Considering New Construction? Read This First!

Considering New Construction? Read This First!

Description: E:New Construction_filesinvis.gifThere are extreme differences between purchasing a resale home and buying a new construction home, and this valuable information can help guide your way.

·       1.   Use your own Broker/Agent.  In many instances the agent you deal with at the sales office or model home represents the builder’s interest - - not yours.    Often in their sales contract it states that the agent onside represents the builder.  You absolutely should have your own real estate agent representing your own interests.  It doesn’t cost you anything, and can save you trouble and money.             

·       2.  Recognize that the builder cannot make much in price reductions.  The builders have established a set of prices that they feel best makes their home marketable with an expected profit margin.  Lowering the price on one home drops the comparable value of the other homes in the community, bringing an entire set of homes down in price.   If you are represented by an agent experienced in negotiating such as the Magic Real Estate Team, they will help you negotiate in the form of builder concessions of additional upgrades for no cost or for less money. 

·       3.  Recognize that builder incentives in the form of interest rates and reduced closing costs may not be coming from the builder.    Often their preferred lender has negotiated with the builder to provide lower interest rates or closing costs in trade for a particular number of loan transactions.

·       4.   Allow your agent to help you look past the beauty of the new home and concentrate on value and quality.    Our client Chris loved the online photos of the new construction of one company.  When we took him to see the actual construction in process and pointed out serious shortcuts that particular builder was making, he realized that he could have made a very serious mistake in allowing that builder to build his dream home.   Good agents like the Magic Real Estate Team are familiar with new construction and will guide you to look at quality and value of the new construction.

·       5.  The floor plan isn’t the floor plan.  The little floor plan you see when viewing your potential home at the builder site is not an exact representation of what your home might look like.  Room sizes are close estimates, but usually measurements are rounded.  Sometimes your chosen particular lot requires modifications in order to fit the home properly. 

·       6.  The difference in construction on community sites and building a custom home should be recognized.  Community sites are where several homes are being built by the same or a group of builders based on a preapproved set of plans that have already received a stamp of approval by the local building authorities. In a custom home situation, your set of plans can be modified prior to construction or even during the construction process if you agree to pay the extra associated costs.  In preapproved communities, in general fewer options for modification are allowed, as changes increase the builder’s time and cost.  Changes to floor plans, even something as simple as adding extra outlets, must be included in the particular permit and approved, which can involve new drawings and repeated permit processes.  If you do want to make changes, be absolutely certain you’ve worked it out as part of your purchase contract.

·       7.  Expect to use the builder’s own contract and addendums and not a standardized form.  Never sign anything without reading and having your agent go over the contract with you in order to protect your interests.  

·       8.  Expect changes, and use Change Order forms.  While everyone starts out thinking about all of the choices to be used in their custom built home, suppliers may run out of or change products, or prices change, or you might change your mind in the process.  Builders typically reserve the right to substitute materials and finishes, sometimes leading to surprises.   Make choices early in the build, and ask about the things that a builder might substitute.  Use written change orders for all changes that require signatures and make certain your agent reviews the changes before you sign documents.  Be aware that changes can cause delays.

·       9.  Anticipate the number of days until completion of your home.  After the permit and lumber drop, depending on the square footage, weather, and construction materials, the home may take four to six months for completion.  Every builder, city, county, all have different time frames that historically work for them when completing a home.  As part of your pre-sale purchase, the builder or builder’s representative will provide an estimated date of completion for the building of your new home.  It is important to remember is that the estimate is just that - - a projection of when the home will be complete and ready for occupancy providing everything goes according to plan. 

·       10.   Be careful when walking your home site during construction hours.  In some cases your purchase contract might state you cannot visit the site without making an appointment with the seller’s representative.    If you visit your home during construction, you must not disrupt work flow.  If you have any concerns about the work, you should call your agent or the builder’s agent and not discuss it with the workmen themselves.  In fact, it is recommended that you be very nice to the construction foreman if you run into him/her, because you want them to be your advocate.  Be very careful of the hazardous conditions of construction sites.  Many sites will require a hard hat to be worn.

·       11.  Include your Broker/Agent in every walk-through and meeting with the builder, and include them in email conversations.  Some builders try to restrict agent attendance, however in our experience you will want an extra, knowledgeable set of eyes and ears to help things keep on track. 

·       12.  Bring your camera on all visits to the site.  Take plenty of pictures during the construction process, so later you can look back to remember the home construction process.  It is handy to later look back and know what is approximately behind certain drywall.  And it is fun to look back at the photographs of the home coming together.

·       13.  Have your own home inspection done prior to closing on the home.  Your agent will make certain that your purchase contract allows you to bring in a qualified home inspector to test the various workings of the home.   While each step of the build process has been inspected by not only the foreman in charge of your project, but also by the local building inspector, it is important to have your own inspection done by a qualified home inspector that has your interests at heart.

·       14.    Make certain you keep up with your paint and other color choices, material choices and vendor information, so you can match it later when accidents happen.  Most builders will put together a box of touch-up paint for you as normal practice, and most will itemize vendor information in their contract, but you will want to keep all vendor information where you can access it.

·       15.  The final walk-through at closing is not final.  Be certain your Broker/Agent is with you on this important walk-through.  A good agent will help you prepare and negotiate the punch list of items that the builder must still address after the closing.    Also be aware that there is no such thing as perfection in home construction. 

·       16.  The Certificate of Occupancy is often the final step before the builder releases the home to you.    This involves a signature on the final inspection by the city or county building inspector that allows the home to be occupied.  When obtaining a loan, in most cases the lender is going to require the Certificate of Occupancy in order to close. 

·       17.  Welcome to move-In day.  There is nothing like the excitement of moving into a brand new home in which you have made all your own choices.  On the day before the furniture arrives, buy a roll or two of clear tacky carpet protector or paper to cover the walking paths on the rugs and floors so that you and the movers don’t leave tracks on the new carpet of your new home.  

True Story:  Rob and Sandy were building their dream home in a beautiful subdivision.  They had taken a second mortgage on their current home, and paid the builder for thousands of dollars worth of upgrades.  Then the sale of their own home fell through.  They found out that in their contract for the new home they were not protected against such a circumstance, and they could lose the thousands of dollars they paid the builder in advance if they could not get their home sold within three weeks.   What Rob and Sandy did not know was that their own interests were not represented when they signed the contract to purchase the new home.  What they did not realize, and what you should know:

  • The agent you deal with at the sales office or model home REPRESENTS THE BUILDER'S INTERESTS - - not yours.
  • You absolutely should have your own real estate agent representing your own interests.  IT DOESN'T COST YOU ANYTHING, and can save you troubles and money.

Two good agents run the Magic Real Estate Team, and can be reached at 770-653-0756.  We have had tons of experience in dealing with new construction all over North Fulton, Cobb and Cherokee Counties. 

By the way, when the sale fell through on their home, Rob and Sandy hired the Magic Real Estate Team to sell their home in time to close on their dream home.  The Magic Real Estate Team found a buyer in time.  Even though they did not represent them in the purchase of the new home, the Magic Real Estate Team took a look at the construction and recommended that Rob and Sandy hire a home inspector.  The home inspector disclosed a crack in a supporting beam that could have been disastrous, and the builder corrected the problem.  And Rob and Sandy and their children lived happily ever after.

Another True Story of New Construction

Kyle and Leigh bought a new home in Alpharetta, using the agents at the sales office.  Less than two years later Kyle was transferred to Texas and hired the Magic Real Estate Team to sell their home.  It was under contract in 29 days, but when the buyer's inspector came in he found a list of repairs that totalled $1500 - - all repairs that should have been handled by the builder when the home was built - - plus a serious electrical code violation that could have resulted in fire!  The Magic Real Estate Team persuaded the builder's electrician to correct their error at NO CHARGE.   If the Magic Real Estate Team had represented Kyle and Leigh on the original purchase, the repairs would most likely have been caught at the onset and the client would have saved $1500.

How important is good representation when you buy a new home?  The lack of it cost Kyle and Leigh $1500, and could have cost them their lives!     If you learn nothing else on this site, please recognize that you need your own professional representation when you buy a home, NEW or USED.