Buying a brand new home from the builder is an exciting event but is also one that can see costs spiral out of control once you start adding options. In that regard, buying a new construction home is very different from buying a resale home.
Here are 9 things to know before you buy a new construction home from a builder.
Pay attention to the dollars because they add up
It sounds silly to say but when you spend hundreds of thousands of dollars on a home – the median home price in the US is around $340,000 – you don’t want to lose track of the smaller numbers. $100 here and $500 there adds up quickly for upgrades that you may or may not need. You wouldn’t just drop $100 on the ground and forget about it so don’t forget to count the pennies and dollars even on a home that costs six figures. Every dollar you spend is after tax profit that you had to earn.
Find out about home buyer programs that you can use
If you’re a new home buyer, there are many national and state programs that exist in addition to first time home buyer
programs that you may qualify for. Some state housing authorities and other groups offer assistance for down payments, favorable mortgage rates, tax credits and other helpful benefits that you can take advantage of. If you are a veteran you may qualify for a VA loan and the USDA offers assistance on rural properties among other programs that exist.
Check out the HUD.gov website to learn about current programs that may assist you during the home purchase process to save money.
Visit other communities from your builder and speak with owners
Builders show you nice clean model homes but what about actual homes they’ve built that are several or more years old? Go on the website of builders you are considering, find out what other communities they’ve built and take a drive there to see what the houses look like. Speak with owners if possible to ask about their experience with the builder in terms of quality of the home and the workmanship, the builder’s willingness and speed at fixing problems and things of that nature.
Do online searches for builder reviews to read what others are saying but visiting their other communities in person can give you a bird’s eye view on what their homes actually look like several or more years later. Speaking with their customers about their homes is even better.
The model home isn’t standard and usually has many upgrades
When you visit a model home for any builder, understand that many of the nice things you see in that home are upgrades that you’d have to pay extra for. If you see aspects of the home that you like, ask the salesperson what is standard and which are upgrades and the cost of each.
Commonly, model homes will feature upgraded faucets and taps, crown molding, flooring, lighting and things of that nature to make the house look as appealing as possible. You start to imagine living in that specific house which is what they want since it costs more than the base price of the house.
Builders make money on upgrades and as we’ll see below, some of them might be better to say no to and have them added at a later date by another company if desired.
Focus on upgrades that are better done by the builder while the home is being built
Some aspects of a home are better done by the builder as the home is being built such as flooring (ie. hardwood), roughed in plumbing, central vacuum, a gas line for a barbeque, electrical additions to the panel in the basement, tile work, underfloor heating, and things of that nature. If it involves something significant that is built into the home, it may be better to have the builder do it as part of the design of the house. A deeper basement or bigger garage would certainly be two things you’d definitely want to get done by the builder up front.
Other things to consider may be higher cabinets, more space for pots and pans, built-in microwave and thicker underpadding for carpeting. Some additions are conveniences that you can make use of but better quality underpadding can quiet floors, make flooring softer on your feet while providing insulation and protection to carpeting.
Other items can be added in later from a third party possibly at a significantly lower price.
Don’t pay for things from the builder you can get cheaper elsewhere
Unless they are included in the price already, watch out for things you can often pay someone else for and at a lower price. Builders often make the most money from adds-ons that they offer during the building process such as upgraded painting, upgraded appliances, kitchen backsplash, decks and patios, crown molding, landscaping and more. Many if not all of these adds-ons can be had in the future and possibly from a cheaper source.
Consider things that typically aren’t discussed by the sales rep
Do you care if your home has a sidewalk on your side of the street? Is there public parking planned for right outside your home? Is your desired home located next to a school or at the corner of a busy street with traffic frequently stopped outside? Could a bus stop be planned near or outside your home?
While you can’t necessarily predict everything, certain aspects of the location of your home are determined ahead of time during the planning phase. I have a friend who is a part time real estate and he said he’ll never buy a home on the same side as the sidewalk. That’s just him. He doesn’t want people walking past his house so close and it’s another area to clear snow from if you live in a winter environment.
Something(s) to think about anyways.
Most structural claims are made 4 – 7 years after a home is built
Before buying a new home, understand what warranty exists and who is responsible for it. In some jurisdictions the builder is responsible for warrantying the home. In other areas, a third party warranty company is tasked with handling problems that occur after possession takes place. You may additionally have a government agency that oversees things to ensure homeowners have someone to speak with when things go wrong.
One of the costliest and common problems in a new home is a problem with the foundation. Most structural claims that are made on new homes occur between the 4 and 7 year mark. So you have already been in a home for a period of time and might even be in the process of reselling the home when major problems are noted either by you or the purchaser. You need to be aware of what rights you have to have repairs made at no cost because they can be very expensive and often creep up several years after you bought the home.
Consider a home inspection
While you want to take advantage of all opportunities to inspect the home during the building process and make note of things that aren’t correctly done, hiring your own home inspector before taking possession of the home may be several hundred dollars well spent. Certified home inspectors are skilled and experienced at noticing things in a home that laymen aren’t. They inspect homes daily and get to know what to look for and can spot potential problems up front before they occur.
Don’t assume that because a home is brand new that it will be built right with no issues.