GET PREQUALIFIED: USING THE BUILDER’S LENDER VS. YOUR LENDER.

Most of the time, buyer clients are pre-qualified with their lender of choice prior to walking into a builder’s model home. However, even though you are pre-qualified with your lender, the builder sometimes requests that you also get pre-qualified through their preferred lender. Reason being is that they have a great amount of trust in their lender that they have a relationship with and if you get pre-qualified through their preferred lender, the builder is that much more confident that you are well qualified to purchase their home making it a less risky situation for them. There are many reasons why using a builder’s preferred lender could be advantageous to you. Most of the time, the builder will give you special incentives for using their preferred lender such as paying for a portion of your closing costs and in some situations all of your closing costs. This could amount to a large sum of money that you could otherwise spend on additional upgrades in the home, or put down towards your down payment.


BUYING A TO-BE-BUILT HOME VS. BUYING A NEW INVENTORY HOME

A to-be-built home is a home that you can customize based on your specific needs and wants. This is a home that you will see being built from the ground up. Buying a to-be-built home usually takes around 6 months to be completed. Once you have signed a contract, you would go to the design center and select your upgrades. Sometimes builders will offer incentives on upgrades such as a small amount of money to spend at the design center or even a free appliance package. But please be aware that many times, on a to-be built home, the final sales price is not negotiable. A to-be-built home is a good option when you have a contingency, another home to sell, because you have plenty of time to get your home sold before your new home is built and ready to be closed. Builders are typically open to contingencies on to-be-built homes. If you choose to buy an inventory home, a new home that has already been completed, you may be in for a treat when it comes to negotiating. Because builders are anxious to sell their homes that are already complete, it is sometimes in their best interest to work with you on making a deal work and just getting the house sold. However, if you have a home that you need to sell prior to purchasing a builders inventory home, you may run into some push back. Builders are sometimes hesitant to take one of their homes off of the market when the buyer has a home that they need to sell first. Many times builders are looking for a quick close on their inventory homes.


KNOW WHAT IS INCLUDED

Typically the advertised “starting price” or “base price” is not the same as the final sales price. Before writing an offer on a to-be-built home, it is important to clarify with the builder exactly which features come standard and which features would be upgrades. Many model homes that you will see are heavily upgraded with expensive structural and cosmetic features that do not typically come standard with the home. Here are a few tips to help you uncover a rough estimate on what your final sales price would be on a to-be-built home:

    •When looking at the model home, ask the sales counselor to point out which features are upgrades.
    •Ask the sales counselor what the sales price of the model home would be if it were for sale. Then look at the base price for that floorplan. This will give you a good idea of how much money was spent in upgrades on the model home.
    •Ask the sales counselor what the average spend is in upgrades on the homes that they have sold in that neighborhood.
    •Ask to visit the design center prior to contracting so that you can get a good idea of which standard options are available. At the same time you can also look at the upgrade options and their costs.
    •Ask to view an inventory home that is currently for sale so that you can see what you will get for the price.


NEGOTIATING WITH A BUILDER

Negotiating with builders can be quite different in comparison to negotiating with a seller on a pre-owned home. Many times negotiating with a builder requires all parties to get creative. Builders are sometimes hesitant to reduce the price of a home for fear of jeopardizing the appraisal values of homes that they will be selling in the future. If you come across a situation where the builder is refusing to work with you on the price, think about other ways to negotiate. Some examples would be to ask the builder to pay for additional closing costs, throw in a refrigerator, washer & dryer package and/or blinds throughout the house. If the property isn’t fenced, maybe they could fence it at no additional charge? You can also ask if there are any incentives on upgrades if it is a to-be-built home. Keep in mind that when negotiating with a builder, the typical buyer costs could vary compared to that of a pre-owned home. Many times if you are buying a new home, it is common for the buyer to pay the cost of a title policy and survey. When you are buying a new home in a subdivision with an HOA, many times the buyer pays all of the HOA fees. This can be quite pricey especially if the HOA charges a one-time capital contribution fee, which I find quite common in new home subdivisions. The most important piece of advice that I can give when negotiating with a new homebuilder is to GET IT IN WRITING. Everything you are promised needs to be in writing. Otherwise, later it can turn into a he said she said game ending up with all parties frustrated and disappointed. Here is an example: If the home builder says that they will pay for your title policy, but the contract says otherwise, have the builder write in the contract that they will pay for your title policy. Don’t just accept verbal promises.


GET AN INSPECTION

Even though the house is brand new, it is highly recommended that you hire your own third-party inspector to do a final inspection of the property prior to closing—EVEN if the builder says that they will have their own inspector come out and inspect the finished product, I still recommend that you hire your own inspector that works for you, not the builder. There are several other different types of inspections that you may also want to look into. Staged inspections are when you hire an inspector to come out and inspect at different times throughout the building process. Check with your inspector on what stages they offer. Typically it will be at pre pour, frame and then a final inspection before closing. Other inspections you may want to consider would be septic inspections and termite inspections. Once you receive your inspection report back from the inspector, send it to the builder and ask for them to repair the deficiencies noted in the report.


HOME WARRANTY

Many builders offer home warranties with your new home. It is important to find out exactly what is covered in your home warranty and ask for a list of phone numbers that you should contact in case of an emergency. Also find out how their warranty process works and who to call or email to submit a warranty claim. Please do not rely on the home warranty as a good reason to skip out on hiring a third party inspector prior to closing. Understand that once you close on your home, it will become your responsibility to take off work and wait at home for the trades to show up and complete the repairs. It will no longer be the builder’s responsibility. This can become extremely inconvenient.


THE FINAL WALK THROUGH

This is a time for you to walk through the property and make sure all of the deficiencies noted on your inspection report have been repaired and all of the cosmetic touch ups have been completed. Your house should be clean and free of any trash and debris. If you are not satisfied, you can try to postpone closing until the items have been cleared. On the other hand, you may choose to move forward with closing provided that when you sign off on the walk through, they write a list of items that are still outstanding and provide you with dates that they will be completed.