Raleigh - Cary Home Reviews & Market News!: Surving New Home Construction - Top 5 Tips for Buying a Newly Built Home

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Surving New Home Construction - Top 5 Tips for Buying a Newly Built Home

In today's Real Estate Enviroment, Buyers tend to be more cautious than ever.  Purchasing a home whether new or a resale is a very big deal.  It's more important than ever to have someone who knows the market and what's going on represent you.  This article came across my desk this morning and is certainly worthy of sharing. 

new construction home 

For Your Clients: Top 5 Tips for Buying a Newly Built Home

 

By Dan Steward

RISMEDIA, November 17, 2010-Newly built homes, often in recently developed communities, are regaining popularity and are more affordable than in years past. New homebuilders are using desirable, open floor plans and are helping buyers get into new homes despite the nationwide credit crunch.

As with any major transaction, it's critical that the buyer enter the home purchase fully informed and educated. Follow these important tips in a new home transaction to ensure that the outcome is a success.

1. Choose a Realtor Who Has New Home Sales Experience
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, which would be worthwhile since a strong Realtor negotiating on your behalf can save you thousands more than the commission.

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.

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.

2. Carefully Evaluate the Seller's Lender before Committing
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. However, a builder's lender might not offer you the best deal. This is particularly true if the builder actually owns the lending company.

Builders will offer huge incentives to get you into your new home; sometimes up to 15% of the value of the home. However, they will often put one big stipulation on those incentives - that you use their lender. There are many problems that may crop up when you pigeon-hole yourself to one lender - higher rates and higher closing costs are the two biggest.

Ask to see a copy of your credit report and FICO cores. You can also 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. Reputable lenders will honor that request, even though it's not required by law.

3. Check out the Builder's Reputation
If a buyer has a bad experience with a builder, word spreads rapidly throughout a community. However, accurately and fairly assessing a builder's history is the appropriate path-check public records for lawsuits or complaints and evaluate their resolutions.

Talk to the neighbors and scrutinize the construction quality of surrounding homes. Is the builder consistently building same-sized or larger than existing properties, or are homes shrinking in size, which could reduce neighborhood value?

Learn if the builder limits investor purchases - this ensures that the neighborhood doesn't turn into a "rental" neighborhood, which may appear less well-maintained and reduce property value.

4. Hire a Home Inspector
Many people who buy new construction homes don't bother to get a home inspection. Most new homes come with a one year "bumper-to-bumper" warranty that includes everything, and many home buyers feel that they can find out if there are any construction flaws during those 12 months. The problem is that many problems won't surface until well after the 12-month warranty has expired.

If the inspector calls for further inspection by another professional contractor, find out if the inspector is telling you there could be a serious issue or if the inspector isn't licensed to address that issue.

An inspection provides education about the property, and offers the validation of a trained, independent third party assessment of the structure and systems.

5. Obtain Legal Advice before Buying a Brand-New Home
Before you sign a purchase contract, talk to a real estate lawyer. Standard purchase agreements are designed to keep everybody out of court, but they don't necessarily contain language that protects the buyer.

Ask questions about removal of contingencies and your cancellation rights. Make sure you understand your liability and commitments.

Find out if the materials used by the builder contain chemicals that are hazardous to your health. If your contract contains a warning about health issues, it's probably because it's a valid concern and other buyers have gone to court over it.

Dan Steward is president, Pillar To Post.

Compliments of RIS Media

 

Buyers with Realtor

I just want to mention there are many wonderful builders who build excellent homes.  However, there are many reasons to use a Realtor to help you navigate the purchase of a New Home whether it is being built from the ground up or already standing.  Often, a Realtor can save you money, help you make those tough decisions, and manage the process for you.  For more information on why you should use a Realtor for a New Home Purchase check out these articles and blogs:

Top 10 Reasons to Hire a Real Estate Agent

Why Use a Real Estate Agent When Buying a New Home

Buying New Construction Home...Why Use a Realtor?

Realtors Offer Advantages When Buying a New Home

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Comment balloon 8 commentsCarla Freund • November 17 2010 08:57AM

Comments

Carla- buyers should always have good representation, especially when buying new construction.  The builders' agent represents the builder, and although it's not a license to lie, negotiating will proceed in favor of the builder if there is no buyer representation.

Posted by Susan Morrison (RE/MAX Executive Realty) over 7 years ago

Good Morning Carla, very good points in the post for new home buyers to consider.

Posted by Dan Edward Phillips, Realtor and Broker/Owner (Dan Edward Phillips) over 7 years ago

Hi Carla, Good article and good advice to new home buyers...good luck...

Posted by Brin Realty Associates Team At Bean Group, Amherst NH homes and Southern NH real estate (Bean Group | Brin Realty Associates) over 7 years ago

A Buyer should always consult a REALTOR before buying a house (be it new or old), a condo, land, investment property, etc.  It has nothing to do with Builders, new construction, or builder agents.  A Builder provides us all with a product to sell.  A 'New' House and a 'Resale' should be treated the same in a real estate transaction. 

Posted by Denise Roberts, e-PRO, REALTOR - Specializing in Pinehurst, NC Area (New Colony Properties, LLC) over 7 years ago

Susan - You're right.  I've met some of the friendliest people who are on-site agents.  I've also found many times builders and/or on-site agents prefer buyer's have their own Realtor.  I sell some new construction and I know we prefer a buyer have a Realtor.

Dan - so nice to receive your pleasant comment.  Hope you're having a wonderful day.

Posted by Carla Freund, Raleigh - Cary Triangle Real Estate 919-602-8489 (Keller Williams Preferred Realty) over 7 years ago

Hi Rene- Thank you and good luck to you as well.

Denise - Yes, I couldn't agree more.  I wanted to specifically address new construction because many buyers don't know they can use a Realtor or don't realize how valuable a Realtor is to the transaction and to their bank account.

Posted by Carla Freund, Raleigh - Cary Triangle Real Estate 919-602-8489 (Keller Williams Preferred Realty) over 7 years ago

Carla...We don't have that issue down here.  Most Buyer's use an agent when purchasing 'New' & 'Resale'.  Every market's different, right?!  Even if we're only an hour apart.  You probably have Builder's up there that build multiple homes at a time (large tracts).  It is very different down here.  The Builder's are small and they usually only build one or two at a time.  We don't have large subdivision's where there is a Builder's Rep. on site.  Take Care!

Posted by Denise Roberts, e-PRO, REALTOR - Specializing in Pinehurst, NC Area (New Colony Properties, LLC) over 7 years ago

Denise, Thanks for the info.  Yes, it is different here.  We do have large national builders who build large neighborhoods.  We also have small builders.  Some of the small custom builders do have agents who sit at the house but, not all.   The large National builders serve their purpose.  They help people in lower price points get into a home.  A lot of our custom builders work in a higher price point until you get into the rural areas.  In rural areas you will find custom builders who build homes in a lower price point.  And there are always exceptions as well.  Have a wonderful evening.

Posted by Carla Freund, Raleigh - Cary Triangle Real Estate 919-602-8489 (Keller Williams Preferred Realty) over 7 years ago

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