Home Buying Tips
5 things to consider when buying a new construction
Reading Time — 8 minutes
October 4, 2019
By Opendoor Team
Reading Time — 8 minutes
October 4, 2019
If readily available in your desired market and financially harmonious with your budget, the decision to buy a new construction home almost seems like a no-brainer, right?
After all, that new car smell really pales in comparison to that new home smell, and pre-owned goods aren’t everyone’s cup of tea. It’s important to understand, however, that just because it has that new home smell, there are still things you need to look out for to make sure you’re making a sound investment.
Here are five things to keep in mind if you’re considering purchasing a new construction:
1. The model home isn’t standard design for many builders.
When you’re shopping newly constructed properties, chances are you’ll tour a model home at some point. These homes basically function as interactive showrooms that are gorgeously outfitted with the more premium upgrades a builder has to offer. Their purpose is to demonstrate the customization a builder offers by allowing buyers to experience the full design potential of a home.
Before you get too lost in a model home’s beautiful design, it’s imperative to remember one thing: model home configurations aren’t usually reflected in base sales prices. That’s because most base prices are based on the homes featuring “builder grade” options, aka less premium materials and finishes.
Luckily, the design options of a model home are typically very flexible. Much like buying a new car, you can decide which upgrades you want to add to the base configuration and which you don’t. Unlike buying a new car, where the value decreases the moment you leave the lot, adding premium elements to your home’s design can actually increase its value. Just be sure to consult your budget before making any final decisions.
2. Understand all your financing options.
In addition to offering a home that’s custom built for you, many builders also have representatives on-site who can assist you with every step of the process, including the crucial step of finding a lender.
“One of the most important steps on the road to purchasing a home is to complete a pre-qualification,” says Josh Andrade, a Lennar New Home Consultant based in Dallas-Fort Worth, TX. “Your budget and purchasing power will determine your time frame, areas you will be looking at, and starting price point.”
Top homebuilders often have a network of reputable lenders to whom they can refer you. Take time to understand the different loan options that are available to customers who purchase a new home, such as conventional, FHA, Jumbo, and VA loans. And don’t hesitate to speak to multiple lenders. In a 2018 study, Freddie Mac found that borrowers could save an average of $3,000 over the life of a loan by getting five rate quotes.
“Most new construction pricing is not calculated by square feet but by what is inside the home,” Josh adds. “Sometimes people underestimate their readiness to purchase a home and believe that they are a few years out from their dream home when in reality they could be ready now and take advantage of the current market.”
3. Asking questions is important.
You won’t actually be able to see the finished product until, well, it’s finished. So it’s important that you ask questions along the way. This keeps the dialogue between you and builder open and the process transparent. Lapses in communication can lead to misunderstanding which can lead to misaligned expectations.
“What I would recommend is not only doing your research about the location and homebuilder, but also feeling comfortable with the salesperson and asking to meet the superintendent,” says Tom Watkins, New Home Counselor at Mattamy Homes in Phoenix, AZ. “Walking job sites before buying is important, as a clean job site is a sign of a superintendent who cares and is dialed in!”
Asking questions about the builder’s past work, financing, and scheduling plans is fair and actually quite common as well. Doing so will not only help you better manage your expectations around the process, costs and timelines, but it will also help put your mind at ease as you wait for your dream home to come to fruition.
To give you a sense of where to start, here are a few common questions to ask your builder:
What are the builder’s other projects?
What percentage of the units/properties/plots have sold so far?
Who is your point of contact during the build?
Which features are included and which are upgrades?
What happens if there’s a delay in the schedule?
How often will you be able to view the home during construction?
Don’t be afraid to do a little research on your own time. You can search for reviews of the builder online or even do a drive-by of any of their previous projects to get a sense of their reputation and the quality of their work.
4. Your timeline might affect your options.
While a model home might not technically be considered a new construction in some cases, purchasing one would still mean you’re the first person to live in it. That’s right, depending on the status of a development project, you might be able to snag a model home (premium upgrades and all) for a deal. Once a certain percentage of units in a development have been sold, the builder is likely to want to offload the model home as every day it sits vacant on the market, the builder loses money. It’s a great option for buyers in a time crunch as it means you get a fresh new home that’s turnkey ready.
Speaking of timelines, building a home from the ground up can be an excellent option for buyers who are looking to buy but aren’t in a hurry. Factors ranging from weather conditions at the build site to delays with building materials all affect the timeline of completing a custom built home. Typically, the average new construction takes anywhere from 7 months to just under a year to complete. This could be great news if you’re only 5 months into a 12-month rental agreement. You can break ground on a new home without breaking your lease agreement. Who doesn’t love a win-win?
Speaking of a winning situation, Opendoor actually offers flexible closing dates (up to 9 months) and a late move out grace period of up to 2 days for Opendoor customers who buy a new build and sell through our homebuilder trade-in service.
5. Having your new home inspected is still a good idea.
It may come as a surprise to many buyers, but even new constructions can have structural issues. Hey, mistakes happen. This is why it’s always a good idea to have any home you purchase inspected by a licensed professional before closing.
“The homebuilder will handle city and county inspections, and typically employs their own third party quality control company,” says John DiCristo, Keller Williams Ballantyne Area REALTOR® who specializes in new construction. “That does not replace a licensed inspector though, who will perform an inspection before drywall covers up any mistakes, and a final inspection checking all finishes and mechanicals.”
Just as they would with a previously-owned home, the home inspector is there to verify that the property is safe and up to code. If any of the work done is not up to par, the inspector will include it in his report and suggest a remedy. You’ll then have the opportunity to bring your concerns to the builder and negotiate a fix.
Final Thoughts
Whether you want to be the first to leave you mark on a home or simply want to personalize your personal space, there are countless reasons you might decide to purchase a new construction. Regardless of those reasons, the fact remains that the homebuying process can be a bit tricky. That means it’s important to be as diligent and thorough when buying a shiny new home as you would when buying one that’s “gently used”.
Affiliation Disclosure: Please be advised that a member of Opendoor’s board of directors is also a member of Lennar Corporation’s board of directors. Because of this relationship, transactions with Lennar may provide Opendoor a financial or other benefit. You are NOT required to transact with Lennar as a condition of working with Opendoor. THERE ARE FREQUENTLY OTHER PROVIDERS AVAILABLE WITH SIMILAR SERVICES. YOU ARE FREE TO SHOP AROUND TO DETERMINE THAT YOU ARE RECEIVING THE BEST SERVICES AND THE BEST RATES FOR THESE SERVICES.