With home prices on the rise new construction has started up again. There are many reason to think about buying a new home – everything brand new, the layout and style you want and choice of location. But is a new-construction home the right path for you? Here are five factors you should keep in mind.
- You still need an agent. Even though the home you are buying is not represented by an agent, you still need to have your needs and interests represented by someone who is familiar with the process. The process for finding a great agent for you begins with researching and making sure the agent you sign with has experience in new construction homes.
- New homes are usually sold before they are built. A builder will generally get financing lined up, and map out both a construction and a sales process. This means they’ll try to sell as many homes as possible, before they’re even built.To accomplish this, they’ll build out model homes and allow buyers to go in and review floor plans, fixtures and finishes while the homes are under construction.
- Be aware that even if there are 100 homes in the community, they won’t all be available at once. Home builders tend to release the homes in phases. If the first five homes sell quickly at the asking price, and the market continues to do well, the builder can raise the prices on the second or third phase. Also, the sales cycle for a new community can take years. The last phase could end up being priced 10 percent or more than the first, simply because the real estate market has appreciated.
- A home builder, especially early in the sales process, wants to get a few homes under contract quickly. If the builder can announce they have 10 homes under contract in a few months, the project can seem more desirable to future buyers. Also, builders like to go back to their lenders with positive news about the project and their investment. To do this, they need early buyers to sign contracts. This means that early in the sales process there could be room to negotiate the price down. But with the reward, there is potential risk. By being an early buyer, you’re committed to the project. If for some reason sales don’t manifest, or you don’t want to move ahead before the home is built, you risk losing your down payment. For example, right after the previous housing downturn, some buyers were stuck under contract on new homes where sales had stalled.
- A typical seller has lived in their home for many years, and raised their family or built memories there. So when it’s time to sell, the seller may experience all kinds of issues, questions and uncertainties, which can come out in the negotiation and purchase process. The seller may unconsciously price the home too high because they’re not ready to emotionally detach from it. They may want to know more about you, or what your plans are for the property. With a home builder, it’s just a numbers game. They’re focused more on spreadsheets than sentiment. They want to make sure you’re qualified and can get a loan. They set the prices based on their inventory, though there may be a little room for negotiations.
- If the project you’re interested in nearing the end of its sales cycle, with many homes already sold, the builder may be a little more willing to negotiate with you — not so much on price, but on upgrades. Reducing the price on your home means that after the sale closes, then that sale price becomes public record. But if they offered you an upgrade package (hardwood floors instead of carpet, or higher-end appliances), there isn’t any way to track that. What could amount to thousands of dollars in upgrades could end up being a better deal than simply getting a price reduction.
Buying a home could be the prefect way to get the home of your dreams. Be sure to get an expert to help you get the best deal possible. For more information or an agent with experience in new homes, call Helen today at 847.967.0022 or email [email protected].