New Home Buying Tips

New home buyers don’t want a used house when only new will do. They don’t want to inherit somebody else’s worn carpeting, personal taste in kitchen appliances or look at some kid’s initials scrawled into once-wet cement that they didn’t put there. The home must be brand spankin’ new, fresh and clean without so much as a finger print on the walls.If this describes you, and you have always fantasized about buying a brand new home of your dreams, here are a few tips that can help you to protect yourself — to make the process a pleasant experience.

Hire Your Own Agent

  • 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. Due to the high volume nature of brand new home sales, lots of builder’s agents are paid less than a traditional commission; some earn a salary plus incentives, so turnover is important to their livelihood.
  • 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. Even if you have to directly pay your agent, you can probably add that fee to the sales price, and it would be worth it because a good negotiating buyer’s agent can save you thousands more than the commission.
  • 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

  • While most builders have excellent lenders “in house,” keep these points in mind.
  • Builder’s will often times tie large incentives to using their lender, such as, paying for X amount of closing costs, crediting design center incentives, and so on.
  • 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.
  • 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.
  • Ask to see a copy of your credit report and FICO scores. You can order your own free credit report before shopping for a new home.
  • 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.

Verify Option and Upgrade Pricing

  • Determine which options and upgrades you want. Bear in mind that for many builders, the profit margin is highest in upgrades. Some builders can sell a home for almost bare construction cost because they make the bulk of their profit in the upgrades.
  • 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.

 

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Why Buy a New Home v. Resale/Short Sale

Let’s be honest, in today’s market, there is a lot to choose from. The resale market consists of many types of transactions including, short sales, foreclosures, REO’s, just to name a few. My biggest piece of advise…. don’t limit yourself to resales!!!

Purchasing a new home from a builder is one of the most overlooked and secure types of real estate transactions in today’s market. The main reason? The average buyer believes that he or she can get a “better deal” on a short sale or foreclosure because they are being sold “under appraised value.” That is possibly true, but at what expense to you? The house is ALWAYS as-is, the closing is NEVER certain, and it will usually take AT LEAST 6 months. You are planning your life, for 6-8 months, around an uncertain investment. For what? To get your home $10-15k under appraised value? A builder will gladly give you that.

5 things that a new home offers, that a resale does not:

1. A warranty- ALL new homes come with a warranty, most for up to 10 years after                                       purchase. This includes, among other things, electrical, plumbing,                                           heating and A/C, and, most of all, structural problems. And the things                                   that may not be covered by the builder ie. appliances, are brand new                                       and covered by the manufactures warranty.

2. Options—- This one is simple. Pick what you like, not what the previous                                                     homeowners likes.

3. Closing Costs and Incentives- Builders are in the business of getting homes sold                                        and closed, and that means doing near anything to do so. You MIGHT                                    get some closing costs paid by a resale. But, you WILL get them paid                                      by a builder. They also ALWAYS have some other incentives that they                                    are able to give.

4. Financing Options- Most builders will have their own mortgage company. This is                                   a huge advantage to you! They can often times “buy down” to a lower                                     interest rate, which will lower your monthly payment and/or get you                                     qualified. They know that they aren’t dealing with a bitter seller, that                                     might cause them trouble. THEY ARE THE SELLER! They want to                                         close just as bad a you, and will do anything to do it!

5. A GREAT DEAL- As I said before, they want to sell and close homes. A lot of                                           builders have shareholders that care about CLOSINGS, not necessarily                                   that profitability on each home. Don’t get me wrong, they make                                               money, but they would rather break even and get another closing, rather                               than get no sale at all. You just have to know where they can bend with their                         numbers.

Summary: New homes are usually a more sound investment for home buyers. They come with warranties, so no surprises later. The builder will bend over backwards to make sure you close ON TIME. They offer financing options that other banks CAN’T.

Don’t go at this alone, hire an agent with new home experience to help. Builders factor in the fact that they are going to pay a real estate professional on every home, and it is factored in to their annual marketing budget.

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