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New Construction Home Buying Process

January 26, 2019

New Construction Home Buying Process

Buying a brand-new home from a builder involves a somewhat different process than buying a previously owned one. You're not dealing with a homeowner, which means the seller has no sentimental tie to the house — a factor that could affect the negotiations. When buying a new construction home, regardless of whether it's a custom home you've designed and built yourself or one built on spec, the only person you'll have to work with is the builder.

Of course, buying new homes and previously owned homes have much in common as well: For both, you have to calculate how much you can spend and get financing before your house hunt even begins. You also need to get pre-approved by a mortgage lender or bank and figure out how much you want to put into a new house. Don't forget about the little extras — like insurance, furniture, landscaping, maintenance and property taxes — which can end up draining your bank account.

New construction homes are commonly nothing more than a shell right before they get sold. Looking from the outside, they appear to be built, but nothing is complete on the inside. There's no electrical or plumbing and the walls have not even been framed.

The process of the builder is usually as follows: The house has a rough framework and a flexible floor plan, and the square footage is no longer alterable. However, buyers can still make many choices, including ones involving layout and design elements.

Follow this new construction checklist for buyers to eliminate some of the stress associated with the process.

1. Consider the Advantages and Disadvantages

Consider the Advantages and Disadvantages

There are three ways to buy a brand-new house:

  1. Purchase a home built on spec
  2. Build a semi-custom home that is part of a housing development — there is a set palette or upgrades and finishes you can pick from
  3. Design and build a custom home precisely to your liking

Many of the advantages of newly built homes are obvious: Everything looks new and shiny, and there is less need to worry about maintenance. But before you get too enamored by the fresh paint and pristine floors, consider whether new construction is the best fit for you. Below are some essential questions to ask when buying a new construction home:

  • New construction homes tend to be further from the center of town. Would you mind commuting?
  • New lawns are often harder to maintain. Are you willing to put in the extra work?
  • New subdivisions can have a cookie-cutter feel. Does that bother you?
  • Houses built these days often have little space between them. Are you OK with the lack of privacy that may result?

2. Find Good Builders and Neighborhoods

Find Good Builders and Neighborhoods

If you're considering a home in a new subdivision, think about using a buyer's agent who is familiar with the area, can arrange home tours and can guide you through the process of closing. When looking for a good real estate agent, make sure to do the following:

  • Keep in mind listing agents work for builders, not buyers. Their goal is to meet a quota, not to make a decision that's best for you.
  • Many states have regulations on how real estate agents deal with new subdivisions. If you've hired your agent, let them know right away you want to see new homes. They must be present during your first look at any new subdivision. If not, the builder's sales representative will receive the full commission if you end up buying a house there.

When looking for good neighborhoods, do the following:

  • Check online for new home construction listings.
  • Explore the neighborhood and find out about the quality of the houses and the amenities that are available.
  • Take a walk around the neighborhood and speak with homeowners about how they like the community.
  • Visit model open homes, and take photos and notes. Don't try to visit all of them in a single day.
  • Ask the developer about any homeowners' association fees or rules. The costs can be exorbitantly expensive, and the regulations can be stringent. For instance, storage sheds, solar panels, and vegetable gardens may not be allowed.
  • Don't forget to ask about whether cable and the Internet are readily available and which companies provide them. Just because the new house is wired for cable doesn't mean the cable company offers service.
  • If construction is not finished on the development, prepare for the various inconveniences it will cause after you move in. You'll have to dodge large trucks and put up with jackhammering in the early morning, among other disturbances.
  • Learn about the neighborhood's zoning regulations, which can change rapidly and with little warning.
  • Pay a visit to the city planner's office and learn what may be in store for your neighborhood.
  • Speak with your agent about anything that may be planned for the neighborhood.

Regardless of whether you're building a new home or buying one that is under construction, you can pick which builder you want to work with. To make sure you choose a builder who is financially sound, visit your local courthouse to find out whether a lien has been filed against him or her. Then, visit the construction site and ask subcontractors whether they're getting paid or not.

When doing research on builders, make sure to do the following:

  • Confirm no Better Business Bureau or state attorney general complaints against the construction company are on file.
  • Speak with real estate agents in the area and ask whether the builder is reputable.
  • Take a look at some of the builder's completed work. Ask the occupants if the craftsmanship has held up well.

3. Find out Which Elements Are Amenities and Which Are Upgrades

Talk with your builder about what's standard and what's extra. Amenities refer to clubhouses, fitness centers, gated entrances and other features the entire community uses. Upgrades are add-on items or features you pay extra for, such as specific appliances, types of flooring and other features that enhance your home.

Obtain features sheets for the line of houses you're looking at and study them carefully. Then, compare the features and find out what comes with the home's base price.

If it's unclear to you what the builder is offering exactly, ask him or her questions and write down the answers. This step is vital, as not knowing could cost you a significant amount of money. Keep the following in mind:

  • If the home includes a stove, go to the showroom and inspect the model. If it comes with a basic stove and you're a skilled cook, you may want to get the upgrade.
  • Decide which upgrades you want early on, as every change you make costs money.
  • Think about your needs vs. your wants. When it comes to upgrading, these are two very different things.
  • Builders profit significantly from upgrades because they can acquire the parts and labor for a relatively low cost. Because of this considerable markup, research each potential option on your own — it may be cheaper to move in first and then bid it out.
  • Generally speaking, builders need to sell houses quickly to profit. If you're haggling over the price, have them add the upgrades for a reduced amount or even for free.

Builder-Issued Credits

Sometimes contracts have a section covering builder-issued credits for upgrades. Because buyers often upgrade while the house is under construction, builders commonly list the cost of certain items in the contracts so buyers will know what credits they can expect when adding on to their purchase. These credits can apply to many things, including flooring and appliances.

For example, if a contract lists a $60 credit value for a kitchen sink, and you decide to buy your own instead, the amount you owe at closing will be $60 less. A good number of contracts work in this way, in which credits get added up and then subtracted from the overall price.

Forgoing all upgrades helps keep your costs down, but remember, upgrading during the construction phase is usually less expensive than upgrading later on. If you decide to upgrade your flooring from laminate to hardwood, for instance, you'll be paying the difference in the costs of the material, but you won't have to pay for the installation costs since the builder has to install flooring regardless. The same also goes for windows and bathroom fixtures.

Popular Upgrades

There are often countless ways to upgrade when you buy a new construction home, but the following items are particularly in demand with homeowners.

  • Countertops: These items can often be a pain to fit and install later, so many buyers prefer to upgrade during the construction phase. The standard countertop material in many builders' contracts is basic laminate, which can easily get chipped or stained. Upgrading to a higher-quality granite or marble could cost you anywhere from $1,000 to $5,000 — or perhaps even more. It will depend on your kitchen's size and the material you pick.
  • Tubs and showers: New construction homes typically feature prefabricated tubs and showers, but if you were hoping for a separate shower and bathtub or a spa shower, in the long run, you'll likely save thousands by making this upgrade during the building phase. This upgrade can easily cost you over $5,000 — especially if you're planning to install an oversized steam shower or a whirlpool tub.
  • Carpeting: The default carpet that comes with new construction homes can easily stain and be a bit scratchy. Upgrading to a stain-resistant, plusher carpet may be possible for $100 to $200 per room, depending on size.
  • Lighting: Builder-grade lighting can be quite unattractive. Depending on the lighting you want to upgrade to, each fixture could cost you anywhere from $20 to $1,000.

4. Get an Inspection and Warranty

Get an Inspection and Warranty

When you've finally decided to purchase a new home, have your sales contract be contingent on a final inspection performed by a professional you hire. Don't make the dangerous assumption that, just because the house is new, it will be free of defects. While there are municipal inspections for code violations, independent professional inspections are much more thorough. If it's possible, get the home inspected at each stage of construction, as potential issues are easier to find that way. If your builder is not OK with this, that should be a red flag.

All newly constructed homes have an implied warranty that stipulates the builder must fix any serious problem with the home's structural integrity. Request a builder's warranty for a certain period following your move-in date that will cover any defects in the craftsmanship. Ideally, have the warranty backed by insurance.

Home warranties vary in how long they last and what things they cover. They typically last from one to 10 years. Ensure the warranty you get clearly says what it covers and what it doesn't, as well as the limitations for damages. If you want peace of mind, you can get a real estate lawyer to review the warranty.

5. Close the Deal

It is common for builders to have in-house mortgage lenders or connections to outside lenders. You have the choice of using the builder's lenders or finding financing on your own. Talk to your agent about special funding programs first-time buyers can take advantage of. You should get in touch with at least two lenders and compare their fees, rates, terms, and points.

A mortgage means you'll be committing many years of your life to homeownership, so it pays to learn as much as you can about the process. Read every piece of paper you receive, as well as every contract, declaration of covenants and restrictions and disclaimer. Look through everything with a pen and notebook. If anything stands out, ask the sales associate about it.

Remember not to sign anything until you completely understand the meaning of every word. If you have any doubts about the process, get a lawyer.

Get Your Next Home With SK Builders

Get Your Next Home With SK Builders

For more than 24 years, SK Builders has been proudly serving upstate South Carolina, which includes Greenville, Greer, Anderson, Simpsonville, Taylors, Travelers Rest, Seneca, Powdersville, Easley and Fountain Inn. We attribute the longevity of our business to our values: quality craftsmanship, efficient design, and customer satisfaction.

Whether you're planning on building a smaller starter house or a larger dream house, we can build a quality home that suits your needs, tastes, and budget, while making the new construction home buying process smooth and stress-free. At SK Builders, we can build custom plans at more affordable prices than many of our competitors because we start with basic features and allow homeowners to upgrade as their budget permits. While many custom builders include luxury items in the price, we allow customers with smaller budgets to build custom homes and then upgrade later on.

Although we build more than 100 homes every year, we have remained a family-owned and -operated company, and it shows: Visit our office any day of the week, and you'll probably meet our president or vice president. And while we're small enough to treat every customer with personal attention, we are also sufficiently big to negotiate better prices from suppliers and contractors.

To learn more about our services, call us at 864-292-0400 or fill out our online form.

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