Tips on How to Buy a New Construction Home
Are you thinking of buying a new construction building? If yes, you should try not to assume that the building is perfect. Take the necessary steps to ensure that everything works well. Do not rush into closing new construction deals because problems always crop up.
The biggest mistake of new buyers like you is to assume that new building works well. As a result, they refuse to ask necessary questions and documents before closing the deals. This set of people usually end up regretting their actions after spending thousands on house repairs and the rest.
We do not want you to regret buying your new construction house that is why we will be giving you some tips about buying a new construction home.
1. Get Good Faith Estimates: One of the mistakes of most first time buyers is that they often fail to get good faith estimates. Getting good faith estimates as mandated by the Truth in Lending Act will assure you of the best financing. Good faith estimates is a document that shows the buyer’s APR (Annual percentage rate) and other component costs of a loan. According to the law, this document must be provided to buyers by mortgage lenders within three days of the presentation of the credit.
With the good faith estimates, you can have a good knowledge of your APR. It is always advisable for a home buyer to visit at least three different vendors to compare their APRs and take the cheapest. Good knowledge of the various companies’ APR would leverage buyers’ negotiating powers.
2. Know the builder’s reputation: Before you append your signature on a deed of conveyance of a new building, you should not fail to ask questions about the reputation of the builders. If you ask the seller, you might not get a satisfactory answer. Try to ask important questions that go deep to the status of the building from the potential neighbor. You can ask: if there was any problem during the construction, if they use substandard materials, how fast the builders were able to resolve construction problems and so on. With these, you would have a good knowledge of the builder’s capability. It would be best if you created much time to research the builders’ reputation.
3. Hire professionals to inspect the building: A house might look amazing on the outside but have some “hidden” flaws which you might not notice. A professional home inspector would inspect the new building on your behalf and even ensure that every hidden flaw is uncovered. You do not need to rely on your seller’s inspector. Get your inspector to do the work. It won’t cost you more than $300. You can always hire an inspector from the National Association of Home Inspectors website if there is none close to you.
4. Go through the Punch List: Always ask for the punch list of a building if your builders fail to release them to you. A punch list gives information about the problematic areas that need repair. The builder often flags them and tries to fix the problems. Once the builder is done with the fixing, a new punch list should be created to make sure that all the areas in the previous list were effectively fixed. Most unreliable builder often rushes the transaction to make sure that the buyer forgets about the punch list.
5. Get a good Lawyer: To complete your new construction deal, you need to contact a lawyer to help you vet the contracts. From experience, most construction contracts are very complicated to understand that’s why you need a lawyer to vet it and simplify it for you before appending your signature.
6. Beware of Cost Escalation Clause: You need to be wary of new construction contracts as they are known for last minute surprises. Most builders often include a cost escalation clause to cover up for miscellaneous costs like an increase in labor or material costs. You can always go for a builder with no cost escalation clause in their agreement.
7. Warranties: The fact that your home is a new construction does not mean there would be no mishap in the early stage. You should expect your builder to give you a warranty which will cover you for some years. You can always buy a warranty in addition to your builder’s warranty.
All these might require some extra financial commitment, but they would pay off in the long run. Is it not better to spend a couple of hundreds of dollars than to spend thousands of dollars because of one error or the other? Think about it. Do the necessary research and ask the essential questions. They will help you with your new construction.