Purchasing New Construction Homes
1. Have your own real estate agent. Believing they might get a better deal or out of ignorance many buyers use the developer’s sales agent to represent them. All homebuyers should be represented by a Realtor who has a fiduciary responsibility only to them. Buyers shouldn't forget that most developers require that your real estate agent must accompany you the first time you visit a sales center.
2. Be VERY careful in using the builders “in house” lender. Those incentives for using them often mask higher loan fees. Contact a local independent mortgage broker to obtain a quote for comparison.
3. Consider resale characteristics. Remember location and craftsmanship are important considerations to keep in mind for obtaining the best return when you go to resell the property at a later date.
4. Watch those contracts. Developers contracts favor the developer and are different from standard local real estate board approved contracts. It would be best to have your Realtor review the documents with you before you sign.
5. Understand why developers request upgrades paid for in advance. Experience has taught developers that some buyers will cancel the purchase of a unit for several reasons. If the buyer specified the floor-coverings, countertops and kitchen cabinets and they have been installed by the developer this represents a marketing issue to the developer as other buyers will want to select their own finishes. Plan on paying upfront for all upgrades and changes you make to a unit, and if you decide to walk from the project once you have paid for upgrades, expect a fight from the developer if you want a refund on them.
6. Research warranties on structure, finishes and appliances. Developers typically offer five or ten year warranties on structural elements of a home and rely on manufacturers warranties for appliances, furnaces, windows and overhead garage doors. Beware of one-year warranties on structural elements.
7. Ask for holdbacks on unfinished work. Weather or material supply problems can interrupt completion of a home. If some items aren't necessary for occupancy the developer will want to close on your home. Make sure any substantial items or features that are not completed in your new home have designated funds set aside for their installation or completion. Request these funds be held back and deposited in an escrow account at closing.
8. Have a final written punch list. You should have a final walk-through at least three days before closing on your new home. Create a punch list of all uncompleted or unfinished items. Punch lists can also call attention to items that need to be repainted or need additional attention. Both the developer and the buyers should sign the final punch list in agreement.
9. Beware of pre-construction buying risks. Pre-construction pricing can attract value-driven buyers. There is some risk entering into a project before it has started. Verify that the developer has received a green light from local building authorities and has a proven track record of timely completion in the community.