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My last two homes were new purchases with me being able to pick the style house, the location, and upgrades. In both cases we put $500.00 down to secure a specific lot and then we had 30 days to pick a style, options, price it all out, read the Covenants/Bylaws, arrange financing, before we went to purchase. I could cancel out for any reason and the $500.00 was refunded. Mine was a cash deal so I made my own financial arrangements. I do not know how others worked their finances.
I say no need for a realtor but you will need to have a lawyer review anything before you sign it, especially the final contract. Some realtors say well I will keep an eye on as it gets built. My last realtor (when I sold) was great but she did not know the difference between a shingle nail and a finish nail. She would have been no help on construction issues.
Unless one has a preference when it comes to financing they are all doing the same act for money. If the builder has a preferred mortgage vendor and they are cheaper, then use them. If they are the same as others then extract your pound of flesh for using them in like what are you going to do for me.
My experience says there is very little negotiating room on the base price but one can wheel and deal on the options. One should never pay more then 70% for any option. Do the options now. Do not regret not doing them.
Your new house will never be 100% perfect when you move in. My experience says as long as the builder is still building in the neighborhood then I have someone to go to for my punch list (items remaining to be done). Back to the "gifts" for the construction site manager.
Some will strike a deal with a home inspector for walk throughs as the building is done. Not a total inspection but a series of look ats as construction proceeds.
There will be a construction site manager. Become friends with him. Ply him with favors, cigarettes, beer, cold drinks, good bottle of whisky, etc. He can be your best ally as can be the builders real estate agent. Go to the bribe early and often......LOL
Construction will be in phases. Sometimes you will see no action for weeks and get mad. Then bingo, it is done. Be patient.
Oh, on the financing piece, many will ask that you pre-qual w their lender shortly after signing the contract. You are free to use your own lender at any time, but just pre-qual w them initially so that it's streamlined.
Later, as you get closer to completion, you can shop other lenders and do a total cost analysis to see if the lender's up front incentives (w a potentially higher rate & fees) make sense vs. a lower rate somewhere else. On our last home, we had a GFE from the builder's lender w their incentives. Then went and shopped around. I found a better rate and fee structure elsewhere and the builder's lender matched + gave the incentives.
Last post has good info. You will want to do at least a final inspection and maybe a pre-drywall inspection via a 3rd party. It will give you peace of mind and help ensure the builder resolves issues that you may not be aware of. As you get to the finishing stages, not a bad idea to treat the crews to a fast food bfast (a box of bfast tacos goes a long way!). And yes, the construction mgr is the perfect person to treat every now and then They manage 10-15 houses at any given time, so your little treats now and then will keep your home @ top of his mind and they generally want to do right by you.
All good advice here from prior posters. We're on our 2nd new construction (1st time in DFW also). IMO the market is so hot in DFW right now, there is little/no negotiations. I know when we tried just modest negotiation on lot premium $5K off, we were shot down. It was take it or leave it.
The design phase is much like what you described. Almost all of the pretty stuff you see in models are upgrades. At the very least, upgrade things that are hard to do later (wiring for fans, structural upgrades, bathroom tiling). You may also consider doing things that cost a lot if doing out of pocket on your own later.
Yes, builder will mark up everything, but think about how cheap $ is today and, combined with amortization of 30 yrs, will another $20-$75 on your monthly payment be a big deal if it makes you really happy? Let's say you don't do $5K in upgrades which you really want and are thinking about doing later. $5K is ~$25/mo at today's rates. Seriously weigh the [inflated] builder's price vs. doing it yourself later at cash out of pocket with money you'd be "borrowing" at over 5% (either market opportunity cost or other loans).
Down payment depends on builder and community. We paid 3% at contract. Then, at options/design phase, we had to pay 40% of options costs above $30K. That was in Nov. Many builders in DFW are now requiring 5% at contract.
It is all cheap and nice until there is negative equity in the property.................
Get ceiling fan pre-wires and them buy/install the ceiling fans of your choice.
Upgrade anything you wish that you can't do later for less cost. Electrical, flooring specifically. But, you can change water faucets, light fixtures, paint later for less money.
Water faucets are a bigger deal than you think. I would have happily waited to put in my desired faucets but then I would have been stuck with the extra holes in my sinks that would have come with the builder grade faucets. So you can replace them but you'll be limited to something that fits the same template of what the builder puts in. That's a bit easier in the bathroom but in the kitchen, if you want a more modern single handle faucet, you are going to have to use a plate or plugs to cover up the holes from the standard double handle faucet that most builders will use.
As for the OP's original questions.
1. As others have said, if you have already connected with the builder, it's unlikely they will let you now insert your real estate agent into the process. As for negotiability, it depends on your market. I bought new construction last year in Denver - one of if not the hottest real estate market in the country. I had my own agent (who came with me and signed in on my very first visit to the model home). There was no negotiability at all - if I didn't buy it, someone else would and probably within the next day or two.
2. After shopping around, I used the builder's preferred lender. Their rates were the same as everyone else I talked to and the incentive made them a better deal for me.
3. With my builder, I gave them a $10K check for the down payment. They held that check until the final contract was signed after going through the design process. Once I signed my final contract which included all of my options, they cashed the check. I did not pay anything more until closing and my mortgage funded.
Some builders will allow you to do change orders during the building process - mine did not. That was regardless of my wanting to add things and spend MORE money. What was on my signed contract was what was delivered, period. Of course there were things I wanted to change, but couldn't. The upside was that I knew my exact cost and that didn't change, despite issues during construction that had to be corrected - that was all the builder's responsibility, not mine.
One will have negative equity once they reach a certain point (value vs. note + upgrades), regardless of whether the person rolled the cost into a mortgage or if they spent out of pocket. We're talking about $5-10K here. Even if the builder is overcharging by 100%, it's $5K max of negative equity risk -- much less than the inherent risk of negative equity where a builder is still building out the development through the next 1-X yrs.
Thanks all for the information! We have decided to move forward with building... we are SUPER excited but still a little nervous. Feels like we have to be awfully 'trustworthy' in this transaction... it's my girlfriend and I - signing up with a builder & lender "team" essentially... with no realtor, etc. on our side... we are somewhat dependent on the builder/lender team once that contract is signed. Am I just being a worry wart by looking at it this way??
Also - on a slightly off topic question - we were quoted a 4.0% interest rate based on the middle credit score of 750... does that seem a bit high to anyone? I recall reading that pref. lenders tend to quote a little high on the rate to cover the fact that rates can't be locked until closer to completion date of the home; and quoting a little high covers in case the rates raise a bit. But to stay competitive I'd think they'd disclose that they're doing that - if that's in fact the case. Thoughts?
Conventional
4.0% Rate
Based on 750 middle/qual credit score
5% downpayment
He mentioned that there's a "first time homebuyer program" that we qualify for... she's a first time homebuyer, I'm not. Not sure if the rate on that is necc. better..
Good thread! Thanks all for the info. Just getting my feet wet on doing a build myself.
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They manage 10-15 houses at any given time, so your little treats now and then will keep your home @ top of his mind and they generally want to do right by you.
