- Buying a new home is not a slam dunk; there is a process to manage and a myriad of details to oversee. It is important for a buyer to understand both their and the builder's obligations in the process.
When it comes to house hunting, buying a brand new home often seems like a much simpler route to take. There is nothing like moving into something that has never been lived in before.
A buyer doesn’t have to remodel, repair or properly redo what the prior owners may not have done correctly in the first place.
However, buying a new home does not mean that everything is always as it should be. Here are eight things buyers need to watch out for with new builds:
A builder contract is a contract. Period. This typically means there are no changes that can be made whatsoever, and yes, these contracts are most often totally in favor of the builder.
Buyer’s should make sure they read this document very carefully and go through every paragraph with a fine-toothed comb. They should consult an attorney to walk them through the various provisions so they understand their obligations as well as potential risks.
Items a buyer should pay particularly close attention to include:
- The amount of the binder deposit required
- Where the money is being held
- The time frame for loan approval
- What happens if a buyer cannot qualify
- How long the builder has to complete the home
- Buyer’s access to the property during construction
- Obligations for the buyer with respect to meeting the closing date once scheduled by the builder
Builders cringe when they hear this word. It is critically important for buyers to understand what can and cannot be changed at various stages of construction.
If a builder is doing a spec home whereby they’ve selected the floor plan and what goes in the home, depending on how far along the home is construction-wise will dictate if any changes can be made.
Buyers need to understand the building process to understand the reasoning behind why something can or cannot be done.
Once a building permit is obtained, the municipality approving the permit has given approval based on a particular plan and specifications provided.
Therefore, expanding the master suite by five extra feet may just not be possible, nor is adding an additional bedroom, especially if the home is already out of the ground and being framed.
If the slab has not been poured, it might be possible, but there is a hassle factor involving filing an amended permit waiting for approval as well as an additional cost that is typically involved.
Guess who will be paying that cost? Ditto for any changes a buyer wants to make with regard to interior selections that may have already been picked or if the buyers want to change something they selected at their original design meeting.
Cabinets often take the longest to arrive, so they are typically ordered immediately and not something that can be easily swapped out.
Flooring is often the easiest to change provided nothing has already been installed or is about to happen. Buyers should know that a builder will charge what is called a “change order fee” after a certain date passes in the pre-construction process.
These fees can be quite pricey and should not be taken lightly. Buyers should ask their builder what can and cannot be changed as well as what the costs involved for doing so would be.
Whether the house is being built or already complete, do not forgo inspections just because it is a new home.
A builder is only as good as its subcontractors, and there are likely things that need attention, adjustment or possibly have to be redone.
A walkthrough with the builder will go through the basic operation of all systems in the home as well as largely identify cosmetic issues of concern, but a buyer is not going to be walking on the roof, crawling through the attic and checking all of the mechanicals to make sure the heating and cooling system has achieved the proper temperature differential, etc.
If the house is being built from scratch, now is the time to hire an inspector that specializes in phase inspections that will check the house at each stage of construction from when the slab is poured, the raw plumbing goes in, the framing goes up and so forth, etc.
Buyers or their designated representative should check on the house quite often while it is being built. Don’t assume that the construction manager is on top of things — hopefully he or she is, but the construction manager is likely managing several homes in potentially more than one community being built.
Go early and often — just check with the builder on the policies regarding visits to the home, and wear proper safety gear accordingly: hard hats, close-toed shoes, etc.
Take pictures and, make notes of anything you have questions about and bring them to the attention of your construction manager.
Remember that all communication typically needs to go through the construction manager about any questions; the subcontractors on duty are not in a position to answer a buyer’s question about the tile installation looking wrong, etc.
Obtain a timeline of what is going to happen and when from the construction manager.
This should hopefully be provided to the buyer before the start of construction if the home is being built from scratch, but if the home is a builder inventory product where the plan has already been selected and the construction is already in progress, find out what the timeline is for each milestone to be completed.
This also goes for a brand new home. Although a buyer’s expectation is often perfection, be prepared to see imperfections in the drywall, paint, grout, tile and so forth.
Sometimes, the installation of finishes is not the best. Builders are challenged with finding reliable crews that can consistently deliver good work in a time frame.
The best tradespeople are often in demand and are often spread quite thin, hence others may need to be brought in and sloppy work can happen in an effort to meet deadlines.
The walkthrough is an opportunity to identify anything cosmetic that should be fixed, and if there is bad installation of a finish like tile on the floor or walls, ask for it to be redone.
Come armed with plenty of blue painter’s tape to mark any areas in question!
Every builder has his or her own definition of this.
Although a home may appear to be finished, there is still a laundry list of things to complete from cosmetic corrections, adjustments, and in some cases, there could be things that need to be redone or corrected due to bad installation or product: the handle on the refrigerator door was bad, a window was cracked or a cabinet door was scratched and a new one had to be ordered, etc.
Builder contracts vary on what their obligations are in terms of this as it relates to a closing date.
Some have a “promise to complete” list that is signed by the buyer and builder before going to closing, and other builders may have the buyer sign an open items checklist acknowledging that these things need to be addressed.
In any case, be sure to get an agreement in writing about how any open items will be accounted for by the builder after closing.
Speaking of closing, it is important to understand what the builder will warrant and what they will not once the home belongs to the buyer.
Although this may have been explained at the initial signing of the contract, several months have likely passed, and it is important to review so there are no surprises later.
Terms like “one year cosmetic,” “one or two year mechanical” and “10 year structural” may be bantered about, and it is important to understand what those mean.
Most builders will provide a one-year time frame to account for any cosmetic issues that arise; this usually means as a result of the house settling once it is built: nail pops, drywall cracks, etc.
It is a good idea to keep a list of things that develop while living in the house as a buyer observes them. Mechanical warranties refer to heating and cooling systems, the water heater, plumbing and electrical. Structural refers to the roof and items pertaining beams, supports, etc.
Be sure to obtain all procedures for how to submit a warranty claim should it arise as well as documentation on the warranties the builder is providing.
Buying a new construction home involves managing a big project. There are lots of moving parts and pieces to keep track of.
What buyers may not expend in terms of expenses redoing and repairing an older home, they will likely make up for in effort in making sure all of the pieces of the puzzle fall into place with building a new one.