You may be asking yourself, what do I need to know about buying a new construction home from a new home builder. Buying new construction is super easy and can be stress-free, there’s just a few things you need to keep in mind when you’re considering the purchase in the Nashville real estate market. Here, I’m going to give you the things to watch out for in pre-construction as well as contract items and a few other tips.
The Building Process
Remember. Your negotiation power is lessoned in a pre-sale. A pre-sale is when a builder has a lot and you want to build a certain home plan on that lot. While you can try to negotiate anything, the chances of you getting a better deal than a “spec” or “completed” home is not so strong. For example, if the price is $275,000 for the base model, you can expect the item listed on the finishings sheet. The typical upgrades are items like more hardwood on the floors, tiled utility rooms, finished bonus rooms and lighting upgrades.
Don’t over-upgrade your new home above its fair market value. When you’re in the buying mood, you get in the mindset of, “Hey, I’ll do it now, because I’ll never do it later.” Sure, you may not ever do those upgrades, however if you find yourself in a re-sale spot, those upgrades may not return to you. While you remember the day you chose that upgraded counter top or the extra piece of trim, you homebuyer will likely not notice it in the sea of competitors in your neighborhood.
You may see a better deal on a spec home. A spec home sitting in stock is a liability and a financial inconvenience on a developer. The best thing is you get to see exactly what you get. While it may not be the light fixture you would have chosen, or the counter top you would have been in heaven with, or the tile style you had envisioned in perfection, compromising those small details could net you a bigger value in the long run.
Be aware of the common sense (so you thought) upgrades. One Nashville builder (at one point) did not include the door between the master bedroom and the master bathroom. One person I know (prior to my tenure in real estate) discovered this upon closing new home. He was additionally reminded of it during his housewarming party, when the master bathroom (in full view of the back deck) compromised the privacy of a female party guest on the commode! Other “this-is-so-stupid-and-should-be-included” items include garage door openers, raised vanities, elongated commodes and closet lights, to name a few.
The Contract Process
The builder will have their own contract. Remember, that contract will be written with the home builder’s best interest at heart. There is absolutely nothing to be extra fearful about in this process. If you don’t use their contract, they’ll likely not work with you on the home purchase. They have the right to have their own contract. As you go through that contract price, here are some things to be mindful of.
Inspection contingencies. In the Tennessee state contract, after the inspection time, you have the right to exercise an inspection contingency for items that make you leery above cosmetics. In the builder contract, they will reserve the right to repair everything, giving you no “out.” Honestly, if you’re wanting to walk from a contract on a minor, fixable glitch, you weren’t purchasing the home in good faith…so shame! :)
Earnest money. If you’re getting upgrades, the builder will likely want those upgrades given in NONREFUNDABLE earnest money. Keep in mind, the builder would not have normally done those upgrades; and if you walk, he/she is stuck with having to try to sell it again with your taste items.
Completion dates. A builder will need to safeguard his/her interests if he/she cannot deliver the home on the contract close date. Rain, snow, supply backorders and a host of other items could delay construction. This could leave you in a situation that you may not get to close on time. This could be a big deal to you if (1) you have storage costs; (2) temporary housing costs or (3) any host of other costs. You will not be given recoupment of these costs, if the home is not delivered on time.
Incentives. Often, if you use the builder’s preferred lender, you may get closing costs, upgrades or a spattering of other perks. The preferred lender is in place to make sure you close at ALL cost. In the easy situations, there are typically no red flags; however, you may find that a you have to pay a bit more due to a loan type change or who knows what. It happens rarely, but just be aware. Don’t be afraid to ask your preferred lender to see if they can match or exceed those deals.
Should You Use A Buyer’s Agent?
Well, the REALTOR hat says you should, but I do have a condition on that. A buyer’s agent can cause a lot of problems in the normally systemized smooth process IF he feels like he has to prove his value to you in the process or his ego says, “I want to show you the power I have over these people.” Your buyer’s agent will likely be unable to conquer a lot of the things a builder may throw into the mix. A great buyer’s agent however will be a great advisor and measuring stick for what is normal/abnormal. A buyer’s agent value is also in the concierge services throughout the process. Find a buyer’s agent who understands the ins-and-outs of working with a builder and can create the biggest win-win, stress-free situation for everyone involved.
