Buying a brand new house in today’s real estate market has never been easier. Usually brand new construction homes are much more expensive than a resale. But in today’s market, most of the builders are offering competitive pricing that matches resale homes and sometimes are even less. Plus, they are offering so many incentives that cover all your closing costs. And some builders are even providing lower fixed interest rates.
In this blog I’m going to be breaking down the entire new construction home buying process.
Hey guys, I’m Alejandra Paladino, your local Arizona real estate agent welcome back to my page. I share all about living in Arizona and moving here.
How exciting that you are wanting to buy your own house and you’re thinking about buying a new construction house. I’m going to go over the process and steps involved.
Step #1
The first step to buying a new construction house is to get connected with a local real estate agent that specializes in new construction. Having your own agent will cost you nothing but benefit you tremendously. What many people don’t realize is that the builder will pay your real estate agent’s commission. So it costs you nothing to use a real estate agent.
The real estate agent will be your greatest resource in the purchase of your new construction house. We will inform you on available communities and homes matching what you’re looking for in your house. We will negotiate with the builder, review and explain contracts to you and once under contract we stay in touch with the builder to make sure your house is being completed in a timely manner. And throughout the process we will guide you on inspections to get completed and attend home walkthroughs with you.
Step #2
The next step is finding communities with homes matching what you are looking for. Something important is to make sure your real estate agent is always with you on the first visit to the builder. That way we can get you registered. The great thing is once we have you registered with the builder at that community you can easily go back and do not always need your real estate agent in case they aren’t available. We just need to be there for the first visit so that we can get you registered to be able to guide you on your purchase of your new house.
Most of the new build communities offer 2 different types of home options. One is a to be built house which is where you can pick out the exact lot where the home will be built. You pick out the floorplan that you like and can pick out the elevation. Also, with these builders there are options you can select to customize your house. The floorplan usually means the model and design of the house. And elevation means the way that the house looks from the outside. Usually each floorplan will have about 3 different elevations to choose from and they can greatly change the way the house looks from the outside.
The other type of home that’s available in new construction is a spec home which means the builder already started building the home and has picked out all of the options and elevation for the house. For those of you that want to customize your home completely this will not be a good option for you as the builder has already selected everything. But from my experience, they do select nice neutral choices that most people like. Plus, the benefit of a spec home is that it will be ready sooner than a to be built home. Generally a spec home will be ready for closing sometimes as soon as 30 days and sometimes as long as 6 months. While a to be built home will take on average 10 to 12 months.
Step #3
The next step is securing the house once you find one that you like. We will negotiate price, review and sign contracts and pay the deposit. All of the builders require an earnest deposit. This is a good faith deposit that’s paid to the builder to reserve the home for you. This way they will take it off the market and not sell it to anyone else. This earnest deposit can range from $500 to 5% of the purchase price. Also at this stage is when you will get pre-approved with the builder’s lender. In order to receive all their amazing incentives the builder usually requires you to get preapproved with their lender.
Step #4
The next step when we are under contract is getting an inspection done.
I highly recommend getting a home inspection done. Not a lot of people realize and think to do this with a new construction home. But You will be amazed by how many little things can come up in a home inspection that go undetected until you move in.
If you are buying a to be built home from the ground up, then I recommend 2 inspections one inspection is your pre-drywall inspection, which is where you get the house inspected before drywall is put up so the house is framed, wood beams are visible and it’s a great time for the inspector to check everything and make sure there are no items that have been done in incorrectly. Whatever the inspector finds we submit that punchlist to the builder to get completed. The other inspection I recommend is the pre-closing inspection. This is generally done right before closing and before your pre-closing walkthrough of the house which is done a week before closing.
Again, whatever the inspector finds we will submit to the builder to get completed.
If you are buying a spec home than I recommend the pre-closing inspection.
If you only plan on doing one inspection, I recommend doing the pre-closing inspection. The house will be done and the inspector will be able to check everything that we cannot physically check. The Inspector goes on the roof they go in the attic. They will run all of the water faucets and sinks at once. You’ll be amazed. They’re going to test the house in ways that a normal person will not. Then we hand the entire report to the builder with items that will need to be corrected. The goal is to have the builder correct everything before you close. I’m not saying the builder won’t do repairs after you close it’s just better to get everything addressed as much as possible so that you will feel comfortable knowing your house has been properly built and you won’t have any immediate issues.
Step #5
Next step is finalizing closing. The builders will not give us an actual final close date until it’s 45 days from Closing. This is because there can often be delays, such as vendors and material shortage or other issues that may come up while you’re home is being built. Because of that we will not know your exact closing date until it’s closer to 45 days from closing. Usually when the builder puts Cabinets in your house that is when we get the closing date
Step #6
Once we have received closing dates, the lender will schedule the appraisal.
When we receive the appraisal, we will review it closely to make sure that the house value has appraised for atleast the purchase price if not more. The great thing is when you buy new construction most of the time the value of the house is higher by the time you’re about to close so you will be walking in with instant equity.
Now if the appraisal comes in below the purchase price then that’s where we would go back to the builder and renegotiate. The lender cannot legally lend you more money than the house is worth so let’s say you’re buying a $500,000 house and the appraisal comes in at 475 we would need to renegotiate with the builder to see if we can get you that lower price. Knock on wood but I have not had any new construction homes come in lower than the purchase price in the 6 years I’ve been a real estate agent.
Step #7
Next step is the pre-closing walk-through which is usually a week before closing. For instance, if you’re closing on August 16 your walkthrough would be a week before you close on August 9. Typically all the builders have the same formula. Remember before the pre-closing walk-through, I would highly recommend having your inspection done. This is with a third-party inspector and will be a separate fee. If you don’t have an inspector your real estate agent will have inspectors they can recommend.
Each builder is going to offer you different warranties, but most of the warranties are 10 years for structural items and two years for other items and 1 year workmanship.
After you close on your home, every builder gives you a one-year warranty punch list of items. Basically that means that after you’ve been in the home different things will pop up but let’s say, even as you were moving in might’ve hit some furniture on the wall and the paint is damaged they will correct that. I recommend keeping a little notepad in the drawer of the kitchen and you can start making a list of all of the items that you want to get repaired. Now before that one year is due, I recommend having another inspection because this is when the house has settled and you will find the most items. If you only want to pay for one inspection, instead of all three that I’ve mentioned this inspection will be the most critical. The house has now been sitting for a year and it’s good to see if anything has happened during that time that maybe was not noticed before since the Inspector will check places that a normal person will not, so you will really get your moneys worth.
Step #8
Next step is closing!
In between your pre-closing walkthrough and actually closing date you will sign all your paperwork at the title company. These are the loan documents and that is when you will be paying your cash to close. This amount is made up of your down payment and closing costs.
And closing day is the actual date you will receive keys!
Now I know this was a ton of information and you may probably still have questions about the process. Feel free to book a call or zoom call with me so we can chat further and we can come up with a plan for buying your new house.
If you currently live out of state and are curious to learn how to buy a house while living out of state I recommend watching a video I created on the topic.
I hope you found value in this blog. Let me know if my team and I can help you in any way.
If you have any topics you want to see a blog/video on let me know.
Thanks for taking the time to read and I’ll see you on the next blog!
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Also, you will want to decide what type of home you want as nowadays you can buy a single-family home, a townhouse, a condo and there’s even multigenerational homes.
The single-family homes are the most popular as they are the ones that families and people prefer living in.
They will have a home with their own yard. A townhouse will look like a house, but it will usually be attached but often times attached to another unit, sometimes even attached on both sides of the unit. The tricky thing with townhomes that most people don’t realize is the HOA is much higher, but that’s because they will cover more of the property such as roof maintenance and replacement. While a single-family house you would be in charge of paying that cost if you’re out of the warranty. That is the same for a condo.
A multi generational home is usually a house where you can find a home within a home. One of the popular builders that is known for these is Lennar. They have a model called nextGEN homes.