The possibility of owning a brand new home has obvious appeal. Many new home buyers have the option of getting the home customized, making the property even more desirable. Additionally, with a new home, you don’t have to worry about all the problems that come with older homes – right?
Not really. In reality, there are a lot of things you need to be aware of when buying a new home, some of them issues that are unique to new construction.
First and foremost, it is important to have a real estate agent representing you when buying new construction to help you ensure that you ask all the right questions. As amazing as it can be to own a new home, it can be equally frustrating to discover that your dream property doesn’t come close to meeting your expectations.
1. Who is the builder and what is their reputation? How long have they been building?
The abilities and experience of the builder will have a significant impact on the quality of the final product. You are spending a lot of money, so you deserve a well-built home. Ask around and talk to several different recent buyers, and maybe even a few other builders or related contractors in the area that will know the work of the builder you are considering. Understanding the builders reputation is one of the most important factors before committing to them.
An important tip when buying a new home:
Take a stab at using Google. Search both the builder’s name and their company name. You should be looking for any negative reviews or other news that may put into question your decision to build with them.
2. What type of homes do they typically build?
Different builders specialize in various types of construction. It makes sense to choose a builder that has a proven ability to build the kind of home you want.
For example, if the builder typically builds economy homes and all of a sudden jumps into selling luxury homes, this is something you may want to think twice about. There is so much that goes into building a luxury home. Building an economy home vs a luxury property are night and day!
3. Do they have other projects going at the moment? If not can you give me some completed project addresses to go look at?
It can be helpful to visit homes they are currently building to see the process they use. At the very least, you should take a look at homes they have already completed to see what the final product looks like.
Checking out other existing projects gives you the opportunity to explore the builder’s craftsmanship. What type of products do they use? What is the level of detail? How neat do they keep their work sites? Does pride show in their work? These are good questions to get answered when building a new home.
4. Who will oversee the construction or my home and who can answer my questions once the building starts?
Just because the owner of the company is experienced and capable does not mean the employees working on your home will be equally capable. There is nothing wrong with asking a few questions about who will be in charge of the building of your home.
You also want to get his or her contact information so you can ask questions when you need to. Lots of builders, however, may not give you their phone number. You will be required to direct all the questions and issues through their real estate agent or building supervisor.
If the building company you are hiring is a large one, it is almost a certainty they will have someone overseeing the day to day operation of their building projects.
5. Are there any special financing incentives for the project?
Many times new home builders will offer special financing to entice buyers. But if you don’t ask about the specials, you may not learn about them. Some special financing packages are really worth looking into. For example, the builder might offer one of the following incentives:
- A lower interest rate than the going rate you will find at other lenders.
- An extended rate lock at no charge. When building a new home it can often take months to finish the construction, especially if you are custom building. Lenders typically will only lock a rate for 6-8 weeks before they will charge you significant additional fees. Having an extended rate lock when building a new home is a nice perk.
6. What are the standard features in the homes and what are the extras?
Every home builder includes a set of standard features in each home built while offering extras that cost more. Much like buying a car, you want to find out what is standard and what is extra. The scope of is included and what isn’t is one of the most important questions to ask when buying a new home.
The builder should have a detailed “specifications” sheet that details everything that comes standard with your new home. Often times the builder will also have a pre-determined upgrades list that allows you to pick and choose what you would like added to the home and at what cost.
7. Will I have the opportunity to make additional upgrades once the home has started?
Building a home takes time. There is a possibility that you will decide later that you want additional features. It can be helpful to know that you can request upgrades after the builder has started on the home. Some builders will not allow changes to be made after they start construction.
Having this information obviously will be very important. Builders that are flexible with upgrades is also an important consideration. Can you imagine building a custom home where you have decided to change the family room from carpet to hardwood and the builder says sorry too late?
8. How often and when will I be allowed to tour the home once construction has started?
You should be able to tour the home periodically during construction. However, you most likely won’t be able to wander the work site whenever you like. Talk with the builder to determine when and how often you can tour the home while it is being built.
There are some builders that will be very restrictive when it comes to site visits. You should ask the question up front on how often you will be able to visit your home. After all you are spending a lot of money and of course, are going to be excited to watch the progress.
9. How long will my home take to build and what happens if you don’t make the date?
The builder should have a good idea of how long it will take to build your home, and be willing to explain what will happen if that date is not met. As the buyer, you will need to be somewhat flexible – no one knows exactly what the weather will do in the months ahead – but you have the right to a clear estimate.
The builder’s policy on completion date is one of the most important questions you can ask when buying new construction. There are some builders who have a fantastic reputation for delivering their product on time and others who are downright awful!
You want to have a strong grasp of how closing date issues will work especially if you are buying and selling a home simultaneously. Missing delivery times is one of the biggest complaints against builders. Trust me if the builder doesn’t deliver on time you will be able to find out. The builder reputation will already be suffering for it.
10. Do you offer any energy saving features in your homes?
A new home that is well-built should include a number of different energy saving features. The various technologies related to energy saving materials and features in new homes have come a long way, and continue to improve year by year. Make sure you are getting features that will save you money and reduce your impact on the environment.
One of the hottest trends in building is making the home energy efficient. Look for energy star products supplied by the builder. More builders are building with 2×6 wall vs. 2×4 walls for the added benefit of additional insulation.
11. Are there any differences in cost for the lots?
You will probably have several different lot options. Keep in mind that different lots may have different price tags. You may want to save money with a less desirable lot or get a lot that costs a little more and puts you where you want to be in the neighborhood.
Make sure, however, that you look over the lot premium carefully. Quite often the lot premiums builders assign to their lots do not translate to the value when it comes time to sell. You want a good location but not at the expense of overpaying.
Some of the valid reasoning for charging a lot premium include:
- A lot with a walk-out basement which is more valuable given you can have a beautiful living space with natural light.
- A better location within the neighborhood.
- A larger, flatter or more usable lot.
12. Is there a list of vendors I will need to meet with?
The home builder will use different vendors for different aspects of the home. If you need to meet them, it will be helpful to know about it. You should find out up-front who the vendors are and where their businesses are located.
These are the locations where you will be picking out your selections unless the builder has them on site.
13. When do extras have to be paid? Upfront or at closing?
Sometimes you have to pay for extras up front. Avoid the unpleasant surprise of an expensive bill early on by asking ahead of time. Sound financial planning entails asking the builder how he or she collects their monies for extras. Some will require all of it paid up front, some will allow you to pay at closing and others may ask for half payment.
14. If building in the winter how will be landscaping and the completion of the driveway be handled?
Landscaping and pouring the driveway often require waiting until warmer weather. Get the schedule in writing, so you know it will be taken care of. Quite often your lender will require a “hold-back” of funds ensuring that the work gets completed.
If a holdback is needed because of winter weather, you need to find out if the builder will cover this or they will require you to front the funds in the event of a hold-back.
15. How quickly will punch list items be completed after the final walk through?
You may discover on the final walk through that some things are missing from your home, either due to a mistake or other issues. You want to make sure that the builder will take care of the problems in a timely manner, so you can fully enjoy your new home as quickly as possible. You should make sure you get in writing the completion schedule of the builder.
If there is a major item that hasn’t been completed or is on back order, it makes sense to ask the builder for a holdback of funds to ensure these things will be finalized.
16. Does the home come with a builder’s warranty?
One of the most important questions you can ask when buying new construction is what kind of warranty is included. The warranty offered can vary quite a bit from builder to builder. A builders warranty provides peace of mind, particularly when it comes from the builder. If something breaks early on, you want to know it will be fixed. The typical length of many warranty contracts is a year for all the major components in the home.
17. Will I be able to have a home inspection when the building is completed?
You should be able to have the home inspected when it is completed. A builder, however, is not going to allow you to make your sale contingent on a home inspection. Doing so would be entirely unrealistic. The builder is not going to construct a custom built home only to allow you an escape clause the week of closing. The home inspection should be for informational purposes only.
Picking a professional home inspector, unaffiliated with the builder, will be able to verify that the home is built to current standards. Find your own inspector instead of using one recommended by the builder. Your agent should be able to help you find a dependable professional. Keep in mind that in all major cities and towns the home will need to be approved by all the various city inspectors.
More often than not a home inspection will be more for learning about the major components than anything else.
18. Are there any protective covenants for the neighborhood?
A neighborhood of new homes should have some protective covenants to preserve the value of the properties. You will need to know the covenants that will affect both you and your neighbors. For example, some of the more common protective covenants will be things like:
- You can’t raise livestock on the property.
- You will not be able to store commercial vehicles like a camper in your front yard.
- You will not be able to dramatically alter the appearance of the home without prior approval. This might include the paint color.
Keep in mind there can be a distinction between the words “protective” and “restrictive” You want to make sure you’re not buying into a neighborhood where you will not be able to do what you want to your home!
19. Will there be any homeowners association?
If you will be part of a homeowners association, you certainly want to know about it. The HOA will be responsible for enforcing the rules that are supposed to protect the value of your property and the quality of life in the neighborhood. The quality of your HOA is important because a bad HOA experience can make life much more challenging than it has to be.
20. Can I speak with some of your past clients?
Talking with past clients is important so you can get a clear picture of what it’s like to be a customer. Make sure you talk with at least two or three past clients before you commit to buying from the builder. Most people who have built a custom home with a particular builder will speak freely good or bad about their experience.
Article originally found on Maximum Exposure Real Estate.