Purchasing a new home is no small feat for any buyer in this market, but it’s an especially daunting process for those who’re springing for a house before it even gets off the ground.
When buying a house or condominium before it’s constructed, there are often so many unforeseen hurdles that might get thrown in your buyers’ path. Being prepared for them before they happen is key to a successful and less stressful transaction.
So, if you’re helping your buyers navigate the process of buying a pre-construction house, here are the top five things you should educate and prepare them for.
1. Take advantage of early-bird privileges
In 2020’s final quarter, 41 percent of prospective homebuyers were seeking a newly built home, more than twice the 19 percent share a year earlier, according to a Housing Trends Report from the National Association of Home Builders (NAHB).
It’s no secret that Americans are currently scooping up new homes, so more builders and sellers are now looking to sell new houses and condos before they’re even constructed — and increasing their prices.
Taking advantage of early-bird pricing, or “first-tier pricing,” can be monumental for new house and condo buyers. It can help them save money and give them an abundance of options when it comes to floor plans, views and more.
2. Understand what is included and what isn’t
A survey conducted by Bankrate found that 43 percent of homebuyers have at least one regret about their new home. One way to reduce buyer’s remorse is to avoid assuming what might be included in your new house and what isn’t.
“Items that could be considered an upgrade are window screens, window blinds, garbage disposal, air conditioning, and even the details like cabinet pulls,” Francine Viola, a Realtor from Coldwell Banker Evergreen Olympic Realty in Washington, said.
3. Prepare for delays
It is normal for pre-construction houses and condominiums to experience delays, but these delays are getting longer and more frequent in the current housing market.
According to a May analysis by Freddie Mac, the housing market in the U.S. is 3.8 million single-family homes short of meeting the country’s current demand. The housing market has hit a snag, so being prepared for construction delays is imperative now more than ever.
“Sometimes unexpected delays, such as permit re-approvals, bad weather, and unforeseen glitches can delay delivery dates by a few or several months,” Sep Niakan, founder and managing broker of Blackbook Properties, said. Flexibility should be a key trait in any pre-construction homebuyer.
4. Protect yourself: homeowners insurance, warranty and inspection
A National Association of Insurance Commissioners report shows homeowners insurance rates increased 3.1 percent from 2017 to 2018. Insurance rates are skyrocketing due to climate change, natural disasters and a host of other reasons, but purchasing it is necessary. The process of doing so, however, is trickier when purchasing a home pre-construction.
“During construction, the construction company has their own policy covering building materials and liability, but that protects their company,” Karen Condor, a real estate expert from Expert Insurance Reviews, said. “It doesn’t cover the buyer,”
Both inspections and warranties are vital for any homebuying process but especially for pre-construction homes.
“Spending the time to cover all of the details relating to the warranty will help avoid any confusion on how any defects are handled,” Bill Samuel, owner of Blue Ladder Development, a homebuying company in Chicago, said.
5. Utilize the cooling-off period
The Federal Trade Commission (FTC) provides consumers three days to cancel a purchase of $25 or more, which is referred to as the “cooling-off period.” This time can vary in length from region to region but is overall an imperative time during a pre-construction housing purchase.
“During this period, buyers can review their agreement, arrange finances or cancel their sales agreement for any reason,” Jeff Johnson, a real estate agent and expert from Simple Homebuyers, said.
Purchasing a pre-construction home can be a stressful situation, but your clients can avoid most of its headaches if you help them prepare for the process. If you prepare them for delays, schedule inspections, have warranties and homeowners insurance in place, and use the “cooling off” period, you can save them from countless headaches.
Following these five tips when buying a pre-construction home, along with good intuition, can make the process significantly smoother and help get your clients into their new home sooner.
Jason D. Greene is a global real estate adviser for Greene Luxury Group | ONE Sotheby’s International Realty in South Florida. Connect with him on Facebook or Instagram.