TJC Real Estate: Tips For Buying A New Construction Home

Home builders may have an in-house or preferred lender that they recommend. Be mindful as the builder’s lender may not offer you the best rate or mortgage—some builders own their own lending company. There are some builders that will offer attractive incentives to get you to purchase the home, but will require you use their lender to qualify for the incentives. There could be issues by going with the builder’s lender, such as: higher closing costs and higher mortgage rates. Another tip, ask the lender to guarantee the Good Faith Estimate.

Bad news about a local restaurant travels much faster than the good reviews—the same goes for home builders. Take some time to drive the neighborhood and talk to people in the new construction area of the neighborhood to see what they think about the local builders. Ask for the builder that they went with and why. Another route is to check public records for pending litigation or past lawsuits and how the builder responded to the complaints. Check online to see if there are negative reviews about the builder. Many people will post negative and/or positive reviews on sites like: Better Business Bureau, Google, Yelp, Facebook, Twitter, and other review sites and social media.
Visit model homes to see the workmanship and finishes. If you have access to someone that has built houses in the past, ask them to visit the model home with you to get their opinion on craftsmanship. Check with the homeowner’s association (HOA) to learn about rules, amenities, and fees for living in the neighborhood. Visit the developer and/or city planner’s office to see future development plans, so you know how it will affect the property. You can also visit the courthouse to see if there are any liens filed against the builder. Ask local real estate professionals what their opinion is about the builder.

Many home builders will offer a one-year warranty that covers front door to back door (bumper to bumper), which includes almost everything. The catch is that most issues will not emerge until after the one-year warranty on newly constructed homes. Having an inspector may provide you with the opportunity to catch any issues with the home prior to closing, so the builder can resolve any issues before you move in.

A real estate professional can help walk you through every step of the new home construction process. Generally, the builder will pay the buyer’s agent commission, so the service to the buyer is gratis. Builders do not provide a discount to buyers if they do not use a real estate broker—the builder will normally keep the additional monies. Remember, the builder sales associate has the builder’s interest at the forefront, so having an advocate during the building process can help you make some of the major decisions that go along with building a new home. A realtor will provide you with insight on what upgrades to do with the builder and what to do after market. They can offer suggestions about current trends and finishes, so your home is competitive if you should want to sell your home.

Review the standard finishes builders are offering before upgrading countertops and floors. Be certain to create a budget to keep track of costs associated with upgrading carpet, countertops, or floors. Many builders offer granite countertops and hardwood floors as standard options that should be considered. If you can live with some of the standard finishes, then you can budget to spend more in the kitchen, master bath, and/or the finish the basement. As you know, the kitchen and master bathroom are two important rooms for resale value.
Speak to your lender to make sure they will lend on the options and upgrades that you picked. Inquire with the builder to see if you have to pay for items and materials that the builder cannot return to the vendor. Ask the builder if they can decide on upgrades if you miss the deadline for requesting certain upgrades.

Be sure to stop by the sales office before heading over to the construction site. During the day your home site will be buzzing with activity. When you have the opportunity, stop by to take pictures of your home while it is under construction. It’s a good idea to see where electrical, duct-work, plumbing, framing, etc.

Some builders will offer some materials and paint after the home is built. Ask the builder to give you some of the carpet remnants, hardwood flooring pieces, granite, tile, and other leftover materials. They may not oblige, but it doesn’t hurt to ask. Ask the builder to provide you with important paint codes and material manufacturers for future reference.

If you do a walk through prior to closing and notice several items that are not complete, then it would be a good idea to escrow some of the funds, according to Ron Phipps of National Association of Realtors. Explain to the builder that you do not want to close until the outstanding items are fixed or completed. This will provide the builder with some motivation to finish the job.

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