Nine Things You Should Know Before You Buy a New Home

1. Builders often try to pressure you to use their lender. They want to minimize deals falling through, and controlling the financing is one way to do this. They may offer you upgrades or buy-downs to go with their financing. Of course, the best way to find out if these incentives are really free is to get a Good Faith Estimate from the builder’s lender. Compare it with estimates from a couple of other lenders, and the best deal will become obvious. You’ll often find that the teaser interest rates advertised will cost you, and you can get just as good a deal, or a better one, with another lender. If you do find a better deal than the builder is offering, get a qualifying letter from your lender. This should satisfy most builders that you’re a genuine, qualified buyer.
2. Get copies of the CC&R (covenants, conditions, and restrictions) and HOA (Homeowners Association rules). Read them over carefully, because these document will tell you what you can and can’t do with your home. For example, you might be prohibited from parking RVs (recreational vehicles) next to your home, or there may be restrictions on how and what your landscaping will be. One homebuyer had a motor home that he wanted to keep on an extended driveway next to his home. Unfortunately, he didn’t read the CC&Rs before he bought. When he started to work on his driveway extension, he found out quickly that RVs were not allowed on the home sites. This ended up costing him $35 a month at an RV storage about a mile away.
3. 3. Research the builder. Check with the Better Business Bureau and a state contractor’s board if you have one. Research not only the company but also the builder’s name. You want to know if there have been complaints filed, how many, and if the builder has gone bankrupt recently. If the company or builder has generated lots of complaints, seriously consider shopping elsewhere.
4. Walk around the community and talk to at least three new homeowners. Ask them how they like the builder and how fast problems, or complaints are handled. Especially important, find out how many items were on their punch list and how long it took the builder to take care of them. The punch list is a list of mistakes, problems, or anything the builder has to take care of that you find during final walkthrough. If the new owners all tell you the punch list is more than a dozen items and repair is slow, that’s a red flag.
5. Ask the salesperson or builder representative how close to the completion date homes are finished. If possible, get a copy of the construction schedule. If the builder is behind a month or two on projections, this may cause you problems if you have to be out of a home or rental on a certain date. This is another red flag to consider.If you find a model you absolutely love and want to put a deal together, make sure you get everything you want in writing. An oftenused saying in real estate, painfully learned and relearned, is: ‘‘If it isn’t in writing it doesn’t exist.’’ Verbal promises are nothing more than hot air, because you can’t enforce anything not in writing.
6. Get a price list of the options and upgrades. Don’t ever sign any paperwork unless you know exactly what an item costs. ‘‘To be filled in later’’ is an absolute no-no. Also, never leave the sales office without copies of all the paperwork. Too many buyers run into problems later because they didn’t get copies of addendums covering upgrades and options. Nathan and Laure found this out the hard way when they bought a home in the first phase of a new community. The salesman told them that a fireplace (a $2,500 option) was included in the model they picked out, and they took his word on it. Several weeks later, when they did a framing walk-through, they noticed the concrete and framing for a fireplace was missing.
7. As it turned out a fireplace for that model was not standard, and the salesperson who wrote up the sales contract no longer worked for the builder. You guessed it—there was nothing in the paperwork about a fireplace. Nathan and Laure had to write a check for half the option or $1,250 to get it added, with the balance due in 30 days. Obviously, they weren’t too happy about it, but there was nothing they could do without losing a sizable deposit if they backed out.
8. This can’t be stressed too strongly. Make sure you get copies of all documents and number the addendums 1/x, 2/x, etc. Missing addendums usually cause the most problems because that’s where changes and contract modifications are written.
9. Make sure you understand the paragraphs in the purchase contract about when you close. Builders often pressure you to close before the house is finished or the punch items are completed. You don’t want to close before all items are done, so deal with this up front and get it in writing on an addendum if you have to.