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Common Pitfalls When Buying A New Build
Buying a home is emotionally and financially stressful. Building a home? Now thatâ€™s a whole different animal. Thereâ€™s a big difference in buying an existing home on which you will imprint memories and experience, and choosing how a home is built. Often buyers get a â€śdream homeâ€ť mentality and start tripping into common pitfalls.
Letâ€™s see if we can prevent a few.
Bring Your Own Agent
This is one we run into a lot. The assumption is that, for an existing home, thereâ€™s a lot of research, inspection, and title issues that may crop up that are best handled by an agent. With a new construction, what could you run into?
For one, builders donâ€™t use a standard contract. If youâ€™re buying an existing home, a â€śPurchase and Sale Agreementâ€ť is generally about 10 pages, not counting all the other disclosures and documents that go with it. With a new build, theyâ€™re usually 25-40 pages, and every builder is different. Navigating the contract is its own special sort of nightmare, so having backup to make sure you donâ€™t end up in an unfair position is recommended.
Second, itâ€™s to the builderâ€™s advantage that youâ€™re unrepresented. This is why theyâ€™re eager to take down your name and info when you visit the model â€“ youâ€™ll be blocked from hiring representation from that point forward. They may even incentivize you to come in unrepresented. You see, building a home is a risk for the builder as well, so putting you in a position where you have as little leverage to make changes or back out of a contract is in their best interests.
Bringing your own agent to handle your contract and research for you costs nothing and saves big headaches later.
Reputation is Everything
Especially in a market like Middle Tennessee, when homes at all price points are in high demand and the getting is good, you need to know who youâ€™re working with.
Does the builder consistently deliver on time? What is their reputation for communication? Are there any liens by sub-contractors against their properties for back pay? Is there a history of codes violations, lawsuits, or other major red flags?
These are all things your agent can advise you on before you ever set foot in a model home, and can pay massive dividends in your stress level down the road.
When we buy a car, most of us realize at this point to say no to all the add-ons. When we buy a new home, thatâ€™s not always so.
The model home you see is going to be the best of the best. Itâ€™s going to have all the highest-end options you can choose from, be it granite, crown molding, hardwood, or more. Make no mistake â€“ this is on purpose. Youâ€™re supposed to fall in love with the biggest and the best, and this is another reason why they prefer you to be unrepresented.
Before you set foot in the model, understand where the line between â€śneedâ€ť and â€śwantâ€ť is, and know what your hard limits are when budgeting. Itâ€™s rarely the big things are push you overbudget, but the slow stacking of many small upgrades.
Builders are loath to adjust prices on their homes â€“ and in this market, they rarely have to. Adjusting their prices, when it closes and hits the MLS, affects the appraisal price of all the homes they have and will build, and flags to agents that theyâ€™re willing to come down.
If youâ€™ve got leverage, use it against something the builder can easily swallow â€“ upgrades and trim packages. There is a premium associated with every upgrade you choose, and things like crown molding, larger baseboards, or detail touches generally have more wiggle room that what appliances are installed.
You Donâ€™t Have to Use the Builderâ€™s Lender
So this one is complicated. Most every large builder is going to have a preferred lender â€“ sometimes they even own the finance company â€“ and theyâ€™re going to do everything they legally can to encourage you to use them.
In the state of Tennessee, you canâ€™t be required to use a specific lender, but a builder will often require you to be pre-approved with theirs to be eligible to purchase the home or receive incentives. The logic behind this is sound â€“ if itâ€™s a lender tied to the builder, theyâ€™ll keep them in the loop on any changes or problems with your status.
There are going to be times when using the builderâ€™s lender makes sense â€“ and thatâ€™s absolutely fine â€“ but you and your agent should do you research first. If another lender provides a better rate or options and the builderâ€™s lender canâ€™t match them, donâ€™t hesitate to use whatâ€™s best for you.
Donâ€™t Skip the Inspection
Itâ€™s a no-brainer that youâ€™d want an inspection on an older home, but why bother with a new build? New homes have problems too. Maybe a sub-contractor was rushed and did shoddy work, maybe the builder is working on multiple homes and got something mixed up. Regardless, hiring your own inspector to double-check is money well spent.
With new construction, there are two types of inspections - pre-drywall and final walk-through. A pre-drywall inspection allows you to make sure electrical, cable, and other utility lines re in the right place for any planned features. This is especially important if youâ€™ve requested any special, electronic additions.
The final walk-through is much like an existing home â€“ the inspector will check for codes issues, proper functioning of all systems, and any obvious errors in construction. If anything got sloppy during the build, this is where theyâ€™ll catch it.
Learn to Live with Delays
Itâ€™s stressful enough planning out a two-sided closing â€“ in which your current home closes or lease expires at just the right time to move into your new home. Let me just state â€“ itâ€™s almost impossible to plan in new builds. Yes, plenty of builders close on time and on schedule, but thatâ€™s the exception not the rule. This is where your early research on the builderâ€™s reputation helps, but does not guarantee an on-time close.
You have to understand â€“ building a home from scratch requires a level of coordination from venders, sub-contractors, codes officials, and the blessings of agreeable weather stretched over months. Have a backup plan for where you can stay, or arrange to stay in your current lease/home on a month-to-month basis to accommodate.
Know Your HOA
Most new-build homes in and around Nashville will be part of a planned community and have some form of HOA. There will be fee to maintain common areas and amenities, so itâ€™s important to know what thatâ€™s going to run you. This may also affect where you choose to buy â€“ if youâ€™re never going to use the community pool, why pay for it?
More importantly, you want to know the community rules your HOW binds you to. While some are very loose in what they do and do not allow, some have very narrow limits on how you can modify the exterior of your home â€“ from what color you can paint the door, to when or how many Christmas decorations you can have.
If youâ€™re the first phase of a community, these restrictions may not be as clearly defined, so lean on your agent to research them for your and help decide if this is home-sweet-home or a headache in the making.
Be Aware of Whatâ€™s Next
Just because you picked a lot that backs up to peaceful woods or an open field doesnâ€™t mean it will stay that way. Depending on the community and builder, more phases or construction may be planned in the near future. That view maybe filled with construction crews and, eventually, a new neighbor not long after you move in.
Also, consider the area at large. New, large communities are often built in response to jobs and demand, and they attract small businesses and retail shopping centers to serve them. Itâ€™s worth the time to research what development is happening in the area. Are the roads in the area large and maintained enough to support more residents? Or is that another round of construction to look forward to?
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