Buying a new home, regardless of if it’s a new build or a resale property, is an exciting time, and potentially one of the largest financial transactions one will make. Though the excitement is the same in both scenarios, the process of buying a new construction home is vastly different from buying a pre-owned home.
Below we will discuss 5 questions you will want to answer before beginning the process of building your new home.
1. How do I choose a builder?
Before you can even begin to plan, the crucial first step in the home building journey is to decide on a builder. While this decision is easier said than done, there are a number of easy steps you can take to narrow down your options and pick the best builder for the job.
First, make a list of builders who serve your community. From there, preview the company’s websites and cross off any builder that you can plainly see does not offer the service or style you are in the market for. Next, check out the companies online reviews, making special note of repeating concerns or complaints. Red flags may include failure to complete a job, lack of communication and inability to work well with clients.
Continuing, it is imperative that you sit down with a shortlist of builders you may be considering. This will give you a chance to meet face to face, see firsthand how they interact with clients and ask all the questions you may have.
Once you have completed all these steps, follow your intuition and choose the builder with whom you feel most comfortable working.
2. Do I need a real estate agent?
While there is no legal obligation to use a real estate agent for a purchase of a new construction home, more and more buyers are finding the benefit of having one. When you are dealing with the sales team or agent of the construction company, it is important to remember that they are working solely for the best interest of their client, the builder. And while most builders work hard to ensure satisfied clients, there is no real downside to having extra resources on your side.
Not only does using a realtor cost the buyer nothing, but real estate agents are also able to help go through the contract, explain the fine print, act as an advocate on your behalf, negotiate terms and conditions and help make decisions along the way.
It is likely in your best interest to use a realtor who familiar with both the area and the builder you are using. For example, if you an interested in Maple Ridge new construction homes, a local agent would likely have past experience with a builder and know about the processes, contracts and more.
3. Are mortgages for builds the same as resale purchases?
There is a significant difference when it comes to financing a new construction home and the purchase of a resale property. However, the difference doesn’t typically affect the buyer or their ability to qualify.
When purchasing a new construction home a lender will implement what is known as a construction mortgage. This type of financing is typically done in “draws”, where clients pay large portions throughout the build vs. all at once upon closing. Many times banks will advance money to be sent to the builder at the beginning for a deposit and then after a certain point in construction and so on.
At the end of the build, the mortgage is then registered against the property in the same fashion as a traditional mortgage and then converts to a standard loan. While this may all sound confusing, most of the transactions happen directly between bank, lawyer and builder, leaving the client out of the process.
4. What decisions will I need to make?
How many and what kind of decisions one will be making will depend on how many customizations are planned. When purchasing a new construction home, many times, builders will have a handful of options that you will need to choose from which include flooring, countertops, cabinets, paint colours, and fixtures. The design team will present you with a set group of choices, typically falling in the neutral range, and you will make your selection. Designers are able to help assist with colour schemes and have many past projects and model homes to use as examples.
After all your standard decisions are made, the option for upgrades is usually offered. From their further home customizations may be allowed. These can range from higher-end finishes and features to different paint colours and designer themes.
5. What are the potential issues I could face?
Similar to purchasing a pre-existing home, there are potential issues that can arise in any real estate transaction. The most common issues found when purchasing a new construction home include:
- Delays in construction:
There are a number of reasons a project can be delayed, many times it is completely out of the control of the builder and tradespeople. From extreme weather conditions to disruption in local, national and global supply chains have routinely been the largest factors when delays occur.
Depending on your builder, there may be clauses in your contract that discuss what will happen in the case of significant delays. From price decreases to payment for temporary housing, this is one of those crucial questions you will want to ask before deciding on your builder.
- Lack of communication:
A common complaint with building a home is that the client feels out of the loop. Building or buying a new construction home may be an everyday occurrence for the builder, however, this is a significant event in the client’s life and as such, they are generally heavily invested in all aspects of the project. A good builder will understand this and make sure to keep clients adequately informed throughout each step of the construction process.
The best way to resolve the issue is to calmly but clearly explain your frustrations and ask to be better informed. In most cases, it is an oversight or timing issue and in the matter of a conversation can be dealt with.
When building a new home it can be very easy to go over one’s original budget, especially when one starts upgrading areas of the house. An excellent way to ensure this does not become a problem is to thoroughly go through your finances, allocate funds for additional desired upgrades and stick to a plan.
When budgeting for the purchase of your new construction home it is important to consider a number of different scenarios, as prices can fluctuate depending on certain decisions down the road. This is one of the instances where having a realtor can really pay off as they are able to accompany you through the design and customization process and provide valuable insight into what may be a good investment and what you likely won’t see add significant value to your new home.
At the end of the day, it is up to you what you want to upgrade and spend money on and where you wish to save. Having a well throughout out plan, which you communicate to your builder and team, will ensure that you are prepared to make decisions without emotions or uncertainty taking over.
There are many different things you will want to consider both before and during the process, and with a bit of work and research on your part, the right builder for the job and a knowledgeable real estate agent, you will be able to confidently be able to begin your new construction home buying journey.