6 Things You Must Know before buying new construction
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Buying a new construction home versus a resale home can be quite appealing. It's never been lived in so you don't have to worry about those mysterious stains on the carpet or when that old furnace might stop working. And while there are certainly a lot of benefits to buying new construction, the sales process can be quite different from your typical resale transaction. So here are the six things that you must know before buying a new construction home.
Number one, builders use an escalating pricing model.
Unlike a resale home where the seller will lower the price the longer it sits on the market, a new construction home may actually go up in price. Typically, builders will offer the lowest price and best incentives to those who commit early and sign a contract during the early months of construction or even pre-construction. Then as more units are sold and the project comes closer to completion, they will increase prices on their remaining units to meet the demand. Now this of course is assuming that it's a healthy market and a desirable project.
By planning ahead and starting your search for your new construction home early, even as much as a year or more, you can ensure you will get the lowest price and best incentives.
Number two, a builder's contract is written by the builder to protect the builder.
When it comes times to submit an offer on your new home, rather than signing the standard Colorado approved contracts, which are written to protect the buyer, you'll likely be signing a builder's contract. Now each builder's contract will vary, but you'll find that many of them do not contain an inspection contingency, an appraisal contingency or even a favorable loan contingency. Now without these contingencies in place, getting out of a builder's contract without penalty, which usually means losing your earnest money, can prove to be a bit more difficult. In addition, dates and deadlines including the date of completion are written with very lenient terms because material shortages, bad weather and permits can all cause delays for the builder.
Therefore, you'll not only want to be confident in your decision to go under contract on your new construction home, but also be flexible with your move-in date.
Number three, every thing is negotiable including the sales price.
Just because you're signing a builder's contract, doesn't mean you can't negotiate specific terms of the contract. This is where having a knowledgeable Buyer's Agent on your side to help you, can be a huge advantage. I know this first hand because I started my real estate career working for a new home builder. When buyers were working with a real estate agent, it usually made the entire transaction go more smoothly so the builder and I were more willing to negotiate the terms.
And as your buyers agent, I have the real estate market knowledge to help justify and negotiate a lower price and additional incentives.
Number four, your property taxes may increase after the first year.
In Colorado, property taxes are assessed every two years, so there's a big chance that your new construction home was assessed prior to your home being built. Now depending on the condition of the property prior to construction and when you closed on your home, you may find that your first year or two of taxes are actually quite low. However, when your property taxes are re-assessed, you may see an increase in your property taxes because the value of your property has gone up since the last assessment.
This is simply something that you are going to want to take into consideration when evaluating the cost of home ownership for your new construction home.
Number five, time is of the essence for selecting finishes.
One of the most attractive reasons to buy new construction is the opportunity to select some of the finishes like flooring, tile, lighting and even paint colors to help personalize your home. The builder will likely have deadlines for selecting these finishes, but it's not unheard of for those deadlines to fall within the first couple months of construction. And as the builder gets closer to completion, some options may not be available or already selected by the builder.
You'll want to clarify with the builder which finishes and appliances will be included in your new home and be sure to get in early to make those selections.
Number six, custom changes aren't always possible.
Now while it never hurts to ask and everything is negotiable, many builders will be reluctant to agree to custom changes and this is for good reason. Each change request opens the door to additional risk and opportunity for error. If for any reason you don't close on the home, the builder is stuck with your custom change that may not be appealing to the next buyer. Additionally, with so many hands on the project, a simple request for a custom paint color could ultimately result in the wrong paint color or even the wrong home being painted, which in turn can cause additional project delays and cost to the builder.
Keep in mind that once you've closed on your home, you'll have more liberty to make those changes yourself. However, if you find yourself wanting a lot of changes, especially structural ones, you may want to consider working with a custom builder instead.
So there you have the six things that you must know before buying a new construction home. Now it wasn't my intention to convince you that buying a new construction home is any better or worse than a resale home, but simply to make you aware of the impact of those differences so you can feel more prepared and confident in moving forward in the search for your next home. Thank you for listening. I'm your realtor, Milena Joy. I know changing where you live can change how you live. So give me a call and live your best life in your next home.
