When homebuilders stop building, inventories of homes for sale dwindle and we end up in a tight sellers’ market. While there are many reasons for the recent slowdown in new home construction (high material costs, unavailability of labor, etc.), there is good news on the horizon: they are building again.
In fact, new home sales increased more than 6 percent in February, which is “nearly 13 percent higher than February of last year,” according to AP economics writers Christopher S. Rugaber and Josh Boak.
That makes this the perfect time to learn the ins and outs of buying a newly constructed home. Sure, a lot of the process is similar to buying an existing home, but, if you’re considering a new home, it’s critical that you understand some of the differences – critical to both your sanity and your pocketbook.
If you’ve ever visited a new home community, you no doubt noticed the fencing that corrals folks to ensure they visit the builder’s office prior to viewing the model homes. The greeter inside this office is typically a licensed real estate agent, employed by the builder or developer. His or her job is to not only let you know all the fabulous features the homes and the community offer, but to peel off those potential buyers who aren’t working with another agent.
While it’s often legal for one agent to represent both the seller (in this case, the builder or developer) and the buyer, and this “dual agency” situation seems like a handy solution for you, be wary. Dual agents are prohibited from representing one party exclusively so you’ll receive only limited representation.
Since the seller is paying for your agent’s services, your best bet is to go into the situation with your own representative. So, when the builder’s agent asks you if you’re working with an agent, let him or her know that you are and you can move on to view those amazing new homes.
Whether or not you should work with the builder’s preferred lender may take some research. Often that lender will be able to save you money on your mortgage but the only way to know for certain is to obtain quotes from other lenders and compare them all.
The initial steps in the house hunt, after seeing a lender, include deciding where you want to live (at the neighborhood level) and in what type of a home. When the neighborhood is brand new, you’ll be presented with several challenges not present when purchasing an existing home. Keep the following in mind when researching homes and communities
As you tour the model homes, unless you purchase identical upgrades, your home will not look anything like the model. In fact, it will be a bare shell, with the least expensive flooring, appliances and fixtures. Find out exactly what comes with the basic home price. With that in mind, you can add upgrades and keep within your budget.
Typically upgrades performed by the builder during the construction process are more expensive than if you hire someone to do them later on. The advantage of having them done during construction, though, is that you can roll the costs into the loan.
Let’s take a look at three of the most popular builder upgrades.
Think about your wants and needs and whether any would be costlier to add once the home is built. Any time a wall needs to be opened you can expect a huge mess that costs lots of money.
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