Buying a New Construction Home
So, you’re looking into new construction I see. Maybe you’re wondering how the new construction home buying process works and how you fit into it. I want to answer some of the common questions for home Buyers looking to purchase new construction, as well as, give you some insight into some of the questions that probably haven’t come to mind.
A lot of people go into the new construction process blindly. In other words, they see sign on the side of the road for a model home, stroll on in, fall in love, and make a decision to buy it! While living on cloud 9 is pretty great, you’ll find yourself getting a much better price and experience when you’re educated on how it all works. In fact, I can give you some unbiased education, because I don’t work for a home builder. I am realtor here in Sarasota FL, and I’ve worked with many clients on purchasing new construction homes. Read on for some of the best tips I’ve got.
How Does it Work?
Just like buying any other home; you have a contract, place an earnest money deposit, apply for a loan, and move towards closing.
Deposit: Unlike buying any other home, building a new construction home often requires a 10-20% up front deposit. That deposit would also depend on how much you are putting down on the home. And keep in mind, everything is negotiable. (Especially when working with a realtor, who will negotiate on your behalf) Similar to a re-sale home, this deposit is non-refundable, unless you have a contingency in place.
Structural/Design Options: At the time of contract, you will select your structural options. Examples of these would be patio extensions, roof extensions, or room size adjustments. Essentially, all the things that would need to go through permitting. After you have selected these items, you will move towards an executed contract. You will then go to the builders design center where you select your interior options such as kitchen cabinets, flooring, paint color, and more. These interior selections will be added to the total price of your home.
Final Walk Through: When your home is completed, you will have a final walk through where you will create a “punch list.” These are items that need to be completed before closing. Maybe you notice some minor things that need to be addressed like paint touch ups. Or, maybe you notice something a little less minor like a cracked shower tile. These items will get placed onto a list to be completed before closing on the property.
Licensed Home Inspector: At this point, I always advise my Buyers to hire a licensed home inspector to go through the roof, plumbing, electrical, and the rest of the home to make sure they don’t find anything that needs to be repaired prior to closing. This is not a necessary step, but I think it’s a wise one and would highly recommend it. In fact, my wife and I purchased a new construction home. Our home inspector noticed some vents on our roof that needed to be re-sealed. An easy fix, but worth an inspector finding it, because I never would have.
Closing: Once your punch list is complete and your home is finished, you will be able to close on your property. You will get keys, HOA information, along with multiple copies of your survey and deed. The builder will explain how to get the water, electric, and gas put into your name. Then it’s time to move in and make it yours! Closings can be moved earlier or pushed later in the new construction home buying process, this fluctuation happens when a home is completed earlier or later than intended.
How do Builders Set Prices?
Three elements go into the pricing of a new construction home. The cost of the lot, the base price of the home, and any upgrades you have inside or outside your home (design center options). Builders typically price their homes in one of two ways.
Lower Base Price: Builders may have a lower base price of the home but be less likely to offer incentives at the design center. For example: The base price of the home is $350,000 and if you spend $100K at the design center, they will give you an additional $20K for free. You will see incentives like this vary all the time.
Higher Base Price: Builders may have a higher base price of the home but offer heavy incentives at the design center. For example: The base price of the home is $400, but they may give you $50K for free at the design center.
Base prices and design center incentives fluctuate often, even monthly, in a lot of new construction. You'll notice a lot of the fluctuation has to do with the current real estate market.
When is the Best Time to Buy in a New Construction Neighborhood?
Builders typically start their prices low to get Buyers into the community. Every 20 or so sales, they tend to increase the base price of the homes anywhere from 2,000-3,000 dollars. It's often safe to say that if you purchase at the very beginning of a neighborhood, you have a good chance of getting a great price. BUT, you do have to deal with all the of the construction dust for a few years. Typically the other time to find a good deal is the last 3-5 homes in a community. At this point, the developer has essentially finished up the community and may drop the prices of the last few homes, to sell them and move on to their next project.
What the Builder Isn’t Telling You
Builders will post certain prices online that all Buyers can see. However, that may not be the “real price” of the home. It’s not that anyone is trying to be dishonest, but you have to understand that most of these builders are running large corporations. So, if a manager decides to lower a price in a particular neighborhood, that message may not get over to the company’s webmaster immediately. Also, design center incentives and other monthly deals, may not always reflect online. However, builders regularly send realtors, like myself, information with price adjustments and new incentives being offered; so we typically have the most up to date information when it comes to pricing. The best way to ensure that you are getting the best price is to use a realtor, particularly one well versed in the new construction process. It is 100% FREE to you.
If you’re looking to relocate, have questions about Sarasota real estate, or Sarasota new construction… reach out! I’m here to help!
Sarasota Real Estate
Posted by Matt Leicht on