NEW CONSTRUCTION IS DIFFERENT THAN TYPICAL REAL ESTATE
When buying new construction, you are typically buying a home that isn’t finished. If it’s in a community you might be able to walk through a model home, but if it is stand alone you’ll only be able to view floor plans and drawings to imagine the finished project. This makes buying new construction a little more difficult than buying a traditional home and requires a slightly different skill set.
IT’S COMPLICATED, USE AN AGENT
New construction is completely different than buying a completed home. For an inexperienced buyer, going to a build site without a real estate agent can make it extremely difficult to successfully navigate negotiations. If you’re trying to discount the home’s cost by not using a real estate agent, the builder or builder’s agent will receive the commision your realtor would have received instead.
However, not all real estate agents are created equal. If you choose to use the listing agent, remember they likely have a long, profitable relationship with the builder. Make sure they are keeping your interests and the builder’s with equal weight. Additionally, some real estate agents don’t work in new construction. It requires a special skill set so check your real estate agents previous sales to ensure their experience.
FACTORS THAT INFLUENCE BUILDER PRICE
There are several things that influence the building price of a home. Some are stagnant, but some are subject to change.
BUILDERS DON’T LIKE DROPPING THEIR PRICES
To avoid setting precedents for future builds, builders will be very hesitant to drop their prices. If they offer a discount on one home then the next buyer will be looking to push for the same deal, ensuring the builder undersells the home.
However, builder’s will still negotiate. Instead of lowering the price, they will be more likely to agree to pay closing costs or perform upgrades with no charge to make the home more appealing. These back end discounts are ways for builders to lower the price without future buyers seeing the discount.
VERBAL CONTRACTS ARE NOT BINDING
Anything and everything that is important to you needs to be in writing. If it’s only mentioned in conversation it likely won’t be included in the final product.
Additionally, do not sign anything until every last detail is figured out. Include deadlines and important decisions in the contracts so construction remains on time. Inevitably, there will be construction delays but this keeps the builder on track so you can accurately plan your temporary living situation while your new home is being finished.
YOU SHOULD DO YOUR OWN HOME INSPECTION
All homes have problems, even new ones. Conducting your own home inspection ensures there are no surprises when you move in and means the builder can fix code noncompliances before you move in.
THERE SHOULD BE A WARRANTY
Different from other real estate, many new homes come with a warranty from the builder. However, these warranties are not one size fits all. Read the entire warranty to see what is covered, what is not, and for how long. Some warranties are from third parties, like windows, that the builder will default to if you run into problems. Be sure to get your warranty information early so you can have time to read it over.
NEW CONSTRUCTION IS COMPLICATED, BUT PROFITABLE
With the return of an NFL football team and promise of the 2024 Olympics, investing in new construction has never been a better idea. Home values will continue to rise if Los Angeles is chosen for the summer Olympics, but the unwavering attraction of the South Bay’s endless summer makes any home a possible rental. While new construction poses its own set of problems, it can also come with great payoff.