10 Things to Know When You are Building a New Home
By Chris Lee
Before joining Kilner & Kirk I spent nearly 10 years selling hundreds of new construction homes for some of the largest builders in the nation. During much of that time, I worked hand in hand with John and Pat to ensure that my new home customers were able to get the best price for their prior home in order to settle on their brand new home.
If you’ve never purchased new construction, buying what is often called a “new build” instead of a “used home” can feel like deciding to run a marathon when all you’ve done to train is a weekly 2-mile jog.
To get you up to speed, here are 10 things you need to know before you sign that contract with the builder and break ground on a new home:
With most builders, your final sales price will typically increase from the "base" price. The base price is designed to get you in the door. But once you are in the model, the builder will offer you options and finishes which will add to the base price. Work with your agent to decide which options will add resale value so that your final price is well worth it.
Your timeframe to move into a new build will vary. New homes typically take 6 to 10 months to build unless it's a quick move-in home (sometimes called a spec-built home) that the builder has available. When planned for well, this extended timeframe can afford you a few months to prepare your current home to get ready to sell.
New homes will often come with a robust new home warranty. It's typical that these warranties last one or two years, covering structural and mechanical defects. It's also common to have an additional structural warranty that extends up to 10 years.
Many builders offer cash or upgrade incentives for using their lender and/or settlement company. While it’s definitely worth looking at this option, you should also ask your agent to connect you with other providers for these services. Even if you go with the builder’s incentives, you’ll be best off making them earn your business by knowing the playing field.
Most of the beautiful options you see in the models are (as the word option implies) not standard. Models typically show the highest option levels to show the home at its best. As a rule, the average new buyer adds between $20 to $70K in options.
With more demand for homes than there are homes to purchase, negotiations are slim in our current market. Do not expect that you are going to have the leverage to undercut a builder's price. Certainly, there are circumstances where there is an opportunity to pay less, but overall, this is not normal.
Builders charge "Lot Premiums" for more desirable lots. If you want the best view or to be closer to the pool you may pay an additional $5,000 to $40,000 for your lot. If you are paying more for a location within a new subdivision, have your agent run the numbers on comparable homes to be sure it’s money well spent.
Topography is extremely important. When purchasing a lot without seeing it graded as it will be when you move in, make sure you understand the future topography of the land. If the home has a walk-out basement, that typically means there is going to be a slight slope in the back of your home. If your home has a walk-up exit the lot is going to be flatter. These factors can impact everything from stormwater management to the usability of your yard to possible easements on your property.
Front Elevations (the aesthetic of the home from the street) can vary and will have increased costs. Features like stone, siding, or brick can easily add cost to your home depending on the option you choose. On a single-family home, I have seen clients increase their costs by over $40k just to get that perfect look!
New large subdivisions often rise in price faster than the rest of the market. When buying in a new subdivision, know what stage the builder is in. If you are buying a great location with strong demand and you are the first to invest into the equivalent of rising stock, your home value will stand to benefit more in the short term than if you are buying at the end of the builder’s tenure in a neighborhood.
With all of these factors, the question remains: should you buy new? New construction gives you immense control, and when what you control are factors that radically impact your life, that control is often worth paying for. Just be sure to pay for the factors that make your home also perform as a great asset for you.
