Buying a pre-existing home and buying a brand new home have many of the same procedures. In both instances, the buyer pays money to show serious interest (earnest money in a transaction on a pre-existing home and a deposit for a new construction home), due diligence occurs (inspections and appraisals), the finances are completed (either a loan is secured or cash is transferred), and final documents are signed at closing with a title company that acts as the third party. However, some things are different, and there are some things you need to know in order to compare the two options.
See my list of pros and cons of buying a new construction home.
1. Usually purchasing a home from a builder is a fairly straightforward transaction. You get your pre-approval, choose the house - whether it is one of their inventory homes or a home that is currently being built - and pay your deposit, and you have a house (provided that nothing changes in your situation to cause the financing to fall through). Some builders offer no negotiations while others will wiggle a bit, but there's generally far less back-and-forth with negotiations.
2. No pet allergens. If you are prone to allergies from pet dander, buying a home that has been lived in could potentially necessitate more deep cleaning, replacement of all carpets, and the need for an air purifier. With new construction, you remove the issue of pet dander from previous owners.
3. Incentives. Builders often have incentives for potential buyers, like money toward closing costs, interest rate buy-downs, or package deals for appliances like washer/dryer and/or refrigerator that are not usually included in the sale of the house.
4. Warranties. Builders warranty their work. Different parts of the home will have warranties for different lengths of time, but all builders offer a warranty of some kind. Make sure you get the warranty information before signing, and keep that information handy.
1. Very few negotiations. I may be able to talk them into throwing in an extra ceiling fan (maybe!), but generally speaking, builders right now are not doing a lot of negotiations.
2. Dust. When you purchase a home in a community that is still being built, there will be dust (or mud after it rains) everywhere.
3. Strings attached. In order to get the incentives they offer, builders have strings attached that involve using their title company and their loan officer.
4. Noise. If you work from home, make sure you have a sound machine and/or ear plugs, as you will hear construction noise regularly.
5. Delays. If you are contracted on a house that is still being built, expect delays. If they initially tell you that your home will be completed on July 15, and your lease ends July 31, have a backup plan in place in case it is not completed on time. Some builders generally get their homes built when they say they will. Others are often delayed by a few weeks to a few months.
6. Very little regulation. Because builders and their sale representatives are not regulated by the Texas Real Estate Commission and are not required to follow the National Association of REALTORS®' Code of Ethics, they play by their own rules. And while most of the sales reps I have worked with have been polite and professional and have "played nicely," sadly some have not. This also means that builders are free to change the price after you have gone under contract - sometimes by tens of thousands of dollars! Of course, if they raise the price, you can get out of the contract, but you need to have a backup in place in case that happens.
Need to Know:
Here's some other information about new construction that is neither positive nor negative, but good to know ahead of time.
1. Builders use their own contracts. Because they do not use the standard forms provided by the Texas Real Estate Commission, you and I both need to have time to carefully read the contract to make sure we do not miss anything like deadlines and contingencies.
2. Yes, you still need an inspection. Just for fun, go watch some videos by Austin Jenkins and pay close attention to the ones in which he is inspecting new builds. Inspections on new construction go in phases so they can inspect it from the ground up, with the final inspection occurring after it is complete, before you move in.
Buying a new construction home can be a great option since it allows you to customize certain features and everything is brand new. It is important to do your research on both the builder and the neighborhood you are considering before making a decision. If you have questions about buying new construction, just ask!
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Carolyn Barnes, Your REALTOR® & Katy Expert