Purchasing a New Construction Home: Major Dos and Don’ts

Becoming a homeowner is not just a major part of the American dream; it is also a practical investment for anyone seeking a tangible asset to use as a living space in the here and now, and one day trade in for a higher return. And there are a couple of ways you can go when it comes to buying a home. Some people prefer the charm, character, and individuality exemplified by older homes while others would rather skip having to do the upgrades and repairs and simply buy into new construction. If you’re of the latter mind when it comes to purchasing property, you still need to realize that there could be drawbacks associated with your choice if you’re not careful. So here are a few dos and don’ts you’ll want to keep in mind throughout the process.

DO:
1. Ask about pricing. When you view a model home and hear the base price of units under construction, you might not realize that those walnut cabinets, granite countertops, and fancy lighting fixtures are all going to cost you more. So you need to ask what you can expect from a base model, as well as what upgrades and extras add to the price so you don’t feel cheated down the line.
2. Check out other properties. Before you settle on a new construction home you should take the time to look at not only alternatives, but also other tracts built by the developer. You’ll want to see how they hold up over time and you may even think about ringing a few doorbells to ask previous buyers about their satisfaction with the developer and the product.
3. Hire an agent. Unless you have a real estate license it’s probably in your best interest to hire an agent to help you through the buying process. This pro can give you valuable advice and help you navigate the tricky waters of negotiating a price and signing a contract.

DON’T:
1. Count on low HOA fees. One of the hooks developers commonly use to attract buyers is the promise of HOA monthly assessments that are lower than nearby neighborhoods. But don’t count on these rates to stay low once you’ve got the keys in hand. On average, you can expect your HOA rates to jump by a fair margin (say 25%) following the handoff of the association from developers to homeowners.
2. Be afraid to haggle. Unsurprisingly, most developers hold firm on their pricing. Because everything in the home is brand new and you get to select your finishes and even the layout in some cases, you really have no leverage to negotiate. However, you may be able to finagle extras like upgraded finishes or even appliances, which developers often throw in to sweeten the deal, especially if sales of their units are slow.
3. Rely on deadlines. If you buy in a pre-construction phase expecting the project to be done on deadline, you could find yourself disappointed and without a place to live or financing to live on. You should be aware of the fact that all kinds of setbacks can occur in the building process. For example, inclement weather may strike, heavy equipment could be back-ordered, or permits might get held up along the way. So make sure any loan you take and plan you make accounts for this common issue.