new construction
New construction can be exciting, but how can you be sure you are protected?
SELECTING THE RIGHT BUILDER Do your research prior to looking at a new home community. How familiar are you with the builder? What is their reputation? What is the quality of their construction? Are they a custom home builder or national builder?
REPRESENTATION The agent in the builder’ s sales office represents the builder’ s best interest, not yours. The sales contract is written with the builder’ s best interest in mind and each contract is specific to that builder. A buyer’ s agent can help you navigate through the terms of the contract and evaluate your risk in the transaction. You will specifically want to understand your risk in the event of future price increases while your home is under construction. Most builders will pay the buyer’ s agent commission or at least a portion of the commission.
RELEASE DATES Most builders are releasing a few lots at a time due to the supply chain shortage. Know when the lots will be released and how the offer process works. Often it is required that potential buyers be prequalified with the builder’ s lender prior to submitting an offer. Some builders are calling for the highest and best offers from buyers on the waitlist when a lot is released. Be sure you fully understand what you can do to increase the likelihood of your offer being selected.
OPTIONS Due to supply chain shortages some builders are not allowing buyers to make design selections. Instead, a home is built with a predetermined design plan that cannot be altered. When builders do allow buyers to make design selections most buyers are able to select all design features before the builder breaks ground on the home. The further the home is in the build process, the less design selections the buyer can make. For example, when the home is in the framing stage usually the cabinetry is already ordered for the home. Exterior elevations or exterior appearance is submitted to the city when the plat for the neighborhood is created and therefore cannot be altered. Homeowners may change the exterior appearance of their home once the neighborhood is transferred to the neighborhood HOA or independent HOA management company, depending on covenants and restrictions for the neighborhood.
EARNEST MONEY( DEPOSIT) & UPGRADES When purchasing a resale home, we typically see 1-2 % earnest money deposited at the time the offer is accepted. When purchasing a new construction home, we see a much higher earnest money( deposit) requirement. Most builders require a deposit of approximately 5 %, however that amount can vary. Builders also require buyers to pay a certain percentage of the design options selections in advance. Typically, the amount is around 25 %. When purchasing a new construction home, if a buyer decides to back out of the contract or default, they will lose their earnest money and any options money paid. A buyer needs to be 100 % sure they want to purchase the home at the time of signing the contract! Breaking the contract later can be very costly!