When you buy a new build instead of pre-owned home, the real estate and financing process is slightly different. And while buying a home that no one has ever lived in before is exciting, it's important to understand all of the legal and financial implications of buying from builder.
For these and other key reasons, you need to ensure that your interests are protected.
Upgrades and Custom Features
When you look at a pre-owned home, you may love everything about it except the finishes, the carpet or the wallpaper in the bathroom that looks like it's from 1982 (and probably is). When you buy a new home in a new development, the builder will offer a list of optional changes and finish upgrades.
In some subdivisions, you may even have the option of making structural changes like adding a guest house or extra garage bays.
Builders price their base model homes as low as possible to entice buyers. Consequently, the majority of their profit is made through upgrades. When selecting your changes, you may be tempted to go a little overboard, and your final purchase price will increase accordingly.
Financial experts recommend selecting only those changes that will be difficult to make after the house is built, such as adding extra electrical outlets. Go easy on the finish upgrades, because these can always be done later on your own.
Most buyers find that after living in the home for a few months, they have a better idea of what they'd like to add or change.
Most builders work with specific banks, often called preferred lenders. Although the builder cannot compel you to use their lender, they will likely offer incentives for doing so. For example, they may offer to pay some or all of your closing costs.
Before you commit to using the builder's preferred lender, however, spend a little time talking to at least two other mortgage lenders or brokers for comparison. Once you really analyze your options, you may find a more favorable financing package elsewhere.
The Market and Negotiating with the Builder
The market still determines how much power you have when buying a new build home. Maybe you've heard the term "buyer's market." In a buyer's market, you have more inventory to choose from, and individual sellers may feel compelled to negotiate a price based on current market conditions.
This practice holds true for builders as well, but many buyers don't realize they have some room to negotiate on a new build.
Builders feel price pressure too, and that can help you to get a better price if you understand how the process works. You may also not realize that you can — and absolutely should — bring your own Realtor® the first time you visit a subdivision.
The builder pays your agent's commission, so it won't cost you more. In fact, you're likely to save money when you have an experienced agent to negotiate on your behalf. A local Realtor® understands the market and will know going in how much you're likely to save through savvy negotiation with the builder.
About Subdivision Amenities
If you're buying in a specific subdivision because it promises certain amenities, such as a community pool, clubhouse, golf course or playground, it's a part of the value of your new home purchase. So, if the amenities are still just an idea and don't actually exist yet, it's critical to do your due diligence to ensure the community will be completed as promised.
You can find out if the builder has posted a bond or other financial security to ensure that the community amenities are finished. This is where a Realtor® can protect your interests even more. Your agent can get these assurances from the state department of real estate or local building department.
If the builder has an established reputation, you likely have little to worry about. If the builder is new or unknown, however, this verification is especially important.
If you plan to purchase a new home in Yorba Linda or the surrounding areas, get the Edie Israel Team on your side before starting the process. Our experienced agents understand the local market and can help you negotiate the complex real estate purchase process. You can count on us whether you're buying or selling an existing home, or whenever you're ready to buy a new build home.