Top Things To Know Before Buying a New Construction Home

In this episode of Your Real Estate Mama, Jan Scott shares essential advice for anyone considering buying or building a new construction home. Drawing from over 35 years of experience, including 15 years working directly with builders, Jan discusses the common challenges that can arise during the building process and offers practical tips to avoid turning your dream home into a nightmare. 

• Learn why having your own real estate agent is crucial.
• The ins and outs of builder contracts.
• The importance of new home inspections.
• How to plan for unexpected costs.

Whether you're stepping into a model home or custom building from scratch, this episode is packed with wisdom to guide you through the process. 

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Chapters

• 0:00 Introduction and Personal Story
• 0:27 Welcome to Your Real Estate Mama
• 1:04 Challenges in New Construction
• 1:56 Insights on New Construction Homes
• 4:18 Importance of Having Your Own Agent
• 5:12 Understanding New Construction Contracts
• 6:45 Understanding Construction Insurance
• 7:40 Custom Builder Considerations
• 8:47 Creating Detailed Spec and Allowance Sheets
• 9:16 Flexibility with Custom Builders
• 9:55 Importance of Home Inspections
• 11:01 The Role of a Buyer's Agent
• 11:40 Final Thoughts - Mama Wisdom & Inspiration
• 12:32 Closing Remarks

Transcript

 Introduction and Personal Story
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[00:00:00] She called me asking for advice because they had already paid the builder a lot of money, but was struggling to get him to come back and finish the home just so they could get moved in. Whether you're buying new construction or custom building, it's important to make sure the process doesn't become a nightmare for you. Let's get to it.


Welcome to Your Real Estate Mama
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[00:00:27] Hey there, welcome to your real estate mama. I'm Jan Scott, and I'm here to help you navigate the ups and downs of buying or selling a home. I've been wrangling the real estate market for over 35 years. And trust me with all this gray hair comes a whole lot of wisdom. I'm excited to share tips, a little humor, and plenty of encouragement to make your journey easier.

[00:00:51] Whether you're new. Or a regular. I'm so glad you're here. Follow the show for new episodes every week and together we'll grow and help even more folks.


Challenges in New Construction
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[00:01:04] I got a call from a friend who was building a house in another state who was in tears, feeling completely frustrated. She called me asking for advice because they had already paid the builder a lot of money, but was struggling to get him to come back and finish the home just so they could get moved in.

[00:01:23] She said, Jan, what can I do? Unfortunately, the only advice I could offer was, It was a stressful situation for them, and sadly, it's something that can and does happen in the building industry. So today, I'm going to share some top things to know before buying a new construction home. With so many new subdivisions springing up seemingly overnight, I want to share some key things you need to know before stepping into that model home or sitting down with a custom builder.


Insights on New Construction Homes
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[00:01:56] Having spent 15 of my 40 years in real estate working with builders, I've got plenty of insights to pass on about new construction homes. You know, everyone loves a new home. Oh, the smell, the fresh paint, everything is under warranty. It's move in ready. And if you're lucky enough to pick out colors, fixtures, and finishes, You can make it uniquely yours before you even move in.

[00:02:23] Now I have to say, I absolutely loved my time in new construction. I will have to confess that there is just something about the smell of fresh wood during construction and watching something being built when there used to be nothing but bare ground that makes you feel like you're accomplishing something.

[00:02:42] I would help design floor plans, which was a favorite part of my job. We would sit in builders meetings for hours and discuss the buyer's lifestyle and what would make this home more livable for them. You know, and today when I walk through some of these new homes by these big track builders, I think to myself, what were they thinking?

[00:03:02] Well, often they weren't. It's all about speed and cost efficiency. I'm not knocking it entirely. They still build solid, affordable homes out there from these big builders. And they're often perfect for first time buyers who are currently paying rent. These homes are a great stepping stone to build equity and to move up in a few years.

[00:03:26] And speaking of resale, newer neighborhoods tend to hold their value better because major components like the heating and cooling system, the roof, they're all still in good shape when you go to sell. And after about three years, the landscaping is more mature and the neighborhoods look established. In my own experience working with builders, you know, every time I saw a new floor plan that I love, I'd want to build it.

[00:03:50] So my family was moved every two to three years. It became a running joke that they couldn't write my address in ink anymore. They had to use a pencil because we were always on the move. Even now, I still get excited watching a house rise from the ground up. But whether you're buying new construction or custom building, it's important to make sure the process doesn't become a nightmare for you. Let's dive into some key things to know.


Importance of Having Your Own Agent
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[00:04:18] Always have your own agent. Make sure your agent has experience with the building process. If they don't. Keep looking until you find someone who does. It's crucial to have your own representation when visiting a model home or speaking to a builder. The agent at the model home works for the builder.

[00:04:39] Their priority is to get the best outcome for their employer, not you. If you walk into a model home with an on site agent without your realtor, be sure you give them your realtor's name and number. Your agent will be an advocate helping negotiate things like seller paid closing costs or special concessions.

[00:04:59] And here's the best part, their commission is already built into the price, so it doesn't cost you extra to have them on your side. Now let's talk about new construction contracts.


Understanding New Construction Contracts
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[00:05:12] When you're working with a big track home builder versus a custom independent builder, there are a few key differences to watch out for, starting with the contract.

[00:05:22] Builder contracts are very different from standard real estate contracts. With some big builders, these contracts can run over 60 pages, and if you're working with a custom builder, it could be 100 pages or more. That's why having an experienced agent to help you navigate these documents is crucial. The contract should detail every aspect of the home, from paint and brick choices to appliances.

[00:05:49] I had no idea how many brick options existed until I started in new construction. There's everything from budget friendly to high end option, and all this needs to be specified so the builder can give you an accurate price. So be careful with cost plus contracts. This means the builder charges their fee plus whatever the subcontractors and materials cost So if prices go up during the build, You're the one paying the higher cost.

[00:06:23] On the other hand, if the builder gives you a firm price in writing, they absorb any rising material cost. You know, and by the way, it may take eight months, sometimes a year, to build a house. A lot of price changes can happen during that time. Another important thing to note, many builder contracts state they're not responsible for liability insurance.


Understanding Construction Insurance
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[00:06:45] That means if something like this happens, copper wiring or appliances or windows are stolen from the home mid construction, you could be on the hook for replacing them. Whether you're paying cash or using a bank loan, construction insurance is a must. Now most of your big track home builders handle all these things.

[00:07:06] You essentially are just reserving a home while they complete it, so they take all the risk. But with an independent custom builder, you need to be very clear on when payments are due and whether they're responsible for everything. until the home is finished and ready to close in your name. Lastly, watch out for non refundable deposits.

[00:07:30] Some builders will require one when you go under contract. And if the deal doesn't close, they might keep that deposit since they've taken the home off the market.


Custom Builder Considerations
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[00:07:40] Here are some things specific to custom builders. When you're custom building from scratch, one of the first things you need to do is establish the price.

[00:07:50] Before you even get to the contract stage, have several meetings with your builders to make sure you're on the same page. If you're building on a vacant lot, it's essential to walk the lot with your builder to discuss things like site prep and other additional costs that could arise. You know lot prep can be a major expense in certain areas.

[00:08:13] So it's important to talk about this up front. I remember working with a client to find the perfect lot for their dream home. We thought it was an ideal lot for a walkout basement. But when the builder joined us, he pointed out several massive rocks that needed to be removed along with the trees that had to be cleared.

[00:08:35] And by the time we factored in the site prep, it added a hundred thousand dollars to the top of the lot cost. Thankfully, we did our homework before making the lot purchase.

Creating Detailed Spec and Allowance Sheets
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[00:08:47] During these meetings, you'll also want to create what's called a spec sheet and an allowance sheet. These documents cover every detail of the home.

[00:08:56] Everything from the trim width to appliance brands, flooring types, countertops, and even the cost of brick and roofing. Keep in mind if you go over your allowances, most custom builders will ask for that overage payment up front, so be ready for some out of pocket expenses.


Flexibility with Custom Builders
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[00:09:16] The main difference between custom building and buying from a big track home builder is the flexibility.

[00:09:22] With a big builder, you usually are limited to a few choices. They've already calculated the price, so they've already picked out your flooring, your appliance package. Your biggest risk is potentially losing your earnest money if you don't close. But with a custom builder, The sky's the limit. You can choose anything you want for your new home, as long as you have the budget for it.

[00:09:47] So hey, if you want to line your cabinets with gold, you can. It's all about what you're willing to spend.


Importance of Home Inspections
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[00:09:55] That brings us to the next topic, get a home inspection. And from the very start, even with new construction, getting a home inspection is absolutely essential. It's important to involve a home inspector throughout the entire build process, not just at the end.

[00:10:14] Ideally, inspection should start before the foundation is poured. Remember, homes are built by people and mistakes happen. While many get caught, some don't. For example, in one inspection during a new build, we found the water lines had been installed in a way that over time, the nails would have punctured the pipes.

[00:10:36] Thankfully, we caught it before the drywall went up and had the plumber fix it. This kind of early catch can prevent much bigger problems down the road. I've seen home inspections save buyers from major headaches long after the warranty had expired. If you want to learn more about home inspections, check out episode 6 called Home Inspection Insights from a Master Inspector.


The Role of a Buyer's Agent
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[00:11:01] You know, it's always exciting to move into a brand new home, whether it's in a big subdivision or a custom build. But to protect your interest and make sure everything runs smoothly, having your own representation is key. A seasoned buyer's agent is key.

[00:11:17] can help you navigate builder contracts, negotiate the best deal, and keep an eye on the construction process, especially if they have been through the building process many times before. So before you get too swept up in that new home smell, make sure you're prepared. Your dream home should be just that, a dream home and not a nightmare.


Final Thoughts - Mama Wisdom & Inspiration
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[00:11:40] As always, I like to leave you with some mama wisdom and inspiration. You know, when considering new home construction, Make sure you count the full cost. While the base price might cover the house itself, there are often many extras like blinds, appliances, fencing, and many more that you'll need to budget for.

[00:12:00] Things that might already be included in an existing house. You know, in Luke 14, Jesus offers some wise advice about planning ahead. But don't begin until you count the cost. For who would begin construction of a building without first calculating the cost to see if there is enough money to finish it?

[00:12:21] So, as you move forward, be thoughtful in your decisions and ensure this is truly the right choice for you.

[00:12:32] Well, that's a wrap. Follow the show for new episodes every week. Don't forget to leave a review, rating, or comment on your favorite podcast platform. Feel free to send me an email to Jan@YourRealEstateMama.com. I love hearing your questions and comments, and I'd be happy to help you find a great real estate agent anywhere you live.

[00:12:56] Be sure to follow me on Facebook @YourRealEstateMamaPodcast. Until next time, y'all take care, happy house hunting, and remember, you should always listen to your mama.