If you’re in the market to purchase a new home, you have an important choice to make – do you buy a previously owned home or one that is newly constructed? Both have definite advantages. With either choice, financing could be a big part of the picture. Additionally, the budget is decidedly different depending on which home you purchase but is an essential component of the equation. Let’s take a look at the steps a buyer might consider if a newly constructed home seems like the best option.
Find Out What Is Considered Extra and What Is Standard
What we are referring to here are upgrades and amenities. Upgrades will enhance your home but also something that you’re going to pay extra for (i.e. granite countertops, high-end appliances, etc.). Amenities, on the other hand, are things that come with the home. Amenities in certain communities, for example, could include a gated entrance, fitness center, clubhouse, community pool, etc.
When It Comes to Real Estate Agents, Builders, and Neighborhoods, Do Your Research
Here are a few things to consider when researching your potential new neighborhood:
- What are the plans for the area (your agent or the city planner’s office may know)?
- What are the zoning laws and will they be changing in the future?
- If the development is still in the midst of construction, can you live with jackhammers and trucks starting at 7 AM?
- Are Internet and cable readily available, what company offers service to you, and is the home already wired?
- Do HOA rules and fees apply (is there a homeowners’ association)?
- Talk to the neighbors and get a good feel for the community. Drive or walk around.
The Good, the Bad, and the Options
When you buy a newly constructed home, there are three ways in which to do so. You may choose to have a home designed and built precisely to your exact specifications. You can choose a home that has already been constructed on spec. Or you could go with a house that is somewhere in between – a semi-custom built home where you choose upgrades, finishes, etc.
Regardless, there are ups and downs to buying a brand-new house. Consider the following situations which can typically apply where homes/neighborhoods are being freshly built:
- Can you deal with the marginal lack of privacy presented by homes being built so close to each other?
- If a cookie-cutter type look exists, will it drive you crazy?
- Can you wait a couple of decades for freshly planted foliage and trees to mature? And do you have the time, money, and patience to deal with planting or sodding a new lawn?
- If the home is far from the city, will the commute be too much?
Demand a Home Warranty and Inspection
Home warranties vary, but typically they can run for up to 10 years. And though new homes come with a builder warranty that is implied, demand a builder’s warranty that will cover a specific period (i.e. one year following the move-in). This will cover any craftsmanship defects and should have an insurance company’s backing.
Never assume that just because the house is new, nothing will go wrong. For that very reason, place a contingency in your sales contract that specifies the successful completion of a professionally executed home inspection (and you get to choose the inspector).
It’s Time to Wrap up the Deal
You need to decide whether you’re going to find your own financing or, as is frequently the case, use the builders’ ties with outside lenders or their in-house mortgage lender. Because most mortgages can last 30 years on average, find out everything you possibly can about the entire process of mortgaging.
Don’t let any papers put before you go unexamined. In fact, getting an attorney (even if you are relatively comfortable with the legal process) is a good idea. If you don’t understand the meaning of every word in any legal form, do not sign it. And don’t be afraid to ask questions.