Much of today’s homebuying advice is geared toward people looking to buy existing homes. However, there is another market segment that deserves sound advice – new construction.
Buying new construction can provide you with exciting choices, but the buying process is different and warrants some tips for success.
Find your own agent. Since the seller (builder) typically pays the commission, it costs you nothing to be well represented by an agent. It’s advised that you choose an agent who is not affiliated with the builder and who has your best interests in mind. Look for someone with experience in new construction, the surrounding neighborhood, and, better yet, with the specific builder. This experience and knowledge will come in handy when choosing your options and negotiating your offer. (Note that many builders require your agent accompany you on your first visit.)
Do your research on the builder and community. Many builders have been in the business for years so consider visiting one of their existing local communities and, if possible, talk to the homeowners that live there. Search online for trends in their reviews and lean on your real estate agent for advice on their quality and reputation. Finally, and equally important, check with the city to see what future projects are planned for your local neighborhood. Will the quaint pond across the street be there in 5 years or is another development slated for its location?
Choose your lender wisely. Many builders will encourage you to use their preferred lender, sometimes offering more competitive rates and fees. However, you need to shop around for the loan that’s right for you and your financial situation. (Note that in some cases, particularly in the early phases of development, the preferred lender may be your only option.)
Negotiate well. Frequently, builders will be reluctant to drop their prices as they don’t want other buyers to see lower sale prices. Instead, they may throw in some options, such as upgraded flooring or appliances, and/or paying closing costs. You’ll want to rely on your agent’s knowledge of the builder and their past negotiating style throughout this process.
Study the fine print. With new construction, you’re likely buying a home that is not complete. Your purchase agreement should include a completion date, but what if this date is missed? What are the ramifications and what are your options if the delays are significant. Be sure to talk through this fine print with your agent.
Similar to the process with existing homes, don’t forget your home inspection. The home may be new, but that doesn’t mean it’s safe and up to code. Additionally, make sure you understand all warranties on the home, from the overall structure to individual appliances. Keep these files close by as you may need them in the first few years of homeownership.
*Excerpts from article by Freddie Mac via Economic Focus