Tips for Looking at New Construction
New homes may be purchased three different ways: buying a house already built on spec; having a semi-custom home built as part of a development, where you choose from a set palette of finishes and upgrades; or having a purely custom home designed and built to your specifications.
- Onsite agents represent the builder; some are licensed and some are salaried employees. Always state that you have an agent.
- Buyers may get better deals on standing inventory homes than on new builds.
- Research the zoning laws for the neighborhood, as they can change quickly. Visit the city planner’s office to see what is planned for the location.
- Ask the developer about potential HOA fees and rules. Request the HOA bylaws and restrictive covenants. Pay attention to restrictions and find out whether the HOA can assess penalties for violations.
- Research the builder. Check courthouse records for liens, ask subcontractors whether they are being paid, review complaints with the Better Business Bureau, and speak with owners of previously built homes about how the construction has held up over time.
- Look at the builder’s newer construction. Is construction lagging, has material quality declined, or are the newer homes smaller?
- There is always a possibility that a builder may not finish the community or complete promised amenities, so investigate the builder carefully.
- Some builders require owner occupancy. Others sell to investors who may rent the property.
- When choosing a lot, ask the builder to walk it with you. Confirm grading, drainage, retaining walls, usable backyard space, sod coverage, driveway slope, and which direction the house will face.
- Confirm whether cable and internet service are readily available and which companies provide them.
- Compare carefully and make sure you understand exactly what the base price includes.
- Upgrades increase the home’s price and can be highly profitable for builders. Separate wants from needs and consider which upgrades can be completed later for less. Some items, such as pre-wiring for electronics or security systems, may be best installed during construction.
- Choose upgrades early and understand the costs of changes and cancellations. You may be responsible for products the builder cannot return.
- Many builders require upfront payment for upgrades. This money may be nonrefundable if you do not complete the purchase.
- Some builders will choose the upgrades if the buyer does not submit selections by the deadline.
- Builders need to sell quickly but may resist lowering the sales price. You can ask for free or reduced-price upgrades or help with closing costs.
- Before drywall is installed, photograph the inside of the walls so you know where electrical, plumbing, and mechanical systems are located. Measure and record important locations.
- Make the sales contract contingent on a final inspection by an independent professional. Municipal code inspections are not as thorough. When possible, inspect during each building phase while problems are easier to identify. Builder resistance may be a red flag.
- Ask in advance how much earnest money is required, when it is due, and under what circumstances it may be lost.
- Ask for the builder’s warranty in writing and understand its duration, coverage, exclusions, and insurance backing. Consider having a real estate attorney review it.
- Builders may prefer their own lender and may have a financial relationship with that company. Compare terms carefully. If you use the builder’s lender, ask for written guarantees regarding quoted costs and terms.
- Ask whether the lender will finance all selected upgrades and options. Any amount not financed will need to be paid in cash.
- If the contract warns about health issues, investigate them. Ask about potentially hazardous materials and check public records for lawsuits involving the builder.
- Ask whether any commission is based on the completed price of the home or only the base price before upgrades and additions.
- Review the contract for a builder exit clause that may allow the builder to terminate the agreement.
- Review construction phase and completion deadlines. Understand what happens if the builder misses a deadline.
- Confirm any builder limitations or guidelines affecting your right to inspect and walk the property.