| The vision of a new home with the ability to | | | | and payments you make go into an escrow |
| upgrade finishes, alter floor plans and be the first | | | | account, not the developers business account. |
| to occupy a property lures buyers into builders | | | | Research state brokerage laws to discover what |
| and developers model homes every day. | | | | regulations developers must follow with buyers |
| According to industry sources over 70% of home | | | | funds. If disputes arise it is easier to receive |
| buyers want a new home. These new | | | | refunds from a neutral third-party or escrow |
| construction focused buyers might see a picket | | | | agent than from a developer.Request copies of |
| fence, but they should be prepared to ask the | | | | blueprints, floor plans and surveys. It's easy to |
| right questions and see red flags before signing on | | | | forget to get clean copies of blueprints and floor |
| the line.Do's-Have your own agent. Believing they | | | | plans of your new home with all the activity and |
| might get a better deal or out of ignorance many | | | | decisions during the construction process. In the |
| buyers use the developers sales agent to | | | | future when you want to make changes or sell, |
| represent them. New construction buyers should | | | | having the footprint of your home will save you |
| research what a dual agent can and can't do | | | | expense and time. Make sure the developer |
| under their state real estate license laws. Most | | | | provides you with an updated survey, showing |
| states require written acceptance of dual-agency | | | | just your parcel. Verify that your new home also |
| by both parties. All homebuyers should be | | | | has it's own parcel identification number issued by |
| represented by an agent who has a fiduciary | | | | taxing authorities.-Research warranties on |
| responsibility to them. Buyers shouldn't forget that | | | | structure, finishes and appliances. Developers |
| most developers require that your agent must | | | | typically offer five or ten year warranties on |
| accompany you the first time you visit a sales | | | | structural elements of a home and rely on |
| center.-Ask how much is this home as we see it. | | | | manufacturers warranties for appliances, furnaces, |
| Models can be filled with every upgrade the | | | | windows and overhead garage doors. Beware of |
| developer offers as an example for buyers. | | | | one-year warranties on structural |
| Buyers should ask freely how much the model | | | | elements.Don't-Forget to ask for holdbacks on |
| costs as they see it. Typically this cost will vary | | | | unfinished work. Weather or material supply |
| dramatically from advertised starting prices for a | | | | problems can interrupt completion of a home. If |
| development.-Pick the right developer. Working | | | | some items aren't necessary for occupancy the |
| with a developer is like a short-term marriage. | | | | developer will want to close on your home. Make |
| Ask for references from the developers sales | | | | sure any substantial items or features that are |
| agents. Do your own investigation of the | | | | not completed in your new home, have |
| developers previous projects, length in business | | | | designated funds set aside for their installation or |
| and complaints filed with business | | | | completion. Request these funds be held back and |
| bureaus.-Consider resale characteristics. The allure | | | | deposited in an escrow account at closing.-Omit |
| of being the first to occupy a home sometimes | | | | final written punch lists. You should have a final |
| clouds a secondary location or poor craftsmanship. | | | | walk-through at least three days before closing on |
| Consider a resale home in a primary location | | | | your new home. Create a punch list of all |
| before signing on the line just because it's new | | | | uncompleted or unfinished items. Punch lists can |
| construction.-Question percent of project sold. | | | | also call attention to items that need to be |
| Developers love to promote the sell-through of | | | | repainted or need additional attention. Both the |
| projects. Inquire how much of the percent sold | | | | developer and the buyers should sign the final |
| are reservations (dating the project) versus | | | | punch list in agreement. Developers should |
| contracts (engaged to the project). Some | | | | complete punch lists within 30 days of |
| reservations don't go to contract because of a | | | | closing.-Tune out during construction process. |
| change of heart, financial concerns or occupancy | | | | Family, work or distance can shift your focus |
| timelines.-Have an attorney review all contracts. | | | | away from closely monitoring the construction |
| Developers contracts favor the developer and | | | | and completion of your new home. Proactive |
| are different from standard local real estate | | | | buyers can catch design mistakes or irregular |
| board approved contracts. Retain a real estate | | | | materials by visiting the job site on a regular basis. |
| attorney to review all contracts. There is little | | | | For insurance purposes some developers limit |
| wiggle-room once you sign a developers contract, | | | | access to construction sites. Stipulate in purchase |
| and they don't like home sale | | | | contracts the timing of all visits during construction |
| contingencies.-Investigate property taxes | | | | of your new home.-Be fooled by low |
| independently. Property taxes can be a financial | | | | assessments. Developers can use artificially low |
| surprise you weren't expecting with the purchase | | | | monthly homeowner assessments in new |
| of a home. Because tax assessors haven't valued | | | | construction marketing materials. Plan on at least |
| a home or project, developers can | | | | a twenty-five percent increase in assessments |
| under-estimate how much the property taxes will | | | | the first year after the developer delivers the |
| be. Complete your own due diligence and call the | | | | association to the homeowners.-Overlook costs |
| local taxing authority to find out the worst-case | | | | between standard and upgraded features. There |
| scenario.-Perform a home inspection. Never skip | | | | can be a large difference in quality and useful life |
| or waive the right to a inspection, the benefits far | | | | spans between builder grade and upgraded |
| out weigh the costs and could save you | | | | finishes and fixtures. It could be worth the |
| numerous headaches and expenses later. New | | | | additional expense to install better carpet, cabinets |
| construction is not immune from defects and | | | | and faucets. Cross-check builder prices for |
| lack-luster workmanship. Hire a professional, not | | | | upgrades at your local home center.-Ignore |
| Uncle Bert. Perform the inspection at least seven | | | | developer incentives as a signal of slow sales. Free |
| days prior to closing.-Inquire about investor | | | | condominium assessments, stainless appliances |
| purchased units. In the | | | | and plasma tvs are thrown in to induce buyers to |
| post-real-estate-bubble-world many developer | | | | write contracts to purchase. What many buyers |
| contracts restrict purchase of units by speculators | | | | think are a freebie are actually signals that a |
| to flip at completion. Look for clauses in contracts | | | | development is slow to sell from increased |
| that require purchasers of units to owner-occupy | | | | competition of a lack of buyers. Incentives are a |
| the first 12 months after closing. Ask sales agents | | | | band-aid for a languishing development.-Be |
| what the percentage of owner occupancy is for | | | | surprised when developer holds firm on pricing. |
| the project.-Get a certificate of occupancy. Local | | | | Developers of popular projects don't typically |
| municipalities issue a certificate of occupancy after | | | | negotiate on unit prices. However sometimes a |
| a unit has passed all building code inspections. Most | | | | developer will throw in upgraded appliances or |
| mortgage lenders require a certificate of | | | | hardwood floors in place of standard carpet. |
| occupancy before they will close on a loan. If you | | | | When a developer doesn't move on prices it is |
| are paying cash, verify prior to closing that the | | | | because they have a investment formula for the |
| developer will deliver you a certificate.-Understand | | | | project, which is typically costs plus twenty |
| why developers request upgrades paid for in | | | | percent profit.-Disregard risks of buying |
| advance. Experience has taught developers that | | | | pre-construction. Pre-construction pricing can |
| some buyers will not purchase the unit which they | | | | attract value-driven buyers. There is some risk |
| have specified the floor-coverings, countertops | | | | entering into a project before it has started. |
| and kitchen cabinets, that have been installed by | | | | Verify that the developer has received a green |
| the developer. Other buyers will want to select | | | | light from local building authorities and has a |
| their own finishes and a unit that has pre-selected | | | | proven track record of timely completion in the |
| finishes by a terminated buyer is a marketing | | | | community.-Postpone discovering costs of |
| problem for developers. Plan on paying up-front | | | | construction loans. Variables beyond a developers |
| for all upgrades and changes you make to a unit, | | | | control can prolong the completion of your home. |
| and if you decide to walk from the project once | | | | Have contingency plans for cost over-runs, |
| you have paid for upgrades, expect a fight from | | | | temporary housing and bridge loans. Investigate |
| the developer if you want a refund on installed | | | | rate-lock expiration dates on mortgages, |
| changes and upgrades.-Require your deposits to | | | | construction or temporary loans. |
| go into an escrow account. Require all deposits | | | | |