5 Best Questions Asked When Buying a New Home
April 15th, 2009
Categories:Home Buyer Education
Buying a brand new home from a home builder can be a very different experience than buying a resale home. Here are some of the best questions home buyers ask when it comes to buying/building a new home.
1. What good is a Realtor when buying a new home?
Unfortunately, most Realtors have the tendency to get their client under contract with a home builder and then they disappear until its time to close (and in reality, the builders prefer it that way). A good Realtor will keep in touch with you and the home builder for construction updates and keep an eye on the community as it develops. When building a home from scratch, a good Realtor will advise you on selecting a good home inspector to inspect the home at various stages to make sure nothing is being skipped or hidden.
2. Are new homes less expensive than a comparable resale homes?
This can depend largely on the market, the builder and the promotions being run. However, generally speaking the sticker price on a new home will be less than a resale home. This makes buying a new home very attractive to first time home-buyers. However, keep in mind there are many additional and somewhat forgotten costs involved with buying a new home.
Consider the cost of these items before buying new: backyard landscaping, interior paint, window coverings (blinds), ceiling fans, pools, the cost of gas to drive the extra distance to work along with the time involved and the depreciation on your vehicle.
Some of the factors that often out weigh these costs are: living in a brand new home, being part of a brand new community and watching it grow, knowing all the neighbors, getting out of the city.
3. Do I have to use a home builder’s preferred lender?
Buyers working with a real estate agent normally have been pre-qualified and have built a relationship with their loan officer. This level of preparedness causes some headache when the buyers come across a new home community and the builder is requiring them to use their lender, or loose out on significant incentives.In today’s market, you are not required to use the builder’s preferred lender, however they are allowed to tie a small amount of the incentives to their lender, normally $10,000 or less, anything more and it appears the builder is forcing your hand to use their lender.
The advice here is get good faith estimates from both lenders and compare the numbers, there have been cases, where using an outside lender and walking away from the incentive, saved the home-buyer a lot of money. Also, keep an eye out for upcoming legislation that will forbid home builders from tying any incentive to using their lender.
4. Will the home builder finish building my home?
This is a question no one can answer with absolute certainty. However a good real estate agent will have a feel for the market and will ask the builder about numbers like volume of sales, amount of inventory, turn around time, and historical pricing, etc. With that information the real estate agent should be able to provide you a good indicator of how the home builder is doing.
Keep in mind, nobody truly knows the financial stability of the home builder. In the event a builder goes bankrupt or closes their door, they will likely finish building your home before closing their doors. Essentially, the builder has put money into the construction of your home and they can only get that back if they finish building the home.
5. Will the home builder finish building the community?
This is a very new concept for home builders, and a very real issue in today’s market. From the builder’s point of view they have several factors to consider when building in a community. Items like the cost of land when it was purchased, the current construction costs, costs of the loans necessary to build and the sales price of the home determine if building a home in a community is profitable. In some cases, building a home in a community in today’s market doesn’t make sense because the builder wouldn’t be able to avoid taking a loss on the home.
As early as a year ago, several builders admitted plans to stop construction and sales in specific communities because it is was no longer profitable to build homes in that area due to increasing costs, and home values dropping. The decision to stop building might come abruptly and be a shock to homeowners living in the subdivision.
However before you buy an existing home in a new community or a new home, ask the sales associate if the builder plans to develop out the community. It should be knowledge they are willing to share. The good news is that if the builder does go out of business during construction, it is very likely another builder will come in and finish building out the community.
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