Owning a newly constructed home has long been part of the American dream. Few experiences can match seeing vacant land transformed into a place where families live and communities flourish.
But before getting caught up in the emotional rush of new carpet and bright paint, gleaming windows and fresh wood, it’s important to understand the steps involved in selecting a home–generally a family’s largest investment–and a home builder, as well as choosing your options, finding a lender and closing the deal.
Careful planning can yield happiness for years, rather than a heartache.
Choosing a builder
The adage about location being everything certainly applies when choosing either a newly built or existing home and how much you’ll pay for it. Most buyers must live within a budget, but there are factors beyond price that should also be considered.
Location means not only the community where you’ll live, but the relative distance to places around it, such as work, schools, shopping, access to major roads, and proximity to medical help and to family and friends.
But for buyers of new construction, choosing a location is only half the equation. Once you have determined where you want to live, you will have to choose a builder who will put you in a house in that location.
“First-time home buyers must understand they’re not just buying a home–they’re buying a community,” said Richard Brown, president of Cambridge Homes. “I’d advise people take some time to visit a couple of subdivisions a builder has done and ask people there how they like the community.”
Pick another subdivision that the builder has completed, preferably one where houses have been occupied for a year or more. Ask the homeowners about problems that have surfaced, and how the home builder responded after the sale was closed.
But don’t be put off by minor annoyances; few new homes are perfect, especially these days when labor markets are tight and experienced subcontractors are in high demand.
In areas where home-building competition is keenest, you may have seven or more companies to evaluate. Even in markets where only one or two builders are operating, it is important to investigate your options.
“We consider that the process is to educate the consumer along the entire way,” said Pete Balistreri, vice president of sales and marketing for William Ryan Homes, which sells to a lot of first-time buyers.
William Ryan Homes gives all buyers a homeowner manual and screens a video for them that explains the behind-the-scenes steps involved in the construction process. Buyers also are taken through prearranged inspections of their houses at various times, including the pre-drywall stage, although they are also free to walk through on their own at any time, the company said.
“We want them to know each day what stage we are at,” Balistreri said. “We want them to know what we put in and how it all comes together.”
Choosing a house
When making your selection, ask the builder about the products, the prices and features included with the home versus those that are optional upgrades. Most builders will offer a range of houses at one subdivision, and determining which one is right for you often comes down simply to personal preference.
In the Chicago market, it is customary for builders to put up model homes for prospective buyers to tour. That helps you visualize how you might live in the space and allows you to see first-hand how the patterns and flow of the model relate to your lifestyle.
Size matters, in terms of how many bedrooms and bathrooms you’ll need. But don’t think that added square footage always adds up to a better house.
What buyers may get “is a far cry from what you see in the models,” said Bryan Mraz, a Roselle attorney; so make sure any changes are spelled out in the sales contract.
And having an attorney review your final contract is not a bad idea, either.
“New-construction contracts always favor the builder,” Mraz said.
Along with the selection of the right model, the selection of a location within the subdivision is also important, as are site amenities such as trees or a slope that might allow for a walk-out basement–amenities for which you may have to pay a premium.
Timing can be important, as well.
“You want to be sure if you’re one of the first people to buy, that the homes following yours will be of equal or greater value,” said Tim Baker, a Re/Max agent in Naperville. “Buying homes inside the subdivision rather than in the outer portions means you’re less likely to have something cheaper built next to yours.”
Preconstruction pricing–buying from blueprints, often before models are open–can mean that first buyers pay the least, last buyers the most. But Baker says that to maximize your investment, plan to stay in a new home awhile.
Upgrades and options
Most models offer far more than you’ll get in a basic house, so be aware of what you’re getting and be cautious about upgrades.
“Adding air conditioners, decks and other extras after the fact can save you hundreds of dollars,” Baker said. “When you buy upgrades, be careful what you’re getting. Are the wood floors really wood or just quarter-inch veneer with particle board underneath?”
Barbara Kininmonth, vice president of Hoffman Homes, says “hard options like basements, kitchens, and air conditioning all make sense.”
“All of those options are a solid investment in terms of resale value of your house,” she said. “It’s the `soft’ options that are more decorative than functional that don’t always add value to your home.”
Brown says a good builder will advise buyers about upgrades that add value, and he believes it’s important not to overly personalize your choices.
“Most people will move a number of times and so you’re always thinking about resale,” Brown said. “When considering your upgrades, don’t just think in terms of what you like; others might not like it.”
When ordering upgrades, remember that subdivisions built by one developer offer no internal price competition. Savvy buyers may get more for their money by buying where a variety of builders are working and upgrade prices may vary.
Remember that a new home may actually appreciate far less in the first few years because of the extra costs of landscaping, window treatments, alarm systems and more. If you’re likely to be transferred in a year or so, there’s no time to recoup your expenses.
Financing
Surprisingly, the first place you may wish to look for financial help is through your builder. Many builders, recognizing that one of the biggest issues with first-time home buyers is financing, maintain relationships with local lenders and may even have upfront commitments from them to supply mortgages to buyers.
“We know how to pre-qualify people and try to match (buyers) with the best financing possible,” Kininmonth said. “Today, there are zero-down programs, variable rates and other options. Generally, our buyers are very smart when it comes to reading blueprints and so forth, but it’s the finance issues that can be troublesome.”
Marc Falk, a loan officer with National City Bank Mortgage Services in Naperville, said that for buyers of new homes it is crucial that a lender be “committed to the rates offered from start to finish” because of potential unforeseen construction delays.
“Because of the amount of business today, some places offer these unbelievable rates with figures they can’t commit to at the end,” Falk said. “It’s kind of a bait and switch that can leave you without a mortgage.”
