What You Need to Know
There’s a lot to consider when buying a home from a builder. The process is exciting, especially with the prospect of living in a brand-new home, but it’s also different from buying a resale property. Here’s an overview of the key factors, along with why it’s essential to work with a knowledgeable real estate agent throughout the process.
Spec Home vs. Custom-Built Home
When buying from a builder, you typically have two main options: a spec home or a custom-built home.
Spec Homes are usually near completion and can have quick possession timelines, typically within 0 to 6 months. However, customization options are limited because materials and finishes are often already selected by the builder.
Custom-Built Homes allow more choices, as you can select the floor plan, finishes, and even the lot. This process, though, usually takes longer—anywhere from 8 to 18 months.
Each option has its benefits, but it’s essential to be clear about your timeline, flexibility, and customization needs. Working with an agent can help you decide which type of home best meets your priorities.
The Importance of a Real Estate Agent
Having a real estate agent by your side is crucial to ensure you’re well-protected and fully informed throughout this unique buying process. An agent brings essential market knowledge, can help with contract terms, and works in your best interest rather than the builder’s.
Before visiting any show home or sales center, it’s essential to bring your agent with you to your first appointment. This step allows your agent to register with the builder, ensuring they can fully represent you. After that, you’re free to visit the property as often as you’d like, but having your agent involved in every step will help avoid potential pitfalls.
Key Factors to Consider
1. Builder Reputation and Reviews
Researching the builder’s reputation is critical. A reliable builder with a solid track record can make a huge difference in the quality and satisfaction of your home-buying experience. Your real estate agent can provide insights into reputable builders and help steer you clear of those with poor track records.
2. Warranty and Post-Purchase Support
Most builders offer a warranty on the home, which may cover issues with structural components, workmanship, or major systems like plumbing or HVAC. Be sure to understand what’s included, and have your agent review the warranty with you. Agents can help ensure you get the post-purchase support you’re entitled to if issues arise.
3. Timeline and Flexibility
Construction timelines can vary, and delays are not uncommon. It’s essential to have a realistic understanding of the builder’s timeline and flexibility for completion. Your agent can help manage expectations and keep you informed, so you’re prepared if there are delays or if your move-in date needs adjusting.
4. Escalation Clauses
Be aware that many builder contracts contain escalation clauses. This clause allows the builder to raise the price if material or labor costs increase during construction. An experienced real estate agent will ensure you understand these terms, so there are no surprises.
5. Deposit and Trust Accounts
Builder deposits can range from 5% to 20%, depending on the builder. Ask if the deposit will be held in trust or used to fund the construction. If it’s not held in trust and the builder faces financial issues, you risk losing your deposit. Your agent will guide you on reputable builders and can help clarify these critical financial details.
6. Hidden and Additional Costs
Beyond the base price, new homes often come with additional costs, such as landscaping, appliances, or even window treatments, that may not be included. Agents can help you get a complete picture of these costs and identify upgrades that could increase your home’s value.
7. Mortgage Considerations for New Builds
Financing a new build can come with unique challenges, especially for longer timelines. Interest rates may change over the construction period, and mortgage terms could vary. Your agent can help connect you with mortgage specialists who understand new construction, ensuring your financing aligns with your plans.
8. Walkthroughs and Inspections at Key Stages
A home inspection is vital, even for new builds, to ensure everything meets quality standards. Arrange walkthroughs at key stages of construction, like framing, electrical, and the final inspection. Agents can coordinate these walkthroughs to help you spot any issues early on and keep you engaged in the process.
9. Community Development and Amenities
If you’re buying in a new community, consider the future development plans. Many new communities offer added amenities like parks, schools, and shopping centers that increase property value and improve your quality of life. Agents are familiar with local development plans and can help you choose a location with desirable amenities.
10. Resale Considerations for Builder Homes
While new builds are highly customizable, it’s wise to consider features that enhance future resale value. Upgrades like a finished basement, energy-efficient appliances, and high-quality materials can make your home more attractive down the line. Your agent can advise you on which upgrades may add long-term value and appeal to future buyers.
What If You Have a Home to Sell?
If you’re buying a new build and have a home to sell, it’s important to consider how the timing of your sale will align with your new home’s possession date. This is usually less of an issue with spec homes since possession typically happens within 0 to 4 months. However, with custom-built homes, possession can take 8 to 18 months, and the real estate market can change significantly during that time.
For example, if you’re counting on your current home’s value in today’s market to finance your new build, there’s a risk that market conditions might shift, potentially impacting your financial plans. This is where having a REALTOR® by your side is invaluable, as they can guide you in planning and timing both your sale and purchase.
Curious about how to navigate selling your home while buying a new build? Check out my upcoming blog post, "What to Do When You Have a Home to Sell While Buying a New Build," where I’ll dive into strategies for managing overlapping timelines, market risks, and financing options.
Final Thoughts: Why You Need a Real Estate Agent
Working with a real estate agent when buying a builder home can be a game-changer. Builders’ sales representatives work for the builder, not for you. An agent will help you navigate the builder’s contract, protect your interests, and keep you informed at every stage. They’ll ensure you’re aware of your rights, help with any negotiations, and address potential issues before they become significant problems.
To ensure you’re fully protected, take your agent with you to the first visit to any builder’s show home or sales center. This step is essential for registration, allowing your agent to represent you throughout the transaction. Once registered, you can visit the property as much as you like, but it’s still wise to keep your agent involved for their guidance and support.
If you're considering buying a home from a builder and want expert guidance, I’m here to help every step of the way. Contact me today to make your new home purchase a smooth and successful experience!
