There is a large sector of the home-buying market that is preferring to buy new construction versus pre-owned homes. At least in our area of lower Alabama, we are seeing the demand continue to increase, which is prompting builders and developers to look for more land to erect new subdivisions or find empty lots in existing neighborhoods.
Through constant research on this topic I found that in Baldwin County, there are nearly 100 neighborhoods with new construction homes. That’s really amazing to me because even though our county is large by land mass, our population is only about 210,000 as a whole.
Because there is so much interest in purchasing new construction, I wanted to share some tips that relate to the builder, the home or neighborhood, and costs. Let’s go!
Determine Your Needs
Before you even sit down with a builder, establish what you need and how much you can afford. This is helpful in choosing a builder because you don’t want to work with a builder who typically builds $800,000 homes when you have a budget of $250,000. The higher-end builder is accustomed to using higher-end materials, so you may not get other things that you need like more square footage.
Compile Your List
Unless you already have someone in mind to build your home, you’ll need to gather some information. Ask around. Get some recommendations from family, friends, and colleagues. Read some local building publications. Go online. The easiest way is to just Google “Home builder in (your city)”. You’ll want to find out how busy they are, if they communicate well with you, and will their timelines match up with yours.
Buying a new construction home is exciting, but it has a lot of moving parts. You’ll want to find the best builder for you. The better the builder, the smoother the experience.
Google the Builder
Typically, buyers find their next home online and don’t have a clue who built it. With new construction, it’s fairly simple to find this information out and within a few keystrokes you should be able to get an idea of what kind of reputation a builder has. Just like we wouldn’t go to a restaurant who has a bad reputation, the same thing goes for where you’re going to live for years to come.
Every builder had to, at some point, build their very first home. You’ll have to decide what kind of experience you’re willing to live with (literally). We have builders in our area who have been in the business for 30 years and others for only about 5. The builder with 5 years, however, puts out a very fine product and has become extremely popular in our area.
One of the best ways to get an idea of the quality of work that a builder produces is to see it in person. There’s a problem with this though. Unless the builder is part of a major development, there probably isn’t a model home to see. Ask the builder if they have any projects going on where you can see their craftsmanship for yourself. A lot of times there are liability issues with going into incomplete homes, so don’t get too excited unless the home is nearly finished.
At the very least, you could ask for a couple of addresses of previously built homes so you can do a drive by.
Most new construction comes with a 1-year warranty on the workmanship of your home and a 10-year warranty on the structure. Some builders may even do better than that. Look into this to know exactly what you’re getting before you commit. Tip: The details of the warranty should be in writing in your real estate contract and signed by both parties.
You should also receive manufacturer’s warranties for your kitchen appliances, HVAC, washer/dryer, and water heater.
So you do all this research on the builder then find out that they are never onsite but have someone else overseeing construction. I guess this is fine because the builder’s reputation is on the line, but this may be something that you ask about. How involved is the builder in the actual construction of your home?
Establish a Time Table
There are a lot of elements that can hinder the construction of your home, like weather, contractors not showing up, and materials arriving on time. However, your builder should be able to give you an idea of when the home will be complete. Trust me, the builder wants to complete your home as much as you do, but it’s a good idea to narrow it down within a couple of weeks.
Where will you live during construction? If you’re renting, can you rent month to month? What would happen if construction took a month longer than expected?
Have Your Own Agent
It really is an honest mistake that most people make when they walk into a model home and use the resident real agent to buy a new home. Tip: It’s a mistake because most people don’t realize that the agent in the model home works for the seller, who is the builder.
In a real estate transaction, there are obviously two parties: the buyer and the seller. Well, it’s impossible for a Realtor to represent the best interests of both parties. What works the best is to have the listing agent represent the seller and a buyer’s agent represent the buyer. This is typical and common practice. I know it’s exciting to walk into model homes to see what’s available; just make sure to have your agent with you before you sign anything. Better yet, have your agent with you whenever you go to see a new construction home.
Analyze All Available Floor Plans
All of our families are different and our needs vary. A good and proactive builder will sit down with you and listen to what floor plan would work best for your family. Do you prefer all of the bedrooms on the same floor? Would you prefer the master bedroom to be as far away as possible from everything else? Do you need a formal dining room? Tip: Take some time with this one; you’ll be living with it for a long time.
Get a Copy of the Homeowner’s Association Docs
Most new construction neighborhoods today will have some kind of HOA. You may not even want to consider a home that has an HOA, so that could be another concern. However, if it’s no big deal, you should absolutely get a copy of their covenants, conditions, and restrictions. I always write into an offer for my clients that the offer is contingent on the buyer agreeing to the content of the HOA documents.
Although most HOA restrictions are reasonable, you may find something that doesn’t fit into your lifestyle. For instance, some neighborhoods only allow a certain style and height of fence. Others may not allow sheds.
Also, make sure that you have a clear understanding of the HOA fees. Most of the time, you’ll find that they’re reasonable but you need to know exactly what you’ll be spending monthly before you sign the dotted line.
Find Out What Features Are Standard
This is also mentioned later in the article regarding costs, but many buyers of new construction think they are buying one thing but end up getting another. When you get to the point of actually writing an offer, make sure that you have in writing what features of the home apply to you. Here are some examples of possible upgrades in a new construction home:
- Brick exterior
- High-performance doors and windows
- Tray ceilings
- Solid core interior doors
- Built-in cabinets
- Crown molding
- Higher-end appliances
- Upgraded hardware for cabinets
- Stone/granite countertops
- Wiring for surround sound
- Extra electrical outlets
- Hardwood floors
- Tiled showers
- Jetted tub
- Double vanities
- High-efficiency HVAC
- Fixed gas connection for grills
- And much more
Tip: Just know exactly what you’re getting and make sure it’s in writing and signed.
Can you make changes once construction has started?
For custom homes, this happens all the time. Most of the time, builders will accommodate you if you want to make an upgrade, as long as they haven’t already started the work or ordered the material.
For instance, if your contract says that you are supposed to have white kitchen cabinets but you have changed your mind to maple, the builder can probably do this as long as the cabinets haven’t been ordered. Of course, they’ll include a change order addendum for the difference in cost.
As with any home, you should always consider how difficult it will be to sell your home in the future. New construction can have its own allure, but don’t let that blurr the lines for resale. Your Realtor can give you a good idea using past sales, typical days on the market, and how popular an area is. As much as you love the home now, always look at the whole picture.
What’s the Future of the Community?
Depending on how large the overall neighborhood is, some developers build out in phases. While there may only be a few dozen homes now, the final product may include 300 homes. That’s not necessarily a bad thing but if the size of your community is important to you, just ask.
Get a Home Inspection
Yes, you heard me right. Always, always get a home inspection whether it’s new construction or not. This tip may sound like a waste of money but it’s not. People sometimes make mistakes and this includes the builder, contractors, and even the city inspectors.
Chances are the brand new home will get an A+, but you will have an additional layer of peace of mind.
Even though you’re purchasing a newly constructed house, you still want to have a final walk-through before going to the closing table. Usually a couple of weeks prior to this, the home will be complete and the contractor will go through the home, making what’s called a “punch list”. Here are some items that will be checked:
- Plumbing/all faucets
- Hot water and pressure
- All light switches and outlets
- Heating and air conditioning
- All appliances
- Gouges/holes in the walls
- Flaws in painting
- Cracked tiles
- Roof shingles and siding
- Gutters and downspouts
The Final Walk-Through is important to make sure that all of these items on the punch list were completed. Tip: Be sure to schedule the Final Walk Through at least 12 hours before you close to give the builder plenty of time to correct any problem issues that were missed.
Get Copies of Everything
Not only will you need copies of everything that you sign but you can also request copies of your floor plan, blueprints, and the survey of your lot. Those are nice to have now, but they will be very helpful whenever you decide to sell in the future.
Ask How Much Without the Upgrades
Most model homes are filled with the finest furnishings and “top shelf” flooring, countertops, and appliances. This is great to give you an idea of what the home is capable of looking like using all of the higher-end materials. When you visit a model home, get the price for a home that is all “decked out” and also get the price of the home using the bare essentials. Chances are the two prices will be dramatically different.
Find Out If There Are Incentives to Use a Preferred Lender
It really depends on your local market whether or not you will be able to realize a price that is lower than the asking price. Tip: So, in order to save the most money as possible, ask the builder if they offer any incentives for using a preferred lender. If the builder does have a preferred lender, they may offer to pay some or even all of your closing costs. We Realtors see this quite often with new construction, so it’s definitely worth checking out. I’m working with a client now who the builder will pay $3,000 of their closing costs if they use their lender.
Do Your Own Research for Property Taxes
On a new construction home, the tax assessor hasn’t evaluated what taxes should be owed yet, and the builder may give you a “ball park” figure. To have a clear idea of what you’ll be paying each month, contact the tax assessor’s office. Your Realtor may be able to come close to by looking at homes that are similar to the one you are purchasing.
Additional Resources for Buying a New Construction Home:
20 Dos and Don’ts of Buying New Construction – Wendy Weir
Questions to Ask When Buying New Construction – Bill Gassett
Tips for Buying New Construction – Paul Sian
Do I need a Real Estate Agent to Buy New Construction – Kyle Hiscock
Are you thinking about buying a new construction home? I would love to hear what’s important to you. Let’s talk.