10 Things to Know When Searching for New Build Homes
If you’re thinking about buying a home, but the idea of pre-owned doesn’t appeal — then searching for new build homes could be a good approach. New construction homes offer customization options and are more energy-efficient than older properties, making them popular with today’s buyers.
But, before you sign on the dotted line, it’s essential to understand the unique aspects of buying a new build home and how to structure your offer accordingly.
Here are ten essentials all buyers should consider when searching for new build homes.
#1. A Real Estate Agent Well-Versed in New Build Homes
The process of buying a new build home is different to buying a pre-owned one, so having a real estate agent who is well-versed in it is a must. Not only do real estate agents have relationships with local builders and developers, but they can help you navigate the process and represent your best interests from beginning to end.
#2. Clarity on the Builder’s Incentives
Builders typically set a base price for the various floorplans throughout their community and stay very close to that price.
They do, however, offer buyer incentives. These can range from upgrades — like landscaping, a finished basement, or stainless steel appliances — to paying closing costs, covering some of your HOA dues, or even buying down your interest rate. It is always wise to understand the builder’s incentives and work with your real estate agent to negotiate where it makes sense for you.
#3. Your Financing Details
In 2021, the median listing price for new build homes is $346,400. So most buyers finance their real estate purchase with a mortgage loan. As you begin your search for a new build home, it’s a good idea to look for a lender with experience in loans for new construction. If you are building from scratch, you may need a construction loan. If the home is already complete, a traditional loan may be appropriate. The lender can also preapprove you for a particular price range, which will help you understand which communities and new builds you can afford.
The builder or developer sometimes partners with a lender to offer incentives and loan programs specific to that neighborhood. This can sometimes work in your favor — however, shop around to make sure you’re getting the best deal.
You’ll also want to understand and budget for the items you’ll be responsible for as a buyer. This includes items like property taxes, HOA fees, and closing costs.
#4. Negotiated Items
When buying a new build home, it’s unlikely that you’ll negotiate on the purchase price — but upgrades are always on the table. Whether you want new granite countertops or a higher-grade wood floor, focus on property add-ons.
This is another excellent reason why you want to work with an agent who has experience in new build homes — since they are likely familiar with the incentives and concessions of builders in your area. In some instances, you may even be able to negotiate builder-paid closing costs, help with homeowners association (HOA) fees, a premium lot, or landscaping.
#5. Clarity on the Timeline
Whether you’re interested in buying a new build home that’s under construction or want to start a custom build from scratch, understanding the timeline is vital.
Depending on the project’s scope, new builds can take upward of six months — so make sure you have a timeline in writing. Keep in mind that closing and completion dates on new homes are estimated. These dates are subject to change due to circumstances outside of the builder’s control, such as inclement weather or city inspections. Your real estate agent can help you add contingencies to your offer that spell out what happens when deadlines are missed.
#6. A Home Inspection Contingency
It doesn’t matter what type of property you’re looking to buy, all homes, including new builds, should have an extensive home inspection. Inspections benefit buyers because they highlight any issues with the property before it exchanges hands.
New build homes shouldn’t have any issues, but the builder will be required to fix them or compensate you if the inspector does find anything unsatisfactory.
#7. An Appraisal Contingency
If you’re financing your home, your lender will typically require an appraisal contingency. An appraiser is sent to the property to estimate the home’s value based on other comparable properties nearby. Your lender wants an appraisal to ensure that they are not loaning you more than the house is worth. The contingency allows you to renegotiate the price if the appraisal comes in lower.
If you’re paying cash for your home, an appraisal contingency will prevent you from overpaying.
#8. A Builder’s Warranty
Most builders offer some type of warranty on their workmanship, as well as the major systems in your home. Have your real estate agent add a request for a builder’s warranty in your offer and understand what’s covered within that.
#9. Understanding of the Community’s Plan
Buyers should also be clear about the community’s long-term plans. If there are undeveloped spaces near the development, ask your agent to determine the zoning of those areas. There could be plans to develop a school, gas station, or shopping mall — and understanding the future plans could help you determine if a neighborhood is the right fit for you.
#10. Knowledge of the HOA
Many new builds are within a master-planned community that will likely have a homeowner’s association (HOA). The HOA is in place to ensure the community has a clean and unified aesthetic, while also maintaining the common areas of the development — such as the pool or entry gate. Homeowners pay a monthly or quarterly HOA fee, which funds these projects.
If you’re buying a new build home in a development with an HOA, find out what the fees are and what the reserve fund looks like. You should also get a copy of the covenants, conditions, and restrictions and read them thoroughly. Your real estate agent can help you understand the important points.
You’ll want to take note of factors like whether there are any specific paint schemes you must follow, whether you can make changes to the exterior of your home without HOA approval, and who maintains the common areas, landscaping, and amenities. You should also find out what rights the developer or HOA has that can impact your ability to rent or sell your home in the future. And, what their process is for handling special projects, like a new gym or security gate, or how they help resolve conflicts.
Searching for New Build Homes
New build homes are a great option for buyers who want the ability to customize their homes. You can start your search for new construction homes here. Or, if you’re interested in reading more about purchasing a new build home, explore the real estate articles on our blog.
