Ten Common Questions we get from clients looking for a new construction home starting, now! I’m Rachel Beasley with That Fit Team. We work with a lot of new construction clients. It’s actually one of our areas of expertise. So we get the same questions over and over and over again. So I wanted to share them with you and the answers to those questions. So let’s get started. And by the way, these are no particular order. Number one, should I look now or closer to when I want to move, if I want a new construction home? This is a great question and it really actually is going to be market to market in today’s market right now, where there’s low inventory, you want to be looking far out from when you actually want to move into your new home.
Here’s why. Builders are getting homes under contract before they even start building the home or they wont release the home for sale until they’re about halfway through the build itself and those houses go under contract very, very quickly. So if you’re looking for a new construction home, you really want to start looking probably about 10 to 12 months before you want to be moving in your home. So right now it’s July 2022. Anyone who wants to be in a brand new construction house, it’s being built custom just for you. Maybe by summer of next year it might sound wild, but now is the time to be looking. And you probably want to be under contract by September. No later. So September 2022 contract probably going to be able to move into your new construction home by summer of 2023. So keep that in mind, you guys.
What Kind of Deposit Do I Need?
Question number two What kind of deposit do I need when I go under contract with the builder? This is another one of those depends on the builder type of situations. Every builder requires a different deposit really actually depends on the price point of the home also or what kind of new construction you’re doing. If you happen to find a new construction house being built not under contract and it’s for sale, ready to go, then you could probably get away with like a $2,500 EMD with your contract, talk to your realtor to see find out from that builder what they require. Most builders, if they’re building a house just for you, where you get to make your own selection, are going to require anything from 3% of the sales price to 20% of the sales price. Some builders might do a little bit different, like a flat fee of $10,000. So again, when you’re walking into this situation, make sure, you know builder per builder what you’re looking at or at least talk with your realtor. So you have some type of an understanding how much cash you’re going to need in order to put a house under contract.
When Do I Start Making Payments?
Number three, when do I start making payments on my new home? This is actually a great question. There’s two answers here. One, if you’re purchasing a new construction home that the builder is building and you’re not going to close on that home and be able to move in until the house is complete, then you don’t start making your payments until after closing on the home. So the home has to be 100% complete. You close on your loan, you are the new owner and then you start making your mortgage payments just like you would any other home sale. Now, the other side of this is, let’s say you decided to do a construction to permanent loan where you are actually purchasing or you own the land and you are financing the build of construction with the builder. So you’re actually paying the builder from funds that you are borrowing from a bank. You are going to be making interest only payments during the process. That gets a very, very detailed. So if you have questions about that, please let us know. Jonathan and I have actually done it twice when we built our homes that we live in. We can help you with that process as well or talk to a loan officer. They’ll be able to explain it to you probably a lot better than I could.
Should I Wait for Another Phase?
Number four, should I wait for another phase to open up in a community? This is actually a really good question and a very common question. So situation is this. You’ve got a new construction community. You know, there’s lots of land back there and the builder hasn’t opened that phase up yet. Well, the builder is doing this for a reason. Typically, they have a plan with the city in place that they are building a certain type of home. And let’s say phase one, phase two looks a little bit different. Phase three a little different from that. Typically, the houses are going to get larger and larger and more expensive as the phases continue. Or maybe it might change a little bit. We’re one phase is 55 and up part of the community. So these are things you’re going to want to know. But I can tell you this typically with a new construction community, as houses are built and time passes, you can have a new construction community literally being built for years and years and years, depending on how big that community is.
Well, let’s say in the first year of that community opening up, you’re going to have price points. We’re just use an example of like $500,000. Well, by the time the whole year goes by and they open up new lots and another phase, a whole year of appreciation and values going up, that builder is going to be asking more money for the same house that they were selling $500,000 for last year. Probably going to be closer to the sixes, so it’s actually better not to wait. That’s the short answer to the question. It’s better not to wait. If you can get into a community at the very beginning, you’re actually getting the absolute best pricing. And as more homes are being built throughout the community and prices go up, your home value also went up. So it’s actually a good thing not to wait. It’s not a bad thing to go in that first few phases because you actually get the best pricing and the best value for your home over time.
Why Don’t Builders Reduce Prices?
Question number five Why don’t builders reduce their prices or give discounts? Here, The easy answer is this It only hurts the builder in the long run. So the builder typically does not reduce pricing because he’s building probably a few models over and over again. And if he reduces his price of a model in one place, it means he’s just going to have to reduce the price for the next person that comes along and is building down the street or maybe in the same area. So it only hurts the builder not to reduce his prices. He doesn’t give discounts either because, you know, an upgrade that he might say, hey, this granite countertops is an upgrade. Well, it also cost him more money to purchase that granite for you. So it’s not like he’s deciding, like, oh, well, there’s these 5 granites and I’m going to charge one for this and one for this and one for that. He’s probably charging an upgrade for a reasons because he’s actually not receiving a discount on that either.
So builders don’t reduce their pricing because the price to build a house is the price to build a house. And right now the cost of materials and labor are going up. So it’s actually not a bad thing that they’re not reducing their prices right now because they probably would be going out of business. So I know it kind of sucks. You have to just pay with the builder says. But if you want a new construction home, you got to pay the price for admission and it’s going to be worth it in the long run.
Do I Need to Own Land?
Number six Do I need to own my own land if I want to build a house? The quick answer is no you don’t. A lot of builders have their own land in their inventory that they would like to find a buyer to pick one of their models and build on that piece of property. Or you go to a new construction community. The builder, the developer owns that land. You pick the model, you pick the property you want to be on. You go under contract, they build the house and you move in easy. But let’s say you want to work with a very custom builder and they have plans of their own, or maybe you bring plans of yours to them. In that case, you probably are going to be best to purchase the land yourself, finance the build, and hire a builder to build that house for you. So long story short, you don’t have to own the land, but in some cases it is best for you to be the land owner.
Will Any Builder Take Plans from Online?
Number seven. Can I buy plans online and work with any builder? No, you can’t. You can’t buy plans online and work with any builder. But there are some builders here in the Hampton Roads area that are completely custom. So if you bring your own plans to them, they can look at those plans and price out, a home for you. Now, just keep in mind that it may cost a little bit of money for their time because think about it, they’re going to have their staff look at these plans. They’re going to send it out to their vendors. It it’s probably going to take a little bit of time to actually price out those plans. So your best bet is to actually work with the builder, see if they have a set of plans that’s very similar to what you want, and also ask if they would be able to be modified or customized for you and then you can work off of someone else’s plans. That’s definitely the cheaper way to go. Or you could buy your plans work with an architect and work with a builder and have them priced out.
What Is Included in the Price?
Number eight, what is included in the price? It’s actually a really good question. So you’re searching online and you fell in love with this model and you want it to be built at such and such address and you love this builder. You pick this builder because you just love everything that you see in the pictures. Well, you really are going to want to find out what exactly is included in that build for that price. And that’s what’s called asking for the standard feature sheet. So every builder has their own standard feature sheet that is basically a list of items that are included in the sales price that you see.
So it can be very deceiving sometimes if you go to a builders model and you walk around and boy, they build those models to be absolutely stunning and beautiful and give that wow factor for a reason. They want you to fall in love with them, so they’re putting their best foot forward now, when you go to those models, you’re going to want to ask for the standard feature sheet. And as you’re walking through the model, ask those questions, oh, is this a standard granite countertops? Is this where the standard flooring would go? Is that extra trim up there? Is that part of the pricing there? And so any time you’re walking through that home and you hear, no, that’s an option or no, that’s an upgrade option. An upgrade equals more money.
So it can be very deceiving sometimes if you go to a builders model and you walk around and boy, they build those models to be absolutely stunning and beautiful and give that wow factor for a reason. They want you to fall in love with them, so they’re putting their best foot forward now, when you go to those models, you’re going to want to ask for the standard feature sheet. And as you’re walking through the model, ask those questions, oh, is this a standard granite countertops? Is this where the standard flooring would go? Is that extra trim up there? Is that part of the pricing there? And so any time you’re walking through that home and you hear, no, that’s an option or no, that’s an upgrade option. An upgrade equals more money. So that sales price that you fell in love with in that model you fell in love with may not include all of the beautiful bells and whistles or jewelry, as some people say, that were in those pictures. So please make sure you get that clarified with your agent or with the builder so you know exactly what you’re getting for the price. That way you don’t have unmet expectations in the end or during the process.
How Long Does it Take to Build a Home?
Number nine, how long does it take to build a home? This is like the biggest question that we get. So and it actually depends on the size of the home, the time of the year, the house is even being built and how many homes that builder is building at once, what can they handle? So there are some builders out there. They can just knock out houses in like 5 to 6 months, probably because they are a production builder that we call in the business. They have like a few house models that they build and they build them over and over and over again. And it’s very, very efficient that way. If you’re working with a custom builder, you’re probably going to be looking at about maybe 8 to 9 months contract to close or contract delivery where you get to move in. And now if you’re actually working from square one, you found a piece of land, you found the builder, you’re working with the builder to get your site plan and surveys. If you’re starting from square one, that’s the survey site plan. All of your systems like, well, and septic or does the lot need to be cleared? If you’re starting from that point, you’re probably looking at about 11 to 12 month process. So keep that in mind.
Can I Add Upgrades to My Sales Price?
Number ten, can I add upgrades to my sales price? The quick answer is yes, and some builders will allow you to add all the upgrades you want to the sales price. For some other builders might actually require you to pay upfront, say, Oh, I want to do this $5,000 upgrade. They might require you to do like 50% down and then you can add 50% to your sales price. So you’d be writing them a check for $2,500 and then also doing an addendum to raise your sales price by $2,500. There’s a few reasons for this. I’ve seen some people do $5,000 in upgrades. No big deal added to the sales price. That’s not going to affect your your value or even the appraisal in the end. But what if you added $70,000 of upgrades to your home and to your sales price?
Well, when your home is close to being completed and you’re actually getting your home appraised by, you know, with your lender so they can get your loan closed in the very end, all of those upgrades might not actually add value to your home. You might really love that golden toilet that you picked out and you paid a premium upgrade for in your primary bathroom. But an appraiser might not actually think it has the same value that you paid for. It’s a toilet, so make sure you talk to your realtor. Know like what upgrades will add value to your home and what are the ones you just wanted because you really like it. And you know what? That’s okay too. But you want to make sure that the upgrades are adding value to your home and the builder is actually looking out for you as your client in the end because he wants to make sure that the house appraises for you and you don’t have to come up with a ton of cash out of pocket or maybe not even be able to qualify for the home anymore because you over upgraded your home. Sometimes you can add those upgrades to the sales price. Just bear in mind that that end sales price has to meet the appraisal. So and you have to be able to qualify for that loan in the end. So these are all things to keep in mind. And you guys, I could probably come up with ten or 20 more questions that people ask us all the time and we’ll do another one of these.
In Conclusion
Just want to give you quick ten questions that people ask us pretty often about new construction. I hope you found this helpful. We really are experts in new construction. I could talk hours and hours and hours about it. So if you’re thinking about purchasing a new construction house or you want to work with a builder and have a home custom built for you, we really are the best team to reach out to because we have not only have built homes our own, but we work with multiple builders here in the area. So we’ve pretty much seen it all and I know we’d be able to represent you very, very well. So Rachel Beasley here with That Fit team, please reach out to us if you have more questions about new construction or maybe you want to work with us to work towards building your next home, we’d love to hear from you. For professionals in real estate, passionate about people, we’ll see you next time.
