What are the things to look out for while buying a new construction home? (RE agent, incentive)
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I am a first time homebuyer planning on buying a new construction home. I have shortlisted few builders whom I am planning on visiting this weekend. I am interested to know about the negotiation points and the things I should be asking them. I do have a realtor working for me but I would like to prepare myself better towards this. Any ideas / tips / suggestions would be appreciated.
In my opinion, the biggest thing to know is that for most builders, it is much more likely that you can negotiate free extras than discounted price. If they discount the price, then that discounted price becomes a comp for future construction.
The next most important thing to know is to know what you are allowed to pick (colors, carpets, tile, plumbing, lighting, etc) and what you aren't, and what your deadlines and budgets are, and whether those budgets are for a Toyota or a Ferrari, so to speak. Many builders only quote basic budgets to keep the price down and then when you inevitably go over the budget, they not only charge the difference, but a markup on the difference as well. This is why most people go "over budget" on new construction, because they had unrealistic budgets set to start with.
Most builders won't go under list price. However, you can negotiate for upgrades. I am closing on my new house soon. I did not use a real estate agent but I was able to get close to $75,000 of upgrades for "free" (real world value of that is probably about $40,000). I did not use an agent because I knew exactly the community, the model, and the exact lot that I want to buy. Did not make much sense to me to use an agent.
Upgrades offered by builders are generally more expensive than the after-market. However, there are things that you should get from the builder as they are much more expensive to do afterwards including
Cat6 Ethernet drops. Good idea to have at least one drop at every possible TV location
Speaker cables pre-wired if you want surround sound and/or a whole house audio system
Upgraded cabinets
Upgraded sink
Gas fireplace
Any other networking, plumbing, electric, and gas rough-ins
The quality of your new construction house will largely depend on the quality of the construction supervisor of your house. In general, the supervisors are employed by the builder and the workers are contractors/subcontractors. Go check out the house every few days especially before the dry-walls are installed. I was able to catch an incorrect framing of my main floor powder room (2 feet longer than it should be in the plan) and also got them to move a basement post one foot to line up with the basement hallway. My builder would not have corrected those after dry-wall went up.
Also, builders often change finishing materials during the construction process. For example, they changed the model of my master bathroom accent tiles and my cabinet hardware from satin nickel to oil rubbed. I did not like the changes but the contract was written specially to allow them to do that.
Thanks Panu16. Since I am an immigrant, my know-how on American homes is very limited. I wish I had that kind of knowledge to course correct them, but I would try nevertheless.
Thanks Panu16. Since I am an immigrant, my know-how on American homes is very limited. I wish I had that kind of knowledge to course correct them, but I would try nevertheless.
NP. You should also start prepping for mortgages. Bigger builders generally have "preferred" lenders in which incentives are offered if you use the preferred lenders. In my case, they offered $10,000 off closing costs. However, the rates they initially gave me was like 0.50% over market rate. I was able to get a better rate by showing them mortgage rates that my credit union is offering. I just locked in the rate this week at 0.125% above my credit union and get the $10,000 incentives. So, what you should do is start applying for membership to credit unions.
I wouldn't push too hard on the price, but do go after upgrades. Since you get to pick the finishes/colors/etc do all the upgrades NOW rather than later.
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