Who doesn’t want to live in a brand new home? Owning a brand new home is very appealing to buyers. When buyers are searching for a home, they may not be able to find “exactly” what they are looking for and will, therefore, consider new construction. The thought of being able to pick all your own finishes including countertops, flooring, cabinets, paint color is very exciting. There are always concessions when buying a home, and even new construction.
Keep in mind that upgrades cost money and the model home that you walk through will most likely not be the finished product. The model home generally has all of the upgrades throughout the home, and they all cost money. So even though you “love” the model home you may not be able to afford all of the upgrades.
There are some very important considerations you need to take into account when considering purchasing new construction, and here are 15 questions which are imperative to ask during your home shopping experience for a new home!
Not all home builders are not comparable to each other, so your due diligence with this process is equally as important as if you were purchasing a resale property. Generally speaking, there can be multiple new construction developments in an area so as a buyer you will have the opportunity to view the different models and compare the construction.
Asking the following questions will be helpful and allow a buyer to perform their due diligence with the home buying process.
1. Should I Hire My Own Real Estate Agent?
There are many reasons to hire your own Real Estate agent when purchasing construction. Some builders, however, insist that you work with their team. However, builders generally cooperate with outside agents and will offer a referral fee to the agent. Your own Real Estate agent will be objective about the different builder tracts and at each development, the agents who work for the builder are going to promoting their own development. Additionally, your Realtor will be able to offer guidance regarding the location of the lot, amount of upgrades, and more. If a home is upgraded more than a model home, you may not recover that initial investment when the time comes to sell it because of initial overspending.
2. What is Builder Information?
This information can be found online. Finding out the name of the developer is helpful. Then take your time and do research on the builder to find out if there are any past complaints or negative reviews with respect to the construction. This information will allow
you to find out about the builder’s reputation and construction history. Many builders will have both satisfied and unsatisfied clients in their past. Consider the trends for reviews when making a decision on utilizing a builder.
Be sure to search the name of the builder, development and the company name to find out any information. Find out if there have complaints against the builder or if other projects have had any issues.
Also, you can certainly drive around the neighborhood under construction and talk to neighbors who have already moved in to ask them about their experience.
3. What are the Specifications of the Development?
Consider the location of the development and it’s proximity to nearby necessities. Picking a desirable area is very important when buying (even new construction) for future resale. Depending upon the area you are searching for, there can be multiple builders or developers within a specific tract. Be sure to find out that information. Important information will include the name of the development, the number of homes in the area, and the amenities. There may be multiple builders within the same neighborhood or tract. You should also be able to find links to the floor plans for the development as well, and options with those floor plans.
Other important information to ascertain is learning about the amenities of the home owner’s association. Is there a pool, spa, recreation room and other features that are offered to homeowners.
4. What Schools Do the Children Attend?
This information can be impactful if it is a family moving in with young children. Some areas are having to develop and build schools and infrastructure in order to accommodate the number of people moving to an area. There are some areas with brand new schools as well. Be sure to fully research the area and there are some great tips for selecting the best neighborhood.
This is the information needed for any buyer whether or not they have school-aged children, as schools are always a consideration for resale value. Once you have the name of the schools or district, then you can find information about how the school’s rate, as this can also impact the value of a home. Most districts have school locators on their websites, and this is excellent information for anyone moving to the area.
5. What Financial Incentives are Offered for Using the Builder’s Preferred Lender and Title Company?
Builders will offer some kind of financial incentive to a buyer. Builders may offer to pay closing costs for a buyer’s loan or for optional features including upgrades. In order to receive the incentives that are being offered, buyers must work with the lender recommended by the builder, as well as the Title company of the builder’s choice.
Other incentives include a lower interest rate, however, a buyer is free to shop around for the best financing. Building a home can take months, so inquire if they will consider an extended rate lock in the event that interest rates change.
6. What are Standard Features and What are Upgrades?
All home builders will have a set price of a home and what is included and what is a standard feature by model. For example that may include countertops, standard grade flooring or carpeting, style of a kitchen sink, and more. If there are certain items that you want to have upgraded, then be sure to ask the cost of upgrading a specific item.
When you tour a model home, remember that you’re previewing a high-end version of the standard home. Therefore, you need to find out from the builder which options are standard, which options are upgrades, and what each upgrade costs.
Other information you will want to know is if the builder takes care of any landscaping on the property front or rear.
7. Is There an HOA and What are the HOA Fees?
Many new home communities have a Home Owner’s Association. The Home Owner’s Association will be responsible for rules and regulations in the neighborhood or community. In newer neighborhoods, the HOA will generally cover the maintenance of the common areas including the community clubhouse, pool, spa, and any other common area. Landscaping of the front yard of the home may also be included. Many newer communities will require that a landscaping plan is submitted for approval for the backyard. This will need to be done within a specified period of time. Be sure to find out what is required in the backyard and how soon that the homeowner will need to complete this. As a new homeowner of a brand new home, ensure that you have a budget to cover the cost of completing the backyard. In the backyard, you might consider artificial turf, as this will ultimately save money on maintenance and utilization of water.
There are also CC&Rs or Covenants, Conditions, and Restrictions which s are the rules of your neighborhood. They describe the limitations of what you can do with your property. The goal of the CC&Rs is to protect and preserve the property values in the community. CC&R’s may prevent you from painting your home a new color or altering the home without obtaining prior approval.
Many new construction projects neighborhoods are located in a gated community.
8. Will the Home Be Subject to Mello Roos Tax?
Mello-Roos established by local governments in California is a means of obtaining additional public funding. Mello-Roos Community Facilities District (a “CFD”) is a tax that allows for financing of public improvements. The services and improvements that Mello-Roos CFDs can finance infrastructure that may be needed as a result of the new construction. The infrastructure that may be financed include streets, sewer systems, police protection, fire protection, ambulance services, schools, parks, libraries, museums, and more.
Mello Roos tax is on the property tax bill and you will it is listed as CFD or Community Facilities District. Consult your tax professional if this tax is deductible.
9. Are There Any Green Features on the Home?
Most new homes are going to have green or energy-saving features. In California, there are strict building codes that builders have to adhere to. Any green or energy-saving features will help reduce your costs of owning the home and the cost of the utilization of energy. Some homes may have solar which will reduce your monthly electric bill. Almost all homes have low flush toilets which use significantly less water, and low flow showerheads which saves the use of water. Most new appliances are energy efficient and most likely will be energy star products.
10. What are the Differences and Costs for the Lots?
Pick a lot with the best location! As ultimately the lot location will have a better resale value. The lots can definitely vary and depending on the location of the development may also have different elevations. Take a tour with the agent who can show you the different features of each lot. Corner lots are ideal and may have a higher premium because you would then only have a neighbor on one side. Also, take into consideration the direction in which it faces.
Builders generally have it designed so that a specific model will go on a specific lot. You may not have the opportunity to pick a model and the lot. Ideally, pick your lot, then select the model that you like the best.
11. What are the Plans for the Immediate Area?
It is the buyer’s responsibility to check with the city to determine what is planned for the surrounding area. If your home has a view, you will want to make sure that it is going to remain with the home.
Builders do put that responsibility on the buyer to find out this information. You will want to know about any other infrastructure that is going to be built and what is the proximity. And how this additional building may impact your home.
12. How Long Does the Home Take to Build?
Ask about the length of time it is going to take to build the home. It can take many months and there can be delays with the weather as well if the home is built during the winter months. Be sure to ask about the date it will be complete as you will need to make plans to either sell your other home or give notice if you are renting a home.
13. Will the Home Have a Warranty?
Most new construction comes with a home warranty and the builders and developers are generally around for a while after the completion as they are working on the next phase! So when you find things that are wrong in the property, you will want to have a warranty in place so the builder can come back and repair them.
Many items will be uncovered in a walkthrough and as they are introducing you to your new home, they may be identifying areas where painters need to touch up and ensure fixtures are appropriately installed.
A buyer should receive the manufacturer’s warranties on the appliances including the kitchen appliances, hot water heater (many new ones are tankless), washer and dryer, the air conditioner, and the roof.
14. Should I Have a Home Inspection?
Yes! You should get a home inspection. This will not be a contingency, but it will provide you with objective information about the property, and hopefully, anything found that is not correct, can be repaired through the warranty. A home inspector is going to look to ensure everything is up to code include hot water heater, seismic bracing, GFI outlets installed per the code, and more. You can decide what items to negotiate after the home inspection.
The walkthrough is separate from the home inspection and is done with a representative of the builder just prior to the home closing escrow. If at the walk-through, there is anything that needs attention, then this is the opportunity to share it with the builder to ensure that it gets repaired!
15. Should I Have a Reserve?
YES! Remember that there will be expenses AFTER you close escrow. New construction does not generally come with window covers so you will have that expense to install those. Also, there will be the cost of landscaping the rear yard, and possibly the front too as it depends upon the development.
You always want to have reserves in the event of an emergency.
There are many considerations when purchasing new construction and some of these questions are vital to the process. Another important consideration is to keep a reserve for any unexpected expenses. This list allows you to perform your due diligence online before you even go out to the tracts to see the homes in person.
Find Other Valuable Resources for “15 Questions to Ask When Buying New Construction” from Real Estate Professionals Across the Country.
Why You Need a Buyer’s agent. Bill Gassett explains in his article about how a buyers agent can help to find the right builder, provide guidance on upgrades and any modifications of the home.
Should I Build a new Home or Buy one Existing. Kyle Hiscock discusses the pros and cons of both. Some of the pros include full customization of the home when building as well as the home being more efficient. Some of the cons may include more upfront costs and lengthy build time.
Pros and Cons of a Gated community. Michelle Gibson explains the benefits including added security, less traffic and the cons which include HOA fees and a potentially false sense of security.
About the Author
The above real estate article “15 Questions to Ask When Buying New Construction” was written by Sharon Paxson of Newport Beach Real Estate. With experience since 2005 representing sellers, buyers, and landlords with their real estate transactions, we welcome the opportunity to share our knowledge and expertise and guide you through the home buying or selling process.
We service the following Orange County CA areas: Corona del Mar, Huntington Beach, Laguna Beach, Newport Beach, Newport Coast, Orange, Santa Ana, Sunset Beach, Tustin and more! If you are considering selling your home, we welcome the opportunity to work with you and list your home with a top Newport Beach CA Realtor.