New Construction Buying Advice

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monkey_business
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New Construction Buying Advice

Post by monkey_business » Thu Jun 08, 2017 1:21 pm

We are looking into buying a house in a new community that is just starting to get built. For those of you that have experience buying new houses, what advice would you offer? I am especially interested in any mistakes you made that would be valuable to know about (in hopes that we can avoid making them!).

Input on anything from negotiating, to the build process, is welcome and appreciated. Thank you.

bloom2708
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Re: New Construction Buying Advice

Post by bloom2708 » Thu Jun 08, 2017 3:59 pm

Search the site for "New Construction" and you will find multiple threads on the topic.

One big item will be your budget. Upgrading items from "builder grade" to "your style" must be kept in check so you do not blow the budget.

The model home will be chock full of upgrades. Deck? Grass? Landscaping? Granite? You get my point. You can't do it all, so be very deliberate where you upgrade.
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

iamlucky13
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Re: New Construction Buying Advice

Post by iamlucky13 » Thu Jun 08, 2017 4:40 pm

Haven't been through this myself, but two quick items I remember from talking to friends who have:

1) Get clear information about exactly what you're getting for any upgrades you pay for. One person spent thousands of dollars on "customized" interior paint. She was shocked to find out after in contract she was not allowed to customize anything about it and didn't even see it until she got the keys. In reality, "custom" at this builder merely meant different colors in different rooms and some accents that they chose instead of a simpler scheme. I would imagine similar potential pitfalls can apply to flooring, lighting, trim, appliances, cabinets, fixtures, window treatments, etc.

2) Consider buying without builder-supplied appliances, if it is an option. I know a couple who did this because they like to cook, and wanted to choose all their own kitchen appliances. They ended up with much nicer appliances than the standard set for not much higher overall cost.

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jabberwockOG
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Re: New Construction Buying Advice

Post by jabberwockOG » Thu Jun 08, 2017 4:49 pm

Try to have your deposit payment held by your lawyer or your realtor in their escrow account. Handing your deposit to the builder for keeping in their escrow account can be a serious problem if the builder goes bankrupt (which happens way more often than people realize). If builder goes under mid-build you lose the entire deposit with zero recourse. If they go under right before you move and you assume possession you will likely find out that the builder never paid any of the subs even though you paid full price and now the subs will all be filing liens for payment against you the new owner. Make sure you go with a company that is verified very stable and make them provide you with written confirmation that they have paid all the subs before you close and take possession of the house.

Visit the site often during construction and look over everything that they are doing to make sure it is going well. Do not accept shoddy construction or any significant unwanted variation from the model plan that you purchased. They will of course promise to make it right in the end, but unless you get it in writing promises are typically forgotten. If something looks weird/wrong speak up immediately and ask them to explain exactly what is going on and why it is done that way. It is way easier for them to fix mistakes early than late. As an example on a house we had built they brought in the wrong brick and had half the front elevation up before we stopped them. They of course tried very hard to talk us into accepting the wrong brick (totally different color and look then we had chosen). I said sorry guys take it down and get us the right brick - resulted in much grumbling... but in the end we got the house we actually purchased.

Make friends with the construction supervisor and let them know in a friendly manner that you are very interested in getting a high quality build and that you will be keeping close tabs on the build process.

ralph124cf
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Re: New Construction Buying Advice

Post by ralph124cf » Thu Jun 08, 2017 6:09 pm

Unless there serious customization issues, consider waiting until the development is half built, and then buying from an owner that has done the landscaping, window treatments, and other new home things that will benefit you. Homes in new tracts typically drop immediately after the builder goes away, and take a bit of time to recover.

Unless you are talking San Fran, Los Angeles, Boston, or New York, you can probably get a 10% discount by the time the builder is building the last house in the development.

Ralph

denovo
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Re: New Construction Buying Advice

Post by denovo » Thu Jun 08, 2017 6:24 pm

ralph124cf wrote: Consider waiting until the development is half built

Ralph
I would like to echo this advice, but for a different reason than Ralph. If a recession hits real estate and the developer gets in financial problems, they may abandon the project and you'll be stuck with a home in the middle of half-built construction. This is not theoretical :( I know who people were in this type of situation in 2007-2009.

TravelforFun
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Re: New Construction Buying Advice

Post by TravelforFun » Thu Jun 08, 2017 7:04 pm

- During construction, come by the house everyday and video everything. Video pipes that will soon be hidden under the ground or slab, and wires and insulation behind walls.

btenny
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Re: New Construction Buying Advice

Post by btenny » Thu Jun 08, 2017 7:11 pm

Can you tell us a little about what kind of home and subdivision you are buying into? The issue is is lots of things that apply to $800K houses are not important for $300K condo? And why are you buying a new home versus a older home with full decorations and landscaping? So tell us more. Good Luck.

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Go Blue 99
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Re: New Construction Buying Advice

Post by Go Blue 99 » Thu Jun 08, 2017 8:48 pm

Look into a buyers agent that will refund you a portion of their commission. In our city, there is a lot of agent competition specifically for new construction buyers, since there isn't as much effort for agents. There is even one agent who offers a 2.25% commission refund if you buy new construction (granted, he admits he isn't a full service agent).

We used a full service agent to buy our new home (building right now), and he is giving 1.5% back. Great way to pay for furniture! And the IRS has ruled that these commission rebates are not taxable income.

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Taz
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Re: New Construction Buying Advice

Post by Taz » Fri Jun 09, 2017 6:38 am

jabberwockOG wrote: Visit the site often during construction and look over everything that they are doing to make sure it is going well. Do not accept shoddy construction or any significant unwanted variation from the model plan that you purchased. They will of course promise to make it right in the end, but unless you get it in writing promises are typically forgotten. If something looks weird/wrong speak up immediately and ask them to explain exactly what is going on and why it is done that way. It is way easier for them to fix mistakes early than late. As an example on a house we had built they brought in the wrong brick and had half the front elevation up before we stopped them. They of course tried very hard to talk us into accepting the wrong brick (totally different color and look then we had chosen). I said sorry guys take it down and get us the right brick - resulted in much grumbling... but in the end we got the house we actually purchased.
Great advice JabberwockOG. This is key for anyone buying a new construction - custom, pick your own options, or spec. My wife's boss (engineering field) is having a mid-grade mostly spec home built in a subdivision near his current home and could come often. He found:
- mistakes in the slab
- incorrect locations of rough-out plumbing requiring them to re-pour sections of the slab and adjust walls
- shoddy framing
- missing outlets,and
- failure to properly fix missing drywall before rehanging the correct cabinets

He made sure the fixes were done but most folks have neither the time or expertise to act as the QA supervisor. Our area is in a housing boom so good, skilled labor and craftsmen are tough to come by.
The destination matters.

Lindrobe
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Re: New Construction Buying Advice

Post by Lindrobe » Fri Jun 09, 2017 8:05 am

Do not assume that new construction means = no issues with home. I live in a subdivision cul-de-sac and there was previously an empty field in the middle of my subdivision. The field has been bought and a new development is going in. While out on my run one day this spring, I looked in the windows on the front door of one of these new homes and found that the front door was unlocked. So, I went inside to look around. The home was 95% complete and had an open house scheduled the next day. I heard a noise in the basement so I went downstairs and there was a large, noisy fan that had been placed in the basement to help dry out the water. The floor and walls of the basement were soaked! The house sold at the open house the next day and new owners will be moving in shortly. :shock:

smitty1515
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Re: New Construction Buying Advice

Post by smitty1515 » Fri Jun 09, 2017 8:15 am

A couple of things.

1.) Things can go wrong. Do not assume buying new construction = worry free living.
2.) Hire an independent inspector prior to closing on the home.

I would be happy to answer any of your questions and I would not dissuade you from buying new construction but do realize you are a number to them and all the wining and dining you get in the model home will be gone when you move in and start making claims to the builder. To expect perfection when they are pounding out homes in 4 months, working on 6-10 at the same time, and bringing numerous subs is not reality.

Here is a link to some of our experiences with new construction. http://www.getinthegreen.com/blog/think ... this-first
Be fearful when others are greedy and greedy when others are fearful. -Warren Buffett

jbuzolich
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Re: New Construction Buying Advice

Post by jbuzolich » Fri Jun 09, 2017 8:29 am

Try to get a basic understanding of building and electrical codes for your area. Nothing extreme but just try to learn if any energy efficiency or water use codes have been updated in the last ten years. Our current home is the first one we ever bought and was new construction. I remember the sales agent for the neighborhood really raving about how he loved his light switch dimmer upgrades he did in his house and now couldn't live without them. Encouraged us to do the same on our option selections and if we didn't want to do the whole house then at least pick a dozen highly used areas to upgrade. Well I found the builder I think was charging about $200 per switch on these upgrades and to be honest I don't like dimmers anyway so we said no on all and that confused the agent. Took ownership of the house after completion and all the dimmers are there anyway along with a number of other $1000+ options for pre wiring things. Turns out dimmers or occupancy switches were required anyway for all incandescent light fixtures in California as of I think the 2006 energy efficiency code updates. I laughed about how many thousands we avoided paying on light switches.
In the 8.5 years we've now lived in the home a few of said dimmers have broken anyway from the kid being a tad rough. 15 minute fix for me doing myself with either a $3 on off only switch or $15 dimmer.

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lthenderson
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Re: New Construction Buying Advice

Post by lthenderson » Fri Jun 09, 2017 8:37 am

I would try to find an open house for other houses the builder has built that are now several years old. The reason I say this is because I've been in many newly built homes over the last decade that have felt and looked very cheaply built. They inevitably have lots of problems because of this. I would make sure the builder I'm thinking of buying from does quality work and that those living in his houses for a number of years have been happy with them. Just in my small circle, I can probably think of a half dozen people who bought brand new homes that will never do that again through the builder they selected. Newly built does not equal quality built. It's easy to lose that fact in the process.

queso
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Re: New Construction Buying Advice

Post by queso » Fri Jun 09, 2017 10:42 am

TravelforFun wrote:- During construction, come by the house everyday and video everything. Video pipes that will soon be hidden under the ground or slab, and wires and insulation behind walls.
This! I took high res pictures every couple of days so now I can refer to them when we have a problem or I want to change something. Sure beats having to do destructive research to find out if your new TV mount or speaker runs are going to hit something important or be blocked by something you can't easily relocate, etc.

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monkey_business
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Re: New Construction Buying Advice

Post by monkey_business » Fri Jun 09, 2017 12:34 pm

Thank you everyone for the advice so far. Allow me to provide you with with some more details:

- The new community is going to be relatively small, about 50 houses total. There is a community with almost identical floor plans, houses, and prices, several miles down the road. It started about 1.5 years ago, and is currently about 80% sold out. The reason why we don't just go with this one is because it is further from everything for us. Essentially, it would add about 10 minutes to the daily commute for both of us, one way.

- The base price of the house is about $275k for a 3 bed + den, 2 bath, ~2,000sq feet structure. This does not include the lot, which is $10-15k. They have a few bogus upgrades they sell. An example of such is a two foot extension to the great room, which is essentially just a straight wall. They want $3.5K for that.

- The house comes relatively "loaded" if you want to call it that. What you get standard is: energy efficient construction (double pane windows, high efficiency A/C, good quality 5" spray foam, Energy Star certification), tile everywhere except bedrooms, granite counters, "gourmet" kitchen (spacious, big kitchen island, large pantry, gas), marble counters in master bath, etc. Some of the items are more "builder grade", such as the tile. Their model houses have upgrades, but 90% of what you see is standard.

- House comes with automation built in. By default this is an IR camera at the front door, pre-wired for security/alarm, Nest thermostat, and an RTI processor box. They give you a tablet that is integrated with the RTI box.

- The builder is local and is known to be of good quality. Numerous realtors (not ones working for the builder, obviously) have mentioned the builder is one of the best in the area. I also did some digging around online, and could not find a single negative review, or even negative opinion of the builder's quality. A few folks mentioned there were issues with the sales and/or building process itself, but everyone seems to be happy with the actual quality of the houses.

- Several houses from older communities by this builder have popped up for sale in the area. The descriptions all mentioned the houses were built by this builder (seems like a positive). The houses sold within a few weeks.

- Reason for wanting to go with new construction vs old is simply because we are not big fans of most of the houses we see for sale that are older. Most of them have older floorplans that we do not like. The ones we liked often cost as much, or more, than the new one we're looking it. I realize a new house does not mean zero problems and homeowner bliss. However, given a choice between a 20 year old house, or a new one, assuming comparable price, I'd bet more on the new one to have fewer major problems. I wouldn't expect to need a new roof or A/C any time soon with a new house, for example. We also live in a hot climate, and like the idea of getting an energy efficient house.

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Pajamas
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Re: New Construction Buying Advice

Post by Pajamas » Fri Jun 09, 2017 1:03 pm

monkey_business wrote: - The builder is local and is known to be of good quality.
That is what I was going to say is the most important factor in buying new construction. If a builder's reputation is good, they will want to keep it that way, and problems like the one mentioned above about "custom" paint that really wasn't shouldn't be so much of an issue. There is less chance of major problems and any minor or punch-list type problems should be taken care of even after you close.

Carefully consider which lot and model you are getting. A corner lot on the main road vs. a deeper lot backed up to a nature preserve can make a big difference, as can the design and orientation of the house in a hot climate.

bluebolt
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Re: New Construction Buying Advice

Post by bluebolt » Fri Jun 09, 2017 1:39 pm

We bought new construction a while ago. A few notes:

We had them leave all the hardware out of the closets. We ended up doing custom closets on our own and it was great to have the layout exactly as we wanted.

Get any thing you care about in writing. We had plans that showed a breakfast bar/extension of the granite from our island and discussed it with the builder. They didn't do it and argued that they never agreed to it. They also claimed that they never agreed to install shower doors even though they were on the plans.

Our agreement said that the builder could substitute comparable materials of equal quality. Instead of installing the two-color bathroom tile we agreed on, they installed a single color which looked way worse.

Have agreement on a punch list and how quickly they will address the items on your punch list.

As others have mentioned, do frequent walk throughs, so you can verify that everything is being done to your specifications and so you can have it corrected if necessary prior to closing.

staythecourse
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Re: New Construction Buying Advice

Post by staythecourse » Fri Jun 09, 2017 1:50 pm

The single most important thing is the reputation of the builder.

You can, and should. write everything you want in the contract AND visit every day AND ask a bunch of questions AND have everything documented, but in the end you are not a builder, you are not an expert, and you may not know if something substandard was done in 5 years if something goes bad.

The builder's reputation is the single most important part of the equation. If they are trustworthy and are prideful of the work they do and the subs they use you will be fine when (mind you I did not say IF) issues arise.

Our builder for our custom home is not the best or most creative, but they are rock solid in terms of reputation. If it is their fault something is not done or done wrong they take ownership and correct it. If something is not done to their expectations of "quality" it gets corrected. Simple as that. They are reasonable, approachable, and respond quickly to questions.

You an always file lawsuits if there are issues, but anyone who has had issues will tell you these cost a bunch and neither party get what they wanted.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

queso
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Re: New Construction Buying Advice

Post by queso » Fri Jun 09, 2017 2:13 pm

I'm definitely more OCD than most and also handier than most and I caught a lot of issues during our construction. Some were simple things like trying to install hardwood floor planks in the wrong direction or an electrical outlet that was measured wrong and was lower than the others, but some were pretty bad and would have had long term effects. For example, when they were working on the deck and attaching it to the house, they improperly flashed the ledger board. That ended up being a relatively big deal since the way they had done it could have allowed water to soak into the subfloor and over time would likely have caused structural damage as well as damage to the hardwood floors on the other side of the wall, etc. My opinion wasn't enough so I had to dig up the documents to show them that it wasn't done to code and that I wasn't going to leave it alone so, begrudgingly, they ripped it all out and started over. They also did some shoddy ductwork under a sunroom that wasn't up to code that required me to crawl on my stomach under the house to document the problem. Bottom line, regardless of builder reputation, the warranties on new construction are too short for some of these issues to appear so you would be well advised to stay on top of them and double check everything they are doing. Unless they have their own trades (most/none in my area do) they will cut corners with some of the subs they use and you really have to stay on top of them when those crews are on the job.

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hand
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Re: New Construction Buying Advice

Post by hand » Fri Jun 09, 2017 2:19 pm

monkey_business wrote: - Reason for wanting to go with new construction vs old is simply because we are not big fans of most of the houses we see for sale that are older. Most of them have older floorplans that we do not like. The ones we liked often cost as much, or more, than the new one we're looking it. I realize a new house does not mean zero problems and homeowner bliss. However, given a choice between a 20 year old house, or a new one, assuming comparable price, I'd bet more on the new one to have fewer major problems. I wouldn't expect to need a new roof or A/C any time soon with a new house, for example. We also live in a hot climate, and like the idea of getting an energy efficient house.
It sure sounds like you're picking new(er) construction for the right reasons (features & layout that don't exist in older housing stock) and the right way by working with an established builder who has a good reputation.

That being said, be aware that new appliances aren't always the same as good appliances and energy efficient materials don't necessarily translate into an energy efficient house if the build quality is poor. Production builders often conflate new with quality and high "R" value materials with energy efficiency in their marketing materials to their benefit. If you are willing to pay the new build premium for energy efficiency, insist on a blower door test that meets standards. R40 insulation is worthless if the wind is whistling through your house.

camden
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Re: New Construction Buying Advice

Post by camden » Fri Jun 09, 2017 3:15 pm

Be aware of the fact that if you are buying property/building a home in a development that is in the early stages, you run the risk ( in addition to the developer getting into financial trouble and walking away) that the plan for the neighborhood could be radically altered from the plan shown to you, and you may well have no recourse if the changes negatively impact you. If the developer can't sell enough 1 acre lots with 2500 sq. foot minimums, he may go to your local Planning/Zoning commission for a revision of the Planned Unit Development, and now the residual unbuilt area has twice as many 1/2 acre lots with 1800 sq. foot minimums....or any other alteration on the theme.

You might think that the Plan for the development you were shown when you buy has some legal force as a contract between the developer and you. You might think that a later major revision in the plan, after multiple houses had already been built, would be very difficult for the developer to obtain from the Planning Commission. In my state and area, you would think wrong on both counts. Very wrong.

Liberty1100
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Re: New Construction Buying Advice

Post by Liberty1100 » Fri Jun 09, 2017 3:17 pm

There's a new trend in the building/remodeling world called "aging in place." It's all about living in your own home for as long as possible by making it more friendly for an aging person. Adding slightly wider hallways so that a person with a walker or wheelchair can get through, making a nearly stepless entrance so that stairs do not have to be traversed, and having door handles instead of door knobs so that when someone looses dexterity due to old age or medical conditions, there is no need to move to a "retirement community."

It may be too late for you depending on how far in the process they are, but things like tall toilets, lower light switches, better lighting not from lamps, and door handles might still be possible. Some of these changes can help you if you are a young family as well. The house becomes more useful for everyone.

Here is a recent NYTimes article on it: https://www.nytimes.com/2017/05/19/heal ... ctors.html

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lthenderson
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Re: New Construction Buying Advice

Post by lthenderson » Fri Jun 09, 2017 3:29 pm

monkey_business wrote:However, given a choice between a 20 year old house, or a new one, assuming comparable price, I'd bet more on the new one to have fewer major problems. I wouldn't expect to need a new roof or A/C any time soon with a new house, for example. We also live in a hot climate, and like the idea of getting an energy efficient house.
For most things yes, but a new house will generally settle the first few years if built on any sort of fill and then remain stable there after. I've adjusted and trimmed a lot of doors and patched a lot of drywall cracks in two and three year old houses.

Hockey10
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Re: New Construction Buying Advice

Post by Hockey10 » Fri Jun 09, 2017 5:05 pm

We did this in the early 1990s. The builder had 5 different models available. We chose the smallest (and lowest priced) of the 5. We did not add any fancy upgrades. We ended up being surrounded by larger and more expensive homes. When it came time to sell, we ended up making a nice profit as the value of the other homes in the development helped lift the value of our home. :moneybag

Also, the poster who mentioned that the reputation of the builder was critical was absolutely correct.

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