As a buyer, whether first time or seasoned, you may be determining whether you want to buy a long-standing home or new construction home for sale.
So is a new construction home for you?
Here are some points to ponder:
Builders are not attached to the homes they build.
Many sellers have lived in their homes for many years, and raised their families, built memories there. So when it’s time to sell, a seller may experience all kinds of issues, questions and uncertainties, which can come out in the negotiation and purchase process.
The seller may 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. If given a choice between two buyers, the seller may pick one over the other for non-financial reasons.
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. They are in it for the business.
Early buyers may get the best discounts!
Early on, the home builder wants to get a few homes under contract quickly. If the builder gets many homes under contract in a fast amount of time, it creates a higher demand from future buyers for that development project.
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.
Early in the sales process there could be room to negotiate the price down for buyers. 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.
New homes may not ever be listed in MLS.
Unlike a regular seller, who lists their home with a local real estate agent, home builders often have their own sales employees working for them on site. They do this to have more control and to cut costs.
For buyers, it may mean the home builder isn’t a member of the local MLS. As a result, the homes may not show up in your agent’s MLS search.
The builder may be more apt to advertise online, in the paper or with billboards. So if you’re interested in newly built homes, work with your agent to make sure you’ve identified all the possibilities.
New homes are often sold before they’re 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. Depending on the state, builders need to get through some of the approvals process before they can actually start signing contracts.
For the most part, you can get a sense of what your new home would look and feel like, and where it will be located in the community. Ready to move forward? You’ll likely have to put down a deposit, from a few thousand dollars to 10 percent of the purchase price.
Be aware that even if there are several 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.
The sales cycle for a new community can take years even. If the real estate market has appreciated, then the last phase of a project could be priced markedly higher than the first.
Upgrades could be better than discounts.
In certain conditions, like when a project is at the end of its sales cycle, the builder may be a little more willing to negotiate with you, not on price, but on upgrades! Public record would reflect a reduced sales price. But if they offered you an upgrade package for a faster sale and deal closer, no one would know.
Upgrades could end up being a better deal than simply getting a price reduction, saving you a lot in the perks of the upgrades–a higher value per square foot of house.
No matter what you choose, to buy and existing or to buy a new construction, it is wise to know your limitations and perks with either choice. Plan ahead and determine what the best option is for your family!