Top 7 New Home Construction Tips

Is buying a new-construction home right for you? Here are seven new home construction tips you should know.

1. New homes may not be in your local MLS.

Unlike a regular seller who lists their home with a local real estate agent, homebuilders often have their own employees working for them on site. For buyers, this may mean the homebuilder isn’t a member of the local MLS. As a result, the builder’s homes may not show up in your agent’s MLS search. The builder may be more likely to advertise online, in the paper or with billboards. So if you’re interested in newly built homes, work with your agent to make sure you’ve identified all the possibilities.

2. New homes are often built after they’re sold.

A builder will often get financing lined up and map out both a construction and a sales process. Then they’ll try to sell as many homes as possible, before they’re even built. To accomplish this, they’ll build out a sales center and allow buyers to go in and review floor plans, fixtures and finishes while the homes are under construction. Depending on the state, builders need to get through some of the approvals process before they can actually start signing contracts.

For the most part, you can get a good idea for what your new home would look and feel like and where it will be located in the community.

3. Be prepared to put down a deposit.

Ready to move forward on a house, even before it’s built? You’ll probably have to put down a deposit, from a few thousand dollars to 10 percent of the purchase price.

4. Prices on new homes in the same project can rise over time.

Be aware that even if there are 100 homes in the planned community, they won’t all be available at once. Homebuilders tend to release homes in phases. If the first ten homes sell quickly at the asking price, and the market continues to do well, the builder can raise the prices on the second or third phase. Also, the sales cycle for a new community can take years. The last phase could end up being priced 10 percent or more than phase one if the real estate market has appreciated.

5. The first buyers can get the best discounts.

A homebuilder, especially early in the sales process, wants to get a few homes under contract quickly. If the builder can announce they have 10 homes under contract in less than a few weeks, the project may seem more desirable to future buyers.

Also, builders like to go back to their lenders with positive news about the project and their investment. To do this, they need early buyers to sign contracts.

For you, the buyer, this means there may be room to negotiate the price down early in the sales process. But there is potential risk. By being an early buyer, you’re committed to the project. If for some reason sales don’t manifest or you decide not to move ahead before the home is built, you risk losing your down payment.

6. Once the project is nearly complete, discounts may be available in the form of upgrades.

Is the project you’re interested in nearly sold out? If so, the builders may be a little more willing to negotiate, not on price but on upgrades. If they reduce the price on your home and the sale closes, then that sale price becomes public record. But if they offered you an upgrade package (hardwood floors instead of carpet or higher-end appliances), there’s no way to track that. What could amount to thousands of dollars in upgrades could end up being a better “deal” for you than a price reduction.

7. Homebuilders don’t get emotionally attached.

A typical seller has lived in the home for many years, raised their family or built memories there. So when it’s time to sell, the seller may experience all kinds of issues, questions and uncertainties, which can come out during the negotiation and purchase process. As a result, the seller may unconsciously price the home too high because they’re not ready to emotionally detach from it.

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