Buying a new home entails an entirely different set of issues than buying a pre-owned (existing) home. You have access to more information on the building materials and systems than you do on existing construction and as a subsequent buyer, but unknowns lurk, including: What will the completed neighborhood look like? Will it include all the features promised in the brochure?
Bottom line: Buyers need to research a different set of questions before making an offer on a new home.
If you’re vowing “out with the old and in with the new” as you shop for a home, here are six tips to help you make a smart buy.
Get a Realtor and One Who Has New Home Sales Experience
Your first step before even looking at new homes in a builder’s neighborhood is to get a real estate agent. As the buyer, you pay nothing to the agent, and the agent is paid by the builder (as the builder will tell you, if you don’t have a real estate agent the commission they would have paid the Realtor is simply rolled back into the builder’s marketing budget and they will not reduce the cost of the home for a buyer who elects to represent him or herself). Having an agent is this case is free for you, and you benefit in the form of professional representation and the considerable knowledge that real estate agent brings to the table. Seek out an agent familiar with the area and one who specializes in new builds before proceeding with any discussions with builders.
** TIP: As an added benefit, if you have a home to sell and agree to buy and sell with your buyer’s agent, they may offer to reduce the cost of listing your current home, thus resulting in additional savings.
Once you have a Realtor on your side, let he or she handle as much of the discussion as possible. Builders like to deal with inexperienced consumers. Real estate agents know how to handle the builders on your behalf and if there’s wiggle room, the agent will help you find it.
The builder’s sales agents are paid to represent the builder, regardless of what they may tell you. Many will use high pressure tactics to persuade you to sign the contract.
Your own agent will represent you, act as your fiduciary and 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 as hard bargaining goes out the window once you’ve emotionally already left your home.
Contact us and ask about our discounts for homeowners looking to buy and sell with us!
Custom Features
You love the house, except for the wallpaper in the powder room, or the carpet in the den.
With an existing home, alterations are often negotiated with the seller. That can be uncomfortable. But with a new home in an unfinished neighborhood, you often have the ability to make selections, but even if these selections have already been made, the labor and materials are still on site and you might be able to persuade the builder to change a few things before you move in.
Most builders are flexible and provide a greater range of choices in things such as appliances, flooring and paint — “the kind of choices that didn’t exist 10 years ago and weren’t common five years ago.
TIP: If your changes aren’t finished by the time you close, “it’s probably a really good idea to escrow some money” so the builder has incentive to do the work in a timely manner.
More Options When It Comes To Financing Your New Home
Builders often have relationships with local banks and, as a result, may be able to offer special financing options.
While you still want to get preapproved with a lender of your own choosing before shopping for a home, it makes sense to weigh all of your options. You can always try to use the offer of builder financing to drive a better deal with your own lender.
Builders can’t require you to use their banks however, they will frequently incentivize you to do so by offering to pay for closing costs, or to buy down the interest rate on your loan if you agree to work with their preferred lender. That said, buyers shouldn’t automatically assume that builder-arranged financing will be a better deal and you should always shop around and compare terms.
Pricing The Benefits
While buyers have become accustom to being in the driver’s seat when it comes to pricing on previously owned existing homes, this doesn’t necessarily apply to new construction. While this price pressure certainly affects how builders price their new homes, buyers need to realize that in most instances builders have already factored much of this into their pricing. While the cost of existing homes has come down in recent years, for the most part the cost of land, and the materials that go into the construction of a home has not.
With a new home, you’re starting fresh, with a product that has an economic life that is longer, and one that you get to personalize. In addition, you also get the latest in technology and systems which translates to less maintenance, and lower property insurance costs, but there is a cost to all of that.
Where you’ll also likely save some money and make up the additional expense associated with buying new is on your utility bills. New homes feature energy-efficient building materials, appliances and systems all of which equate to lower power bills which will quickly offset the additional expense incurred when buying new.
Buyers can usually get a pre-owned home with the same square footage and number of bedrooms and bathrooms for less money than a new one, and if you’re not as concerned about customizing a home, or if you don’t plan on living in the home long enough to offset the additional cost of buying new, existing may be the better option for you.
Builder Warranty
A warranty often means the builder will come back and fix problems, you’re not going to have the same level of coverage with an existing home.”
Warranties vary widely, so read the fine print. It is recommended that you find out exactly what that warranty covers, the remedies it offers and how long it’s valid.
Typically, warranties run from as little as one year to as many as five years, he says. It’s as important to understand what the warranty doesn’t cover as it is to know what the warranty covers.
It’s critical to know who backs the warranty, it might be the builder, or it could be a third-party company.
Arbitration Clause
Some builders include arbitration clauses in contracts, in which buyers give up their rights to file lawsuits. Instead, buyers have to use a dispute resolution process designated by the builder.
Not all builders use arbitration clauses, find out if it’s in the contract.
While arbitration can be a quicker and less expensive way to solve problems for buyers, much depends on how the arbitration is handled and who picks the arbitrators. Check the track record of the arbitration company if one is specified. Does it have a reputation of being consumer-friendly? Also, make sure you can seek arbitration in your own city or state.
If you don’t favor arbitration, you have several choices. You can choose another builder, buy a pre-owned home or ask that the arbitration clause be removed from your contract. For the most part, all the provisions in that contract are going to be negotiable.
Amenities To Come? Ask For It In Writing
If you’re buying in a community built around certain amenities — such as a pool, golf course or tennis courts — that’s part of the value of your purchase. If the amenities are still on the drawing board, do a little due diligence if you’re banking on their completion.
Anything that involves new construction or phased development means you’re at risk of the developer running out of money.
Many municipalities require builders to post bond for yet-to-be-built shared amenities. You can find out if this has been done by asking the local building department, an agent you trust or an attorney.
Buyers are encouraged to google the builder and to visit the builder’s other, previous developments. If the neighborhood requires dues, find out who picks up the tab for unsold or undeveloped property in the community.
If you, or someone you know is considering Buying or Selling a Home in Columbus, Ohio please give us a call and we’d be happy to assist you!
The Opland Group Specializes in Real Estate Sales, Luxury Home Sales, Short Sales in; Bexley 43209 Columbus 43201 43206 43214 43215 Delaware 43015 Downtown Dublin 43016 43017 Gahanna 43219 43230 Grandview Heights 43212 Galena 43021 Hilliard 43026 Lewis Center 43035 New Albany 43054 Pickeringto, 43147 Polaris Powell 43065 Upper Arlington 43220 43221 Westerville 43081 43082 Worthington 43235
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