Moving into a newly-constructed home is similar to getting a new car, but several happy levels higher. No outdated kitchen cabinets, old and bland looking carpeting, or smells from a smoker or their dogs.
Everything in the home is new, clean, and waiting for that personal touch. While these points may put you on cloud nine, there are things that do require your undivided attention with new construction. The following are some things to watch for when looking to buy a brand-new home.
The builder’s real estate agent
When you drive into the new home community and park, you’ll notice how easy it is to first be guided to the builder’s office before you get to see the model homes. That person sitting in the office is a licensed real estate sales agent for the seller (the builder).
You’ll learn what lots or completed homes are available, the community’s amenities and other relevant info. Before you fall in love with a home and sign a long legal purchase contract that tends to be biased in the builder’s favor, do you want the same agent to represent you as the seller?
Although this does happen, and it’s legally okay, is this big purchase with the same agent looking out for the sellers interest in your best interest? The agent may say it’s okay but you know very well they were selected by the builder and they are their primary interest. Otherwise, they would not work for the builder.
Solve this problem from the get go by telling the builder’s agent you have an agent representing you.
Some builders are so controlling that once you set foot in the office for the first time, you better have your agent with you or their commission will not be honored by the builder. Your agent needs to introduce you first. If you see the community advertised first, tell your agent.
Many builder’s agents receive a reduced commission or make a salary plus bonus, as they are working on selling a high volume of homes instead of the 2.5 to 3% commission split they’d normally get on sells of 1-3 homes sold per month.
An agent who only represents you will be your trusted advisor. Your own real estate agent is required to look out for your interests. You’ll be provided with certain state disclosures along with the positives and negatives concerning the transaction.
The builder’s lender
Home builders realize that they need to lure the buyer when their motivation is high and get the process moving forward. Having an “in-house” or “preferred” lender can do just that.
As long as you know you’re getting a good deal with the builder’s lender because you’ve inquired with other lenders there is nothing wrong with going ahead with the process. Just make sure you tried a bank, credit union, and a mortgage broker.
A mortgage broker has the most options and sometimes their wholesale lenders offer specials and rates that beat your neighborhood bank or the builder’s lender. Similar to a listing agent wanting to use their preferred lender, the builder does the same so they can be kept fully informed about the progress of your financing.
Some builder’s lenders will offer an incentive on upgrades but once you go outside the builder’s lender they remove the upgrade incentive which means somehow the builder was getting repaid for the incentive. This practice should be illegal as the lender and seller should not be affiliated.
It is a good idea to check your credit by asking to see a copy of your credit report and FICO scores. You can order a free credit report through AnnualCreditReport.com but if you want scores a lender see, try MyFICO.com for accurate scores versus fake scores from Credit Karma or your banks monitoring service.
The Builder
Lastly, check out the builder’s reviews if you have never heard of them before. The best method is through the Better Business Bureau and your city’s public records for any lawsuits against the builder.
It would be a nightmare for you to have a deposit with a small builder who files a bankruptcy due to pending litigation or doesn’t have the funds to complete your home. Your deposit money will be long gone or tied up at that point.
As you can now see, purchasing a newly constructed home in California has a lot more elements to think about than purchasing an existing home. Be sure you do all of these steps for maximum benefit.