step guide to building a new home for a detailed overview of 10 steps involved in the process. As you can see, there are a lot of details that go into building a new home and it’s critical that buyers realize this.
Discuss With A LOCAL Mortgage Lender About New Construction Loans
Many new construction buyers make the common mortgage mistake when building a new home of believing that the process is the same as getting financing for an existing home. Getting a new construction loan is actually much different than obtaining financing for an existing home.
It’s extremely important that you discuss with a LOCAL lender the options you have and also the steps of obtaining financing when building a new home. The first thing that new construction home buyers need to understand about new construction loans is that they typically have short terms, such as one year. The rates on new construction loans are usually a bit higher as well when comparing to a mortgage for an existing home.
In order to get approval for a new construction loan a buyer must supply important documentation to the lender. A few of the documents that a lender will require include a construction timetable, building plans, purchase offer documents/add-on addendum, as well as a realistic budgets.
Once a new construction loan is approved, there will be a schedule of draws that follows the new build timetable. For example, there will be specified amount of money given to the borrower when ground is broken on the new construction. Once the framing begins, another draw will be given to the borrower. The new construction lender usually will send a representative periodically to the build site to check on the progress.
At the completion of the new home, once the certificate of occupancy is issued, the loan is usually rolled into a traditional monthly mortgage. As you can see, new construction loans are more complex than financing an existing home. New construction home buyers need to discuss all of their financing options well before getting involved in discussions with a builder.
Research Local Home Builders
Choosing the home builder is a very important step in the new construction home buying process. There are dozens of home builders in every city. There will be some great home builders, some average home builders, and some bad home builders.
It’s extremely important for buyers to understand how to choose a home builder so they can avoid choosing a bad builder as this can be a very costly mistake.
One of the first steps to choosing a home builder is to make a list of potential builders. Once a list of potential builders is developed, properly researching these builders is the next step. The internet has made this task much easier since buyers are now able to find reviews on local companies very easily.
Another noteworthy tip to consider when choosing a home builder is to talk with homeowners whose home has been built by the potential builder. It’s a great way to find out what these homeowners love about their new home and also what they wish was different.
Determine Where You Want To Build Your New Construction Home
Location, location, location! If you’ve bought or sold a home in the past, I’m sure you’ve heard this statement. Location plays a huge factor with home values and the desirability of a home.
When buying a new construction home a huge decision to make is where the new home will be located. Typically there are a couple options for new construction build sites.
The first option, which is the most common, is buying a lot within a new construction development. Many new construction developments are built by the same builder and can vary from a few dozen lots to a few hundred. In these new construction developments, a buyer is often required to use the builder who owns the lots.
The other option for new construction home buyers is to purchase a stand alone piece of land and have a home built on the land. This option is attractive for many buyers because the builder can be chosen by the buyer and doesn’t have to feel forced to use a builder who owns the lot.
Negotiate The Best Price, Terms, & Features
Once a buyer determines where and who will build their new home, it’s now time to negotiate the details of the build. When buying a new construction home, determining how much to offer a home is significantly more complex than buying an existing home. It’s not as simple as determining the offer price, closing date, inspections, and personal property that’ll be included in the sale.
When negotiating the purchase of a new construction home, a buyer and their Realtor® must be creative in negotiations. During the negotiation process of a new construction home a buyer decides what specifications they want in their home, what upgrades they want, what additional square footage they want added, and a handful of other important things.
Negotiating a lower price on new construction is often unsuccessful because many builders feel that if they discount for one buyer, they’re opening up themselves to risk of having to discount for future buyers. Where a new construction home buyer is able to negotiate is with upgrades.
Home builders will have pricing in place for specific upgrades, such as adding solid surface counter tops in the bathrooms. While some builders will indicate that the prices are set prices, in most cases, there is room for negotiations on these prices. Other things that new construction home buyers should consider negotiating include appliance budgets, window covering budgets, and landscaping budgets.
Get Everything In Writing
It may sound pretty obvious, but some new construction home buyers neglect to get everything in writing. Even if it’s something as simple as a builder saying they’re willing to install LED lights throughout the house, make sure it’s in writing.
An experienced Realtor® will make sure that everything that needs to be in writing and signed by all parties is. Buyers who decide that getting everything in writing isn’t important often regret this when the time comes for their final inspection of their new home.
It’s not completely uncommon for a home builder to promise something with the hopes that the buyer will forget or that they won’t be able to legally pursue because it’s not in writing. The bottom line is that everything throughout the new construction process is in writing and is legally binding.
Perform A Home Inspection
There are many obvious reasons to have a home inspection when buying a home that’s pre-existing, but not as many for a new construction home. Just because a home is being newly built doesn’t mean things can’t be missed or improperly built.
New construction home buyers need to realize that having a home inspection is still highly recommended. There are common issues that are regularly found during new construction inspections. Issues such as leaking plumbing, missing GFCI protected outlets, and exposed roof nails are a few of the most common. While it’s not likely major issues are going to be present in a new construction home, having a home inspection on a new build is still suggested.
The municipality in which the new construction home is being built will also perform their own final inspection. Once the municipality has completed their final inspection, they’ll issue what’s called a certificate of occupancy. This documents indicates the property is up to local building codes and is safe to live in.
Complete Your Final Walk Through
The final walk through in real estate is sometimes skipped by home buyers, especially new construction buyers. When buying a new construction home, it’s important to complete a final walk through before signing the documents at closing.
The final walk through is an opportunity to look at the new home one final time before taking ownership. This is an opportunity to make sure the HVAC systems are functioning properly, there are no nail pops, the kitchen cabinets and counters are in good shape, and that everything that was promised has been completed.
Buyers who decide to skip the final walk through and find issues after closing may find it difficult to convince the builder to fix issues post closing.
These top 10 new construction home buying tips are extremely important to be aware of if you’re thinking about building a new home. Building a new home requires a buyer to be very involved and buyers who follow these tips will greatly improve the chance that their experience is not only enjoyable but successful!
Other New Construction Resources
- 7 New Construction Mistakes To Avoid via Michael Roberts Construction
- 20 Do’s & Don’ts of New Construction via Wendy Weir
- Things To Consider While Choosing A Real Estate Developer via Mass Real Estate News
- PROs and CONs of Modular Homes via Bill Gassett
Are you thinking about buying a new construction home in Rochester NY? If yes, you need to understand and follow these top 10 new construction home buying tips. Following these tips will make the process much easier. If you’re looking for a new construction Realtor in Rochester, contact me and I’d be happy to discuss your situation.
About the authors: The above article “Top 10 New Construction Home Buying Tips – Guide For Home Buyers” was written by Kyle Hiscock of the Hiscock Sold Team at RE/MAX Realty Group. With over 30 years combined experience, if you’re thinking of selling or buying, we’d love to share our knowledge and expertise.
We service the following Greater Rochester NY areas: Irondequoit, Webster, Penfield, Pittsford, Fairport, Brighton, Greece, Gates, Hilton, Brockport, Mendon, Henrietta, Perinton, Churchville, Scottsville, East Rochester, Rush, Honeoye Falls, Chili, and Victor NY.
© 2017, Kyle Hiscock. All rights reserved.