New home construction is alluring…I know this because I have built most of my homes rather than bought existing.
I have also had lots of experience helping my buyers (especially first time homebuyers) get great deals on new construction. There is just something wonderful about picking your own colors, moving walls around to suit the designer within you, and having a home that smells of fresh paint and new carpet and that no one has ever lived in.
Now, more than ever, homebuilders are offering incentives to catch the interest of first time homebuyers and move up homebuyers, but you must be careful not to leave money on the table when you buy a new construction home. Here are some tips:
- Have Buyer Agent representation. The model home agent will be nice and accommodating, but remember they work for the seller. It is their job to protect the homebuilder and even though they tell you they are required to be honest and fair with you…how will you know if they are, they don’t represent you?
- Don’t think the price you are quoted on new construction homes is written in stone. Different builders give discounts that won’t be offered, you need to ask. Your Buyers Agent will know what they are, because, well….that’s what we do… and can most times negotiate a better price for you.
We recently negotiated $20,000 off of the price on a new build home and additionally negotiated $35,000 in upgrades for some clients…they didn’t think they could get that kind of a deal cause the model home agent told them “the price was the price”….
- Check out financing options before you commit. Homebuilders often offer to pay closing costs, give additional upgrades and put your first born through college if you use their lender. And, while that may seem to be nigh on to a miracle (the southerner in me comes out occasionally) to get soooo much free stuff, there is no free lunch.
- Be sure to do your homework on loans (or better yet allow your buyers agent to Help you check it out), and shop and compare. It may be that you are not actually saving anything.
- Sometimes you will find that paying your own closing costs
(or rolling them into the back end of your loan) will save you more money than using the homebuilder’s lender.
- The Builder may not cover All your closing costs , so you might end up bringing more money into closing than you were prepared for.
- Oh, and by the way, those “extra upgrades” can usually be negotiated anyway.
- Beware of Builder’s contracts. Builders, at least here in Utah, get to use their own contracts, so there may be some troublesome clauses that you will not know about unless you read through the whole contract (now be honest, are you really going to do that?). Don’t sign anything you don’t understand!This is where a Buyers Agent comes in handy as well . We have Read the contract, we Know what to look for, and we can Explainit to you so you understand what you are signing. We have been known to have clauses and wording taken out of a contract that allows builders to do things like i.e.
- Continue to market your lot as you are building and if a better offer comes in, you lose out on the lot, the home… And lose your construction fee
- Require you to get “underwriting approval” with their lender in addition to your own (this usually costs you money and is an attempt to get you to use their lender).
- Watch for the extra charges. Most builders will charge you a Per Diem Fine if you don’t close within a certain amount of time (5-10 days) of Substantial Completion.The problem with “substantial completion” is the builders definition may not include the certificate of occupancy which is required by the lender to complete the loan. You could be paying a fine for something you cannot control. If the fine is $50.00 per day, it could add up substantially.
When you use Buyers Agent, you can be assured that We are paying attention to all those details…so you don’t have to, and we go to bat for you if there is a problem. Makes you kinda think we Buyers Agents are here to save the day huh? But…we Are only human (hiding big red S on her chest while smiling slyly).
Til later, ciao!