New Home Construction
Guidelines in New Construction Purchasing

New homes offer a lot of advantages. The biggest and most obvious benefit is having a homebuilder create a home to your specifications using his floor plans or your own. Many new home builders construct your dream home on your lot while others build in planned communities. The key is to find the right builder for you.

Hire Your Own Agent

Hire a Buyer's Agent to represent you. Most of the time, your agent will be paid by the seller, but sometimes the responsibility for the agent's fee is open for discussion. Your own agent will represent you, be your fiduciary and is required to disclose the positives as well as the negatives about the transaction. Builder's agents don't discuss drawbacks.

If your contract contains a contingency to sell your existing home before buying, again, hire your own seller's agent to list your home. Be aware that buying before selling is not always in your best interest because hard bargaining 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. In some cases, the builder may own the lending company.

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.

Shop around and interview your lender. Find a banker or mortgage broker whom you can trust and with whom you feel comfortable doing business.

Insist that your lender guarantee its Good Faith Estimate. If the lender balks or makes excuses, go elsewhere, because reputable lenders will honor that request, even though it's not required by law.

Investigate the Local Area

If you have children, find out what school system the area is zoned for, and what growth rate is expected. Some areas receive so much new development at one time that the schools have to be rezoned to accommodate all the extra children.

Find out if there are other construction plans in effect for the area. You might love the wooded backdrop only to find out later that they are building a strip mall there.

Verify Option and Upgrade Pricing

Be aware that the advertised "starting at" price of new construction homes usually includes little, if any, upgrades. The model homes that builders show prospective buyers usually have many upgrades. The actual price you will pay for a new construction home will most likely be more than the advertised price if you include any upgrades. Be sure to ask what features are included in the starting price, and what is extra, when you're touring a model home.

Remember that new construction homes come with white walls, no window treatments, and no accessories or shelving. While this may be a dream come true for the interior decorator homeowner, it may also be a hassle for a buyer without the time or extra money it takes to plan these small details.

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, DSS 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.