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Frequently Asked Questions

 

 

 

 

  • Is a new construction home right for me? 
First you need to consider how long you are going to live in the home and second, how much longer will the builder be constructing homes in the neighborhood. If you’re not committed to at least 5 years, then new construction homes might not be the best investment for your money. As long as the builder is still in the neighborhood, you’ll always have to compete with lending offers and upgrades that are typically impossible to match for a resale home. That said, if sales in the neighborhood are going well and the builder increases the base price of the home every phase of construction, it could work to your advantage. However, there are no guarantees, which is why we recommend committing to new homes for a minimum of 5 years. Another aspect of buying a new home vs. a resale is are you handy or can you afford to pay someone who is? If the answer to both of those questions is no, then new construction might be the best option for you! 
 
  • When is the best time to buy? 
First, when the house is completed, meaning carpet and grass are in! Next, at the end of the month. Lastly, at the end of the builder’s fiscal year, that’s not necessarily the end of the calendar year. 
 
  • How long does it take to build a home?
It depends on whether you are building with a production or custom home builder. Estimate 6 months for a production build and 15 months for a custom.
 
  • Do I have to use the builder’s lender? 
While you are not required to use the builder’s lender, many of the financial incentives the builders offer are tied to using their lender. For example, the builder’s lender’s fees might be $2,000 higher than an independent lender, however if you don’t use the builder’s lender you might be responsible for the title policy and no longer receive the builder paid 2 points towards your closing fees or ½ off upgrades. In this scenario, any of these incentives, let alone all three, seriously outweigh the lender’s higher $2000 cost. 
 
  • What is the typical out of pocket expense for a new construction home? 
Each builder will have a range and it also depends on what phase of construction the house is at when you execute the purchase contract. If you’re building from scratch, the builder typically requires 1-2% of the sales price as earnest money and then ½ of all upgrades paid in advance. If you go under contract when the house is almost finished or all upgrades are already selected by the builder, then 1-2% might be your only upfront requirement. Other expenses include, your own independent inspection, approximately $400 and loan application $400, this amount usually includes the cost of the appraisal ($350). 
 
  • What upgrades should I have the builder include and what should I do on my own?
This one is a little tricky. First off, do you have the financial ability to pay for upgrades out of pocket after closing? If the answer is no and you need the upgrades to be included in your loan amount, then just make sure you don’t go over board. Here are some factors to consider, how much of a mess will it cause if I try to do the upgrade with the builder vs. after construction completion, i.e. will a subcontractor have to cut into walls and rip up flooring? Does the type of upgrade I’m considering need a warranty, i.e. is it related to electrical and plumbing? Lastly, do I really need it and if so, do I need it now? 
 
  • What can I negotiate with the builder? 
Everything! More importantly, the closer the house is to completion or the longer it’s been sitting there completed and vacant the more negotiating power you have over the builder. That said, you can negotiate the title policy, closing costs, upgrades, HOA payments, down payment, you name it. The best advice is to always get the home for the lowest price possible, so try not to load your loan. The builder would always to prefer to charge a higher price and give more upgrades, so it doesn’t hurt the market comps in the neighborhood and while they might say an upgrade is worth $5,000 in most likely only costs them $2,000. Negotiating goes back and forth numerous times and it’s a dance of when and what to ask for. 
 
  • Should I get an inspection? 
ALWAYS! The builder will tell you that they hire their own independent inspector to inspect the home for you, but let me ask you this, if the builder is paying the inspector, who is the inspector really working for, you? The answer … not you! Spend the couple hundred dollars and possibly save yourself thousands by hiring your own independent inspector. 
 
  • How do neighborhood restrictions affect me? 
On the positive side, they can prevent nightmare neighbors who park 5 cars in the street, play loud music, have violent breed dogs, leave trash around, park their boat in the driveway, etc. Also, they can provide great amenities such as pools, parks and sport facilities. On the negative side, if you won’t use the amenities that you’re paying for or you need more flexibility like being able to park your RV or boat, then an HOA with neighborhood restrictions might not be for you.