BUYING A NEW CONSTRUCTION HOME

According to real estate industry sources, over 70% of home buyers want a new home. The ability to upgrade finishes and alter floor plans and be the first to occupy a new home lures many buyers into builders model homes every day. New construction focused buyers should consider a few important things before signing on the line.

1. HAVE YOUR OWN AGENT. Many buyers use the developers sales agent to represent them; check your state’s real estate license laws to know what a dual agent can and can’t do. All homebuyers should be represented by an agent who has a fiduciary responsibility to them. And don’t forget that most developers require that your agent accompany you the first time you visit a sales center.
2. ASK HOW MUCH IS THIS HOME AS WE SEE IT. Models are often filled with every upgrade the developer offers as an example for buyers. Buyers may find that what they see in the model differs dramatically from the advertised starting prices for a development.
3. PICK THE RIGHT DEVELOPER. Ask for references from developers sales agents. Do your own investigation of the developers previous projects, length in business and any complaints filed with business bureaus.
4. CONSIDER RESALE . The allure of being the first to occupy a home sometimes clouds a secondary location or poor craftsmanship. Consider a resale home if it’s a better location before signing on the line just because it’s new construction.
5. QUESTION PERCENT OF PROJECT SOLD. Inquire how much of the percent sold are reservations versus contracts. Some reservations don’t go through to contract because of a change of heart, financial concerns or occupancy timelines.
6. HAVE YOUR ATTORNEY REVIEW ALL CONTRACTS. Developers contracts favor the developer and are different from standard local real estate board contracts. There is little wiggle-room once you sign a developers contract, and they don’t like home sale contingencies.
7. INVESTIGATE PROPERTY TAXES INDEPENDENTLY. Because tax assessors haven’t valued a home or project yet, developers can underestimate how much the property taxes will be. Call the local taxing authority yourself and find out the worst case scenario.
8. PERFORM A HOME INSPECTION. Never skip or waive the right to an inspection; hire a professional and have the home inspected at least seven days prior to closing.
9. INQUIRE ABOUT INVESTOR PURCHASED UNITS. Many developer contracts restrict purchase of units by speculators to flip at completion. Look for clauses that require purchasers to owner-occupy the first 12 months after closing and ask sales agents what percentage of owner occupancy is for the project.
10. GET A CERTIFICATE OF OCCUPANCY Local municipalities issue a CO after a unit has passed all building code inspections and most mortgage lenders require one before they will close. But, even if you are paying cash insist that the developer will deliver you a certificate prior to closing.
11. BEWARE THAT UPGRADES ARE USUALLY PAID IN ADVANCE A unit that has pre-selected finishes made by a terminated buyer can be a marketing problem fro the developer. If you decide to walk from a project the develop may not refund on installed changes and upgrades.
12. REQUIRE YOUR DEPOSITS GO INTO AN ESCROW ACCOUNT, not the developers business account. Research state brokerage laws to discover what regulations developers must follow with buyer’s funds. If disputes arise it is easier to receive funds from a neutral escrow agent than the developer.
13. REQUEST COPIES OF BLUEPRINTS, FLOOR PLANS,SURVEYS. Your developer should provide you with an updated survey, showing just your parcel with its own parcel identification number issued by taxing authorities. Copies of you floor plans will save you time and expense should you make changes or sell in the future.
14. RESEARCH WARRANTIES on STRUCTURE, FINISHES and APPLIANCES. Developers typically offer five or ten year warranties on structural elements of a home and rely on manufacturers warranties for appliances, furnaces, windows, and doors. Beware of one year warranties on structural elements.
15. ASK FOR HOLDBACKS on UNFINISHED WORK Weather or material supply problems can interrupt completion. If these items are not essential for occupancy you may still choose to close. Make sure designated funds are set aside in an escrow account for their installation or completion.
16. INSIST ON FINAL WRITTEN PUNCH LIST. You should have the final walk-through at least three days before closing on your new home. The punch list contains all items that need additional attention. Both the developer and the buyer should sign the punch list in agreement.