Top 7 Dangers Of Buying A New Home Build

Dated: 11/10/2016

Views: 159

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Purchasing a new-construction home is very different from buying a resale home, and many people don’t realize how dangerous it can be without proper representation. While it may be very exciting to build a home from the ground up with all the fun choices to be made such as type of floors for the dining room to choosing between subway tiles or penny tiles for your kitchen backsplash, usually the sales person for the home builder is grinning from ear-to-ear as they watch you rapidly run up the tab!


Oftentimes, buyers don’t feel a real estate agent is necessary when building a new home. After all, there’s a sales agent on-site to assist you with your questions, right? Wrong! Always remember that without a competent Real Estate agent at your side, the fox is watching the henhouse! A real estate agent will work on YOUR behalf and because the builder pays their commission, it costs you nothing to have someone represent you during the new-construction process, so don’t go it alone!


Here are the top 7 items to keep in mind when purchasing a new construction home.


1) Don’t sign away your right to representation.

Keep in mind that most builders will require that the real estate agent accompany you in person and register with you on your first visit to the builder’s model home or community. So, you never want to just “stop by” the new-home community without your agent. If you do, you could lose the opportunity to “legally” have your own representation.


2) Understanding the motivations of the builder.

Many national builders are publicly traded companies. They and their sales representatives need to meet aggressive sales goals and answer to the shareholders of that company. For that reason, toward the end of a quarter, builders tend to be more aggressive with their incentives in order to meet those sales goals. The December holiday season is another great time to buy. Most of the country is out shopping and traveling to see family. Very few people shop for homes this time of the year. For that reason, ’tis the season to find some great incentives to purchase a new home.

Most builder prices are influenced by the following:

  • Location

  • Cost of the land

  • Size of the home

  • Cost of the building materials

  • Labor costs

  • Real estate market conditions

  • Builder impact fees

With such a dizzying combination of factors affecting price the on new home sales, the on-site sales people are experts at keeping you off-balance and focused on emotional factors, rather than your bottom line. Your agent should be the added voice of reason and insulate you from getting caught up in the excitement of the moment, and most importantly help you expertly navigate the builders contract negotiations.


3) Builders do not like to reduce their prices. If they do, it sets a precedence for future home sales. Builders are more likely to pay for closing costs or offer design center incentives than to drop their prices which can create the illusion of a good deal but could mean you might be paying a heavy premium for upgrades in the long run.


4) Builders are not like regular sellers. There is no emotional attachment to the property. They make decisions based on what is best for their bottom line such as the” time value of money,” which means that money available at the now is worth more than the same amount of money later. That means that every day a builder has a home that is sitting for sale on the market, they are losing money. Tricks like looking for builder inventory homes that have been on the market for 45 days or more might improve your chances to get a good deal.


5) Get everything in writing. If anything is said during the purchase process that is important to the you, your agent needs to get it in writing. The majority of larger builders will have lengthy, attorney-written, intimidating-looking purchase agreements that cover all the pertinent details of the new-home purchase. These contracts are not written in your favor! Ensure you and your agent read through these documents together and that you completely understand the purchase agreement.


6) What you see is what you get. Frequently a builders’ model home is not a good representation of what comes standard with the home. Often the model home is a high-end version of the standard home. It is the builder’s showcase home and a way for the builder to show off many of the stellar upgrades it can offer. The builder hopes a buyer will like these upgrades and ultimately add them to the purchase of the home. In general, these upgrades have good profit margins for the builder, not you. Each builder will have their own set of standard items that come with a house. A standard item for one builder might be an upgrade for another. So, when touring the model home, find out exactly what options are standard, what options are available, and, of course, what any additional options will cost.


7) Know the builders! Not all builders are created equal. You need an agent that knows the builders, their reputation and what they offer? A good agent will know the in’s-and-out’s of the builder in your area and what they offer? They have frequently visited other communities the builder has developed and will have first-hand knowledge about their overall reputation and product offerings.


>>>>To learn more contact Brandon Tague - Realtor® at (480)322-3392 or by email at [email protected]

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Tyler Monsen Managing Partner

Tyler had goals of becoming a Professional Golfer at the tender age of 4 when he was first introduced to the game by his father. He went on to be a High School All-American and played 2 years in colle....

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