Who doesn’t like walking into a model home? Everything about the home is beautiful, and many buyers instantly fall in love. New construction is appealing to many buyers because no one has ever lived in the house before, it is customized to their taste, and it is move in ready. However, before buying new construction, there are some things you should know before diving in.
1. You should still use a real estate agent. Many people assume that they do not need an agent since they are buying directly from the builder. While you can buy the home through the sales representative and forego the use of an agent, I highly recommend that you still use one. New construction sales are often more complicated than a regular resale, and builders will require you use their contract versus the resale contract that is usually used in home purchases. Therefore, you want a real estate agent that is there representing you and looking out for your best interests. The agent can also negotiate on your behalf. Keep in mind, the builder is there to sell you the home, not to look out for your best interest and make sure you are getting a good deal. Buyers don’t pay the commission to the real estate agent, so do yourself a favor and hire one to represent you.
2. The best time to buy. The best time to buy a new construction home is at the end of every quarter. Builders have sales goals they need to meet, and they tend to be more aggressive with their sales incentives toward the end of the quarter. Another great time of the year to buy is December. Most people are preparing for the holidays and not thinking about buying a new home. Since business goes down in December, builders are more willing to play ball when they find someone that is interested in purchasing and you are more likely to get a good deal on the home.
3. Builder list prices. In general, builders don’t like to reduce their prices, because it sets a precedence for what the future home sales in that neighborhood will be. They are more likely to throw in incentives such as all closing costs paid. However, every day that an inventory home sits on the market, it loses value. Look for inventory homes that have been sitting on the market 45 days or longer. The builder will be more willing to negotiate on these homes in order to get them sold.
4. What you see is not always what you get. Model homes are built to impress buyers that walk through the door. That being said, many model homes contain expensive upgrades that are not standard throughout the home. I equate it to test driving a car. When you ask to test drive a car, they put you in the top of the line model with all the upgrades, hoping they can sell you that specific car while you’re driving it. Model homes are pretty similar to this. When visiting models, be sure to ask what is standard with the home and what is an upgrade. The last thing you want is to be disappointed when you thought you were buying one home, only to find out the upgrades are out of your budget.
5. Research the builder and their lender before purchasing. This is an important one. Research the builder, their reputation, and what things they offer. Also do some research on the builder’s preferred lender. Often times, builders will offer incentives to buyers if they use this specific lender. This doesn’t mean you have to automatically use them. You still have the right to shop around and find the best loan for you, and not the builder. Because construction loans and a larger down payment are not required, the builder takes a huge risk in building a new home. By using their preferred lender, it allows them to see that you are a good credit risk, and they aren’t taking as much of a chance. This is why they like buyers to use their preferred lender, but keep in mind, the choice is yours to make.