When buying a new construction home it is important for you to have a professional who represents your best interest in your corner and not someone strictly there to protect the builder’s bottom line. Using a Realtor doesn’t cost you anything and a knowledgeable Realtor can help you avoid costly mistakes.

Buying A New Construction Home

Man and woman getting set of house keys.Buying a new construction home can be one of the most exciting times of your life (and it should be, think how about how much you’re spending!) and not something you want to “get wrong”. It’s quite easy to get sucked into that “new home smell” but before you tempt yourself, HOLD ON! Read this article for some helpful tips BEFORE visiting those model homes for the FIRST time.


How Much Will a Real Estate Agent Cost Me?

Having a REALTOR® represent you when purchasing new construction won’t cost you anything extra and no, you won’t get a discount for not hiring one. Builders have a certain percentage of their gross sales they set aside and dedicate to their marketing budgets. Real estate agents are paid out of this budget so their commission is already factored into the price of the home. Not using an agent will not net you any additional savings.

The Realtor must be present with you on your FIRST visit to the model home or if you do go without your agent present, just don’t give them your name or information and let them know you’re working with a Realtor and will come back to register. According to the National Association of Realtors (NAR), over 70% of New Home sales are conducted using a Realtor. What does that mean? It means that builders rely on agents to bring them business and they want to make that transaction go smoothly when you have an agent.

How Do I Choose The Right Agent?

Hiring the right real estate agent can make all the difference and you want one with experience. I’ve personally bought 2 brand new homes and in the last 12 months I’ve helped 18 people with their new buying process. Whoever you choose, pick someone that has experience and is familiar with multiple builders in the area and can help guide you to make the best decision for your personal needs and desired location.

Do I Need to Use the Builder’s Lender?

Picture of a mortgage document with pair of glasses sitting on it.Bigger builders often have a list of “preferred lenders” that will offer you incentives such as closing cost assistance when you use their lender, however, this isn’t always the whole picture. First let’s look at why a builder has preferred lenders to begin with. When you build a home and you’re going to be making personal selections in the home, the builder wants to know that when they complete the home, you’re actually going to close on it and in an efficient manner. Their lenders are familiar with their up-front approval process, their appraisal process, their permitting process, their post-construction process and so for the builder it makes things go smoother. After all, not all lenders are the same, and there are some lenders that just make things more complicated.

So we can understand why a builder may want to use a preferred lender, but are they the best option? To answer this we need to understand the complete picture of interest rates and fees that the lender charges. With estimated fee sheets from various lenders we can compare overall value. While some builders claim to only offer incentives for using their preferred lender, this isn’t always the case and we can sometimes negotiate those same incentives with using an alternate lender. The builders sales reps will always bring up their incentives that they offer when working with their approved lender; it’s best to discuss your options with your Realtor and not the sales rep; if there’s something to be negotiated, let your Realtor handle that process for you.

Are New Construction Contracts Standard?

The short answer is no, each of the bigger builders have their own contracts written to protect their best interest to make sure they have the ability to get paid. The contracts were written by the builder’s team of attorneys and is one-sided, advocating for the builder. Who’s representing you in the transaction? Who’s making sure if things don’t work out you’re not going to lose your deposit?

Where I live in Marion County, it seems like new builders spring up overnight; we have dozens upon dozens of “ma and pa” builders. Some of them have their own contracts and some of them just use the standard Florida real estate contracts. Either way, having a Realtor to represent you and make sure you’re protected in the event something goes wrong is important. I recently read one builder’s contract where the builder didn’t offer any sort of a longer term foundation warranty and they also wanted the buyer to forfeit the deposit in the event the home didn’t close. If they don’t build the home correctly, why should you as a buyer forfeit your deposit for walking away?

It’s always a good idea to make sure you’re protected when signing any legal document and if you’re not seeking the help of an agent when building a home, get help from a real estate attorney to make sure you’re protected!

Can I Over-Improve My New Build?

Picture of paint selection cards.The short answer: Easily! When you’re building a custom home and get to pick out every fixture in the home, every piece of flooring, every color, every brick, the roof, modify design, move walls, insulation upgrades, lighting upgrades it can be super exciting but it can also get super expensive super quick! Understanding the market in which you’re building is important; building a super up-scale home in a middle of the road neighborhood isn’t a good investment and having a trusted adviser to help understand appraisal and resale where you’re building is important.

Your Realtor can provide you with sales data for the area before you walk into the showroom so you understand the average sales prices in the areas and keep your home reasonable compared to the surrounding homes. Your intent may be that this will be your forever home, however, let’s face it… life happens and can take us in new unexpected directions. I’ve sold more than one “forever home” in the last year, so making sure you make great decisions in picking out home features and upgrades is important. Don’t rely on the design counselors who are paid by the builder to help you make your upgrade choices!

What about all these Ma & Pa builders?

If you’ve driven around Marion County lately, you’ve probably noticed there seems to be a new home being built on almost every street! The question becomes, who’s building them? We of course recognize the names of some of the bigger long-standing buildings in the area but what about some of these smaller builders that aren’t from the area, is it safe to buy from them?

This is becoming more and more of a great question as more home builders arrive to our area. There seems to be 2 main methodologies that these builders are operating with (and let’s be clear, they both revolve around profit!):

  1. Some builders have money (or investors with money), build homes and then are either a licensed real estate agent who lists the home or their spouse is a licensed agent who lists the home. Either way though, you’re typically dealing in some aspect with the builder directly or slightly indirectly.
  2. Investors with money are hiring builders to build homes and then listing that home with a real estate agent. In this model, you’re not dealing with the builder directly or indirectly, you’re buying the home from the investor.

There are variations on each of the above models that I see but primarily most of these ma and pa type operations fall into one of the two above scenarios.

So what can go wrong?

In either methodology we’d like to know how long they’ve been in the area and what is the likelihood of them being around in a few months if something does go wrong and we need assistance. In methodology 1, what type of warranty are they offering us and is it a 3rd party warranty so even if they close up shop or move to another town can we get that warranty honored? I recently dealt with a builder operating using methodology 1 who didn’t want to provide any sort of a long term home warranty nor offer any financial protection to my buyer.

In methodology 2, the problem here is that the investor wants you as the buyer to deal directly with the builder if a problem arises (after all they just want to make money) and you as the buyer never hired the builder so why should they bother to fix problems for you? I’ve seen where some investors are going as far as asking for the contract to not have any money in it for repairs and not have any time in it for inspections, if a problem arises they just want you to file a claim with the builders warranty department.

No matter which methodology the ma and pa builder is using, it’s important to be educated about the process and be protected by the contract. We have some great people building homes in Marion County with a lot of great value, ask questions up front and understand how the warranty works.

Buying a New Home

Buying a brand new construction home can be so rewarding. There’s nothing like that new home smell, the pleasure of being the first person to live in the home, the satisfaction of seeing all your choices in the selection process of fixtures, colors, flooring, roof coming together for the first time and knowing it soon will be your home. Hiring a Realtor, should help make sure that your experience in the process of building is a positive one, hopefully a memory that lasts a lifetime and make sure your investment is protected. We’re there for you during every phase of the process to advocate and advise; we do need to be there from the first visit though, so be sure to involve us early and let us help guide you through the process or you may wind up on your own.

If you have questions about New Construction, Marion County, Neighborhoods or Builders. Contact me, Philip Stevens with Fontana Realty, directly at 352-362-3418.

Do I Need a Home Inspection With New Construction?

Home inspector in front of home.Many people think because they’re buying a new construction home and the city or county has to send out inspectors throughout the permitting process that they don’t need a home inspection. That’s why you’re building a home to begin with right? We don’t want all the problems of a resale!

Even in the case of new construction, I always recommend getting your inspected by a licensed home inspector; even though the city or county is sending out inspectors to look for things not built to code, they are very busy people and can’t inspect every aspect of the home; they’re looking for major things that are missed or just plain not to code. A licensed home inspector is looking at a much finer level of detail.

I’ve seen home inspectors find more items wrong with a newly built home than the lists on some resale homes. Other times they come out and only report on one or two minor items. Either way, the home inspection only costs a few hundred dollars and it can give you an added piece of mind that your investment is a good one.

If you do choose to buy a home from one of the ma and pa builders in the area then a home inspection should become less optional, just do it!! Need a recommendation for a home inspector? Feel free to reach out and ask which ones are on my preferred referral list.

Buying a New Construction Home: Do I need a Realtor?
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Buying a New Construction Home: Do I need a Realtor?
Are you considering building a new home? Here's some things to consider before walking into a builders model.
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Fontana Realty
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