10 Facts to Know When Buying New Construction

No matter where you drive around the west side of Portland, you pass areas where new homes are being built. NW Portland, Beaverton, Hillsboro, Cornelius, Forest Grove all have development sites underway and North Plains recently approved a large development to begin construction soon.

Buying a newly constructed home is enticing, it's sexy, it's the way to go for some buyers.  It seems the perfect opportunity for buyers to get what they want without the headaches of redoing or repairing a previously owned home.

However, just like when purchasing a re-sale home, new construction has it's own hitches in the process.  The whole process, starting with selecting the development, picking the floor plan and lot to selecting interior features and waiting for county inspection approvals can be overwhelming.  It requires patience and managing expectations throughout the build process.  

Cara Ameer, a Realtor in Florida, recently wrote an article for Inman on 10 things that may help to facilitate the journey of buying a new construction home. Below is a summary of the key points.  Read the full article at Buyers thinking of new build? 10 facts they should know first.

1. Using an agent to represent you doesn't cost more money.  

Many buyers believe that if they use the agent on site they will get a 'better deal'.  What is important to know is that the site agent represents the seller/builder - not the buyer.  Having your own representation ensures your interests and needs are taken into account in the purchase.  

2. Relationships matter

The relationships between the site agent and your agent can be key to ensuring a smooth transaction and good customer service throughout the transaction.

3. Offerings are subject o change at any time.  

You may have seen advertisements about special pricing, available lots, extra features included in the sale, etc. but by the time you visit the site a few months later, those offerings may not be available.  Incentives offered by the builder are subject to changes depending on level of sales activity and buyer demand for homes in the development. They also may vary depending on if the site is newly opened or if they only have a few more homes to sell.

4. Contracts might not be negotiable.  

Many builders have their own contract to use for a purchase versus using the Oregon Residential Sale Agreement.  Their contracts are designed to protect the builder and focus more on what they are not responsible for or do not warrant.  Some builder contracts also don't allow for 'outs' from the purchase like the Oregon Residential Sale Agreement does - such as for inspections or financing.  Be sure to read the contract carefully, and possibly have an attorney review the terms, to ensure you are aware of the financial implications and buyer obligations you are accepting.

5. Financing a new build has some caveats

Builders may offer an incentive for using their in-house lender or preferred lender. Be aware of what the incentives really are and if they also come with additional fees that you may not incur if you used an outside lender. Your Realtor may be able to negotiate some of the lender incentives into the sale agreement even when using your own selected lender.

6. The initial list price is probably much different than the final price.  

Often with new builds, you have the option between several selections of possible lots or interior features.  There may be a premium charged for special lots or upgraded interior features. For those builders who allow for structural modifications, such as moving a wall to enlarge a room, there will be a change in price.  The final price will be driven by buyer decisions for the final product, which may result in a higher home price.

7. Upgrades can be costly. 

I have yet to work with a buyer on a new construction home who hasn't been surprised how quickly the home price increases by selecting options that are not standard. Buyers need to understand the cost differences of the options and to budget accordingly.

8. Choosing design elements can be overwhelming.  

It is so exciting to go into a builder's design center to look at all the options available to put into your new home.  It can also be mind boggling!  Plan to take notes during your visit to the design center capturing the names/colors/manufacturers of the materials you select and possibly take photos to remind you later on what exactly what you chose.

9. Changing your mind might not be possible. 

Once selections are made and the home plan is signed off, it may be very difficult - or expensive - to make any changes.  Cabinets and flooring may be ordered right away preventing a change, structural changes may need architectural reviews and permits may be required, etc. If the builder does allow for the change, there most likely will be delays in completion and additional cost to the buyer.

10. You might need an attitude adjustment

Building a home can be exciting - and stressful.  A lot of decisions need to be made in a short period of time.  Buyer visits to the construction site may create concerns about quality of workmanship. Workers are humans and occasionally will make errors and most builders will address issues before moving forward. Building materials may be in short supply or back ordered causing delays. It is important for buyers to understand the limitations and realities of the builder and be realistic with their expectations throughout the build process.