5 Common Mistakes to Avoid When Buying New Construction
Today’s interest rates run high in the world of real estate, and many homeowners who prefer to relocate instead are looking to stay put. For many, it is not worth the rush to sell when mortgage rates are as low as 4%-6%. This means that there is an extremely low inventory of homes existing for sale, meaning that buyers can’t find a resale home that suits their personal needs or budgets. If this seems like your situation, new construction might be the route for you to consider. Brand-new homes provide enhanced energy efficiency, layouts, and amenities that are better suited to modern lifestyles, as well as the potential to customize space that you don’t get with a resale.
In this article, we will discuss five important mistakes to avoid when buying a new construction home.
1. You Can ALWAYS Negotiate with the Builder
A myth is that prospective buyers of new construction homes typically believe that builders are not going to be willing to negotiate the price of the home. This is not true. Buyers can negotiate all of the following, including price, loan fees, lot lines, and other items. A builder has the right to say no, but if you never ask, you won’t know the answer. A real estate agent who specializes in new construction can provide pointers when negotiating with builders. Hiring an agent will cost you nothing as a prospective new construction buyer, as builders will typically pay the agent’s commission from budgets in marketing.
2. Always Budget for Items That are Not Included by the Builder
It is important to understand what is included in a new build and what is not. New builders offer blank slates. Many brand-new homes don’t come with fully landscaped yards, meaning that if you move in, you get the honor of designing that space. If you purchase in a development with a HOA, you will more than likely have a limited window to put down grass or plant trees, which will cost thousands of dollars out of your pocket. It is important to always look over the HOA contract closely to help you budget for expenses ahead of time. Nothing will rain on a new homeowner’s parade than a scolding letter from the HOA pointing out something that you failed to do. If your home will not be finished months out, try to obtain estimates for the items you will need to pay for and set money aside for those projects. New homes don’t come with basics like window coverings, towel racks, toilet paper holders, or even light fixtures. It is important to know what is not and is standard with your new home beforehand so that there are no future surprises when you finally move in.
3. Don’t Use the Easy Lender Option Way Out
Some large builders have in-house mortgage lenders or companies that they prefer to work with. Whether they are competitive or not, they may not offer competitive rates and terms. If you don’t opt to shop around for the best lender, there will be no basis for comparison. Getting pre-approved with an outside lender gives you more knowledge in being able to compare your experience with obtaining the best experience. When in-house, outside lenders will want to compete for your business, giving you more leverage to negotiate loan costs or interest rates.
4. Know the Builder’s Timelines and Warranties
When you opt to buy a new-construction home, there are two different types of builder warranties that you will hear mentioned: implied and express. Warranties that are implied will help to cover potential defects in workmanship that will impact a new home’s habitability, safety, and livability based on your local standards and building codes. Implied warranties will be worded vaguely, and they typically have a 10-year liability cutoff period for builders. Builders may have an interest in expressing warranties, which are more precise wording on what is covered and times that are cut off for varying parts of a new build. Builders can sometimes request buyers to waive their rights to implied warranties when expressing warranties are offered, making it all the more important to read warranties closely.
Builder warranties usually don’t cover defects or issues with a new home, including the following:
- Appliances are covered by a manufacturer’s warranty.
- Wear and tear damage.
- Lack of maintenance damage or neglect by the homeowner.
- Items installed by homeowners other than the builder defecting.
- Natural disaster-caused damage.
5. Opt Out of Upgrades That Won’t Add Value
A final big mistake to avoid is to not get caught up in the customization of the home. Add-ons or options can seem limitless when walking into a builder’s showroom. Before going on an upgrade spree, it is important to consider which ones will add to your home’s value rather than making it look nicer. It is important to consider the cost difference between a builder upgrade and hiring your contractor to do the work later on.
Bottom Line
Investing in a new construction home will provide a lot of additional perks to your daily life. There are also plenty of pitfalls as well, so buyers need to pay close attention every single step of the way, enlisting the help of an expert when necessary and working closely with a trusted real estate professional. Consider all of the pros and cons of new construction before signing on the dotted line for a shiny new home.