10 Things You Must Do Before Buying a New Construction House
Don't sign on the dotted line until you research the neighborhood and learn about the builder.
A Habitat for Humanity volunteer pounds nails into part of a wall frame as he helps build a home April 16, 2010 in Oakland, California.(Getty Images)
Most homebuying advice is aimed at people who are buying an existing home. But what if you're in the market for a new construction house or condo? What do you need to know to ensure the home you're having built will meet your family's needs?
Buying a newly built home provides some exciting options that may not be available to you when purchasing an existing home, such as the ability to choose the exact kitchen cabinets, flooring and even floor plan you want.
But it also creates some additional challenges, including making sure your builder is reputable, the community is sound and your home will be ready when you are.
Start with studying the community carefully, says Angie Hicks, founder of AngiesList.com, which provides referrals and reviews of service providers.
"We got into the home services niche, helping consumers find great companies to hire, because home is where our heart is," she says. "And your 'home' is bigger than the building where you lay your head. The neighborhood and larger community is an important element of where you want to build – or buy new."
When you begin your search look closely at the subdivision and the location.
"There's no harm in actually visiting the community and talking to neighbors," says Maria Wilhelm, vice president of sales for the Illinois division of the PulteGroup, a national homebuilder. "A lot of people actually do this."
Making a visit is a good way to find out not only about the quality of the homes that are being built, but also about how the condo or homeowners association operates, whether parents like the schools and if you really can commute to work in a reasonable amount of time.
"You don't want the home of your dreams in an area that's a nightmare for you – whether that's because your commute to work is too long, you don't like the schools or there's not great Internet service out in your picturesque rural setting," Hicks says. "These are things you need to know going into the purchase."
Here are 10 things to do when you buy new construction:
Use a real estate agent if you can. Since the seller typically pays the commission, it costs a buyer nothing to be represented by a real estate agent, and many builders are happy to work with agents. An agent who regularly deals with builders and knows the local communities will provide lots of helpful information.
Check out the builder. Many home builders have been in the business for years and produce a quality product. However, a few do not. Check review sites, state licensing boards and the local court records to see whether the builder you're considering has run into any trouble, including lawsuits, complaints with licensing agencies and disciplinary actions by state and local agencies. This is also a good time to talk to previous customers.
Research the community. Before you buy, find out as much as you can both about the area and the subdivision or condo itself. Visit at different times of day, and talk to residents about what they do and don't like.
Choose square footage and location over upgrades. Think about how you want to spend your limited budget. You can never change your home's location, for example, but you can upgrade flooring later. Apply that logic to other choices as well. If you're choosing between a fourth bedroom and granite countertops, you probably should choose the extra bedroom, which is much more expensive to add later. "In that first house that you buy, buy as much as you can, but don't do the upgrades. I'd go for locale. I'd go for square footage," says Scott McMillin, chairman of the board of Corky McMillin, a homebuilding company started by his father, and chairman of Better Homes and Gardens Real Estate McMillin Realty.
Don't overimprove. Choose a home size and options comparable to those of your neighbors. "You want to keep up with the Joneses but not get too far ahead of them," Hicks says. "You don't want to price yourself out of the neighborhood with things that no one else has, but you also don't want to be the only house on the block with linoleum if everyone else has gone hardwood."
Understand your floor plan. Most floor plans include room sizes, and if you don't understand those, take a measuring tape to your current home. Many builders offer virtual reality technology that lets you see what's going to be built, but a better option is to visit a home with the floor plan you want, even if it's still under construction or in a different community. "Nine out of 10 times, people want to physically walk a home," Wilhelm says.
Have a lawyer vet the contracts. Contracts for new construction are complex. As with all legal affairs, it makes sense to have an expert look them over before your sign.
Ask about warranties. Most builders offer warranties on materials and workmanship. Pulte and its companies Centex and Del Webb, for example, offer a one-year warranty on workmanship, a two-year warranty on mechanical and electrical elements, five years on water leaks and 10 years on structure. Make sure you understand what is and isn't covered and what process you need to follow to get something fixed.
[See: The Best Apps for House Hunting.]
Get a home inspection. You may think you don't need to have a newly built home inspected. But getting an independent inspection before closing is always a good idea, and you want to be there so you can learn more about the home. "Newer homes can have just as many problems as older homes, and it's always better to know what you don't know before the last piece of paper is signed," Hicks says. "In the case of a newly built home, a good home inspector can help identify problems before a builder's warranty expires."
Get multiple bids from lenders and closing agents. Your builder may have a preferred lender and a preferred closing agent, and you may be offered discounts and other incentives to use those professionals. They may or may not be your best choice. Get quotes from additional lenders and closing agents, and then decide which is the best option for you.