The New Construction Home Buying Process

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It doesn’t seem that long ago when there were really no new construction homes to buy, and now neighborhoods are popping up all over the place. A common question that comes up from new buyers of new construction homes is “does this home need to be inspected?” and “do I need a realtor to buy a new construction home?” We decided to break down the ins and outs of the new construction home buying process.

First Things First: Components Of New Construction Home Buying

There is a home seller

The new construction home buying process is nearly identical to the “regular” or resell home buying process. You have a seller (the builder) who wants to sell you their home, whether this is a custom built home or a track built home, the same applies.

There is a seller’s agent

Most of the time the builder employees staff that may or may not have a real estate license to sell the home but are trained to get the highest price possible. This is just like 90% of the homes for sale out there that are represented by listing agents.

You still need a home mortgage

Just because the home is new, doesn’t mean that you don’t need a home loan. If you’re buying a home on a lot from a builder you can get traditional financing. However, if you are buying land or have land and want to build there is a completely different loan process to go through.

So what’s really different?

Depending on the “stage” of the home and how custom it is there could be some “new” wrinkles. The more of these “wrinkles” typically the more money and complications involved.

Different Types of New Construction Homes

Stock Homes

These are homes that the builder has built and are standing. The builder is likely to want to sell these more quickly than the others. However, many times these are like the shiny car ads in Sunday paper (or on that Facebook ad), they are designed to get you in the neighborhood to buy a more custom spec home. There isn’t any waiting for the home to be built other than some finishing touches. No contractors to worry about and now pre-drywall inspections to be done.

Due to size restrictions many urban homes, condos and townhomes are sold this way. So for example real estate agents in Atlanta might be able to show you all the new condos in Atlanta. While a Dacula real estate agent in the suburbs might show you 3 stock homes for sale and then take you to the model home (or sales trailer) to look at buying a custom or semi-custom home.

Custom & Semi-Custom Spec Homes

Most people that have bought a new construction home have bought one of these. Home buyers browse the model home and then decide to build one of the 5 or more home plans in the neighborhoods. The home buyer gets to pick the exterior colors, the flooring, wall color and choose from a list of upgrades.

If you’re a home buyer you can relax a bit because most of these homes are being built by developers with “crews.” These crews do plumbing, electrical and all the work on the homes in all the neighborhood. I say relax, but really even if they screw up or delay you can’t do much about it. This is where an inspector can help you protect your own interests but even then the builder may not do anything about what they find unless it’s truly broken.

Custom Built

Whether it’s on your own land, or on a lot the process is a bit more complicated. Now you have to look at the site plan, pick a floor plan and can it fit on the land. If you’re dealing with an experienced builder then you can hope that he manages the contractors but chances are very good that you’ll need to check the progress relatively frequently and be a constant voice in the process.

Keep in mind that this will vary from state to state. Real estate in Texas, is different from Georgia or California. Just like an apartment in Wisconsin is going to offer you something different than one is Boston.

Some Frequently Asked Questions About The New Construction Home Buying Process

Do I Need A Real Estate Agent To Buy New Construction?

How can we be unbiased when there site is a real estate agent directory?! The resounding answer is YES. The reason why you need one is that the builder spends a great deal of money to cut the agent out. Imagine if you were going to court and the prosecution was allowed to spend money to convince you to represent yourself?

Most of these builder are multi-million dollar companies that are created with one thing in mind, profit. That’s the point of any business. As a home buyer, you need to have an extra set of eyes on that contract and on the home. Reminding of your rights to inspect the property and/or at least pointing out the ridiculous provision that says the builder can keep your earnest money even they don’t perform on the contract.

Google “Builder Horror Stories” and you’ll start to see why we recommend a real estate agent for the purchase because the builder isn’t usually out to get you but if you don’t watch out you could get got.

In a regular real estate transaction, the two parties are often fearful of lawsuits and that fear keeps everyone honest. In a new construction purchase, the builder wants you do exactly as your told and knows that once you sign their contract without any stipulations (the ones your agent would suggest) that you have no way out. You’ll lose your earnest money (and your deposit) should you try to back out.

It’s this reason we suggest hiring a new construction specialist as your real estate agent.

Do I Need An Inspection On A New Construction Home?

Again YES! Not getting an inspection is a huge mistake that home buyers make. New construction homes are usually built to county or city code but that’s the minimum. It’s not the standard you want. If you live in a fast growing community there is often 1 inspector for hundreds of homes. As a real estate agent I’d always recommend getting an inspection before the drywall goes up and right before the consumer walkthrough. When a deck is installed incorrectly or the plumbing leaks, you want to know before you move in, not after.

This is a SIX or SEVEN Figure decision to buy a new construction home, don’t skimp on the inspection to save a few hundred bucks.

In closing, the new construction home buying process is very similar to buying a resell, except I think you need to be a bit more vigilant about protecting your interest.

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