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  • Writer's pictureJoseph Gunerman

New Construction: What You Need To Know

With real estate demand greatly outpacing supply, new construction is leading the way in bridging the gap. For many buyers, it’s much easier to get under contract on a new construction home than it is to get involved in a resale bidding war, and it’s fun to design a home exactly the way you want it. I’ve done many new construction deals, from townhome spec homes and big box national builders to custom built single family homes. If you’re thinking about building, here’s what you need to know.


I always preach how important it is to choose a great Realtor and a great lender, and in the case of new construction choosing a great builder is crucial. While that sounds obvious, it’s not always easy to differentiate between the quality of multiple builders in the same price range. To make it even more difficult, every builder will have a persuasive sales team waiting for you at the model home. I have never walked through a model home that wasn’t absolutely beautiful and the sales pitch that they give you while you’re there always sounds so appealing. However, having been through the entire build process with many different builders, there is a huge difference in quality of home and service between the builders. You’re going to want an agent on your team who can help you sift through the different builders to find the best one within your price point.


The second thing you need to know is that it’s important to have flexibility with your timeline. When you’re signing your builder contract, they will have an estimated closing date for you. Do not plan your move around that closing date… because if anything in your build gets delayed, from material shortages to unforeseen weather, your closing date will likely be delayed. Over the last few years I have seen everything from brick, tile, and lumber to garage doors, HVACs, and refrigerators be put on back order or drastically change in cost. I have a client under contract on a 2200 square foot home that is going on a 4 month delay in closing because of a back order on the garage doors. If you’re going to build a home, leave flexibility in your moving timeline.


The third thing you need to know is the sale price tags you see are for the BASE models, and almost everybody wants at least one upgrade in the home. Unless you want no recess lighting, no ceiling fans, carpet in your living areas, and no backsplash in your kitchen, you are probably going to make upgrades from the base model. After you get under contract, you’ll usually schedule a meeting in the builder’s design center where you’ll choose your finishes, tile, stone/brick, and structural upgrades. I would conservatively say you should be factoring in $15,000-$30,000 in upgrades on a 2000-2500 square foot home based on what I’ve seen from my clients. I have NEVER seen a client make it through the design meetings without spending at least $7500 in upgrades, and you’ll probably owe 50% deposit on the design upgrades upfront. So leave room in your budget for upgrades and don’t sign a contract for the base model that is at the very top of your budget.


The fourth and final thing you need to know is that interest rates change. The folks who decided last year that getting under contract to build a home instead of competing in the “crazy resale market” are now preparing to close on their houses with interest rates as much as a full point above where they were when the contract was signed. Interest rates usually cannot be locked in until 45 days out from closing and you are at the mercy of the rate market. Closing today after an 8 month build likely would have costed you thousands of dollars per year in your mortgage payments whereas somebody under contract on a resale home 8 months ago had their 2.75% rate locked in for the entirety of their mortgage. Keep interest rates in mind when you’re deciding to build.


I’ve had MOSTLY good experiences with new construction, but I think it’s important to have all of the information available to you before you decide if it’s the right move. When you’re in that sales office at the model home, the salesperson is there to persuade you to build a home and they aren’t going to mention any of the potential risks or cons. Go with your Realtor, talk through ALL of the information, and then make the choice that’s best for you!



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