New Construction Homes: All About Making a Custom Home Purchase
Many new home buyers are enthusiastic about new construction homes. Home buyers often like new construction because they are perceived as move-in ready, though this may not always be true. In addition, buying new construction does differ from buying an existing home, and sometimes comes with surprising hidden costs.
Buyers who don’t proceed with caution, or use the services of an experienced real estate agent, can easily find themselves spending more money than they had planned.
What Is New Home Construction?
Though the term sounds self-explanatory, new home construction does not always refer to a home that was very recently built. The term may simply mean that no one has lived in the home, so the builder may still hold the title to the home.
In fact, there might be "new construction" homes on the market that were built in the last 18-24 months; they just haven’t sold yet - this is quite common with luxury homes. Additionally, model homes are sometimes advertised as new construction, though they could have been built a few years ago as the neighborhood was being built-out.
Today, most new construction homes are located in planned residential developments where one or more builders have homes for sale. Typically, each builder offers a variety of floor plans, square footage and price points to choose from. In some cases, the buyer can specify preferences on things like paint colors, flooring type, and cabinetry.
This type of house may be referred to as a “personalized production home.” Another type of new construction is a custom-built home. This is a home built to the buyer’s specifications on a lot that usually is purchased and chosen separately.
What is the Process of Buying a New Construction Home?
Your real estate agent will help guide you through the often confusing terms & addenda common with new home builder contracts.
When buying a new construction home, the buyer usually purchases directly from the builder of the home rather than a previous owner. Take note that home builders typically avoid directly negotiating on price, primarily because if they reduce the set price for one buyer, future buyers may expect similar discounts -- and appraisal issues can come up later for the builder if they discount prices early-on. What is more common is to negotiate on features of the home, such as upgraded items like window-coverings, appliances, flooring options, landscaping, etc.
Often, a buyer may use the services of a real estate agent to represent their interests. The agent may assist the buyer in receiving additional incentives or items included with the home than what they may have received negotiating with the builder themselves.
And remember that most new construction homes do come with a home warranty. So it’s important to understand what’s covered, and for how long, as homeowner’s insurance may not protect against if there are new construction defects.
New Construction Homes Hidden Costs and Mistakes
When looking at new construction homes, it is not uncommon for buyers to overlook things or not fully understand the process of purchasing a new construction home. For example, a builder’s model home likely features their top-of-the-line flooring, fixtures, and appliances. However, these items are often considered upgrades and may not be included in every new home.
Below are some of the most common mistakes made by first-time buyers of new construction homes:
- Not reading the fine print. Buyers are often confused about what is included in the price of the home versus what is considered add-ons or upgrades. For example, some builders charge extra for granite counter-tops, landscaping, and outdoor lighting.
- Skipping the inspection. Buyers may assume they don’t need an inspection on a brand-new structure, but this may not be correct. Major construction mistakes are not unheard of, and minor issues are common.
- Not researching the builder. With a variety of builders to choose from, it’s worth a little bit of research to locate a builder with an excellent reputation. Online reviews and word-of-mouth recommendations are a good place to start.
Real estate and legal experts recommend that buyers work with an experienced agent when purchasing new construction, particularly one who specializes in new construction, and choose someone who is not affiliated with the builder. The agent should represent the buyer’s interests, not the builders. #hw
