If those glossy brochures boasting beautiful homes with promised recreational amenities have persuaded you buy into a development, make sure you know your options. Newly-constructed home present different considerations in terms of financing, choices or upgrades, purchase value and warranties versus a pre-owned one.
Before you peruse new developments take time to educate yourself on working with builders and know your options as a buyer. It may be tempting to let your emotions dictate your decision, but be an informed buyer before you sign on the dotted line.
Financing – The smartest move before approaching a builder is to be pre-qualified with a lender of your choosing even if financing is available through the developer’s bank. Do not assume that builder-arranged deals are more advantageous even if they are presented as such. You should always weigh your options. Both lending offers can give you leverage either way.
Some builders offer incentive packages if you agree to use their lender and title company. How will you know if their offer is really the best deal? Find a trustworthy, experienced realtor that knows new construction transactions and what rates and closing costs are fair. An agent’s expertise and advice may prove invaluable because they know the local home builders and their business practices. Builders will treat you better because they cannot afford to lose their reputation with realtors.
Changes – Buying is all about choices, but what if you don’t agree with the builder’s choices? Most builders are willing to change some things to please you, especially if the home still has on site materials and available labor. Builders nowadays offer more options in paint, appliances, and flooring to accommodate personal tastes than they did say five years ago.
They can sell a home for bare construction costs because their profit comes from upgrades. Compare the cost of paying the builder for upgrades to your own purchase and installation costs before you decide. Also keep in mind some builders have time limits on changes and upgrades. Don’t forget to consider the cost of financing your upgrades as well.
Market Value VS Purchase Value – Builders build homes to sell them, not collect them. The pressure on them to sell under current market conditions can give you the edge in negotiations. You might be able to purchase more home for the same price if it is pre-owned, but the new home has a longer economic life and comes with new appliances and better comfort systems. Updating an older home to a brand-new level will cost you considerably. You will see the best savings in lower power bills without those unpredictable repair bills.
The purchase value of your home includes the development’s amenities, like recreational facilities, common areas, pools, and/or golf courses. If they are completed in phases, make sure the developer has the financial resources to finish the planned projects. Ask your realtor or lawyer whether the builder was required to post bond for not-yet-completed community amenities.
Warranties – Warranties come in a variety of coverage levels that may run for one year to five years. Read any builder warranties carefully to know exactly what it covers and what it does not. Be sure to find out who backs up the warranty, the builder or a third-party. Seek your lawyer’s help to know your options if problems arise.
When you sign a builder’s contract, you may give up your right to sue if you are dissatisfied with their work. Most contracts are negotiable, but a builder’s habit of using arbitration clauses may signal a risky purchase. Consult with your lawyer to review how construction issues are handled, by arbitration or by the builder’s dispute resolution process.
Builder Reputation – Researching the builder gives you an inside look at their work standards and customer service. If they have been successful in previous developments by delivering quality work, finishing projected amenities, and maintaining customer satisfaction, then your decision would be easy. Ask your realtor for input regarding any local builders to help you avoid developments filled with empty, devalued homes or low-quality construction problems.