Buy new homes
New homes are wonderful to see – just pick a home builder you love and start looking for fantastic dent-free, nick-free constructions offering the latest styles and designs. Sign up on the dotted line and you can become the owner of the newest house in town, finished to your whim.
Check your new rate (Sep 24, 2021)
Protect your interests
In fact, the builder will facilitate registration. With many new home purchases, it is quite possible that the builder is orchestrating everything.
The builder’s lawyers draft the sales agreement, the sales representative performs the inspections, the builder’s captive mortgage company finances the transaction, and the builder’s closing branch handles the settlement.
It’s a neat and orderly process – and one that leaves the buyer completely dependent on the builder. At the best of times, a new home sale may be fine. But what about something less than the best of times?
A house is a complex product, and a lot of things can go wrong. How can buyers protect themselves when buying a new home, one of life’s biggest expenses?
Choose a home builder
Many builders are building new home communities, but not all are created equal. The National Home Builders Association (NAHB) recommends that you visit a builder’s newly constructed homes and subdivisions.
Visit a subdivision on weekends when owners are likely to be out, walking, gardening, or exercising. Introduce yourself and say that you are considering buying a house from the builder who built his house.
Talk to several owners and try to get a random sample of opinions. The more people you talk to, the more likely you will get an accurate impression of a builder.
When you visit model homes or inspect current inventory, assess the level of building features. Inspect the quality of the cabinets, rugs, trim and paint.
Here are five basic tips:
1. Get your own agent
First, work with an experienced real estate broker, someone who can be a buyer’s agent and who has helped other buyers acquire a new home.
Always visit new homes with your broker and never go alone. This way you will be able to negotiate the broker’s fees with the builder. For more information, the real estate website Owners.com offers an informative video titled How real estate commissions work.
2. Pay for a home inspection
Second, get a qualified home inspector. At first it may seem that an inspector is unnecessary because the house will be new. However, even new homes can have flaws.
Be aware that an appraiser is not a home inspector, and that the builder’s representative works for, uh, the builder….
“Tell the builder that you want the right to have an inspector of your own, and at your own expense, perform these inspections,” said DC attorney Benny Kass, writing for The Washington Post. “Your sales contract must clearly state this. “
The usual idea, says Kass, is to make sure the inspector visits the property three times: before the foundation is poured, before the insulation and drywall are in place (so the inspector can see the plumbing and electrical work before the walls are sealed), and before the procedure.
3. Consider the contracts
Third, the builder’s sale form is not usually the deal that local brokers use to sell homes in your community. Instead, it is written by the builder’s lawyer to give the builder every possible benefit.
The best advice is to hire a lawyer to help you understand what the proposed agreement says and negotiate the terms.
4. Shop around for your financing
Fourth, it often happens that a builder has an affiliate lender. The usual offer is “use our lender and we’ll give you x dollars worth of upgrades”.
“If you are buying a newly built house,” explains the Consumer Financial Protection Bureau (CFPB), “A builder may offer you an incentive or ‘deal’ if you select their affiliate mortgage company or other settlement service company.
You should shop around and compare interest rates and other settlement costs before entering into a contractual agreement to use these affiliates.
To ensure a smooth close and minimize costs, you should shop around with lenders and get pre-approved before you even start shopping at home.
It’s easy to do online. You will then be in a better position to know if the freebies you get by using the preferred lender are offset by additional costs. And you will have a good idea of your financial capacity and the mortgage options available to you.
Is it better to use the builder’s affiliate or an independent lender? It depends on the set of benefits offered by the lender, as well as the rates offered and the terms available. As the CFPB says, it is wise to shop around.
5. Compare title and escrow fees
Fifth, just as builders often have captive lenders, they are also likely to have affiliate closing companies. Again, you have the right to shop for your own closing agent.
If you are using the builder’s settlement company, ask if they helped the builder acquire the property where your home is located. If they answer yes, you may be able to get title insurance at a reduced price. Tell them you want a “short” or “reissue” rate.
What are the mortgage rates today?
Mortgage rates today remain low, below four percent for 30-year fixed loans at the time of writing. Keep in mind that for new construction, you may not be able to lock down until your house is almost complete.
Check your new rate (Sep 24, 2021)