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Buying a New Construction Home is a lot different than buying a pre-existing home. It’s easy to get caught in the moment when driving around the new neighborhoods and walking into model homes. The model homes look fantastic with all their warm colors, professional décor, and latest and greatest upgrades throughout. The builder’s agent in the home greets you with a friendly smile. Sometimes they even have freshly baked cookies in the home which just adds to the aura the builder is trying to create. It’s important to understand that builders spend a lot of resources creating this atmosphere for potential buyers in this highly competitive real estate market in hopes of capturing their share of the market. Their agents in the model homes are professional negotiators working on commission directly for the builder. Although they are friendly, it’s important to not lose focus on the fact that by contract they are in a working relationship with the builder. They're trying to hit a quota, not help you make the right decision for you and your family. This working relationship the agent has with the builder ensures they always have the builders’ best interest in mind.
It’s extremely important you seek assistance from a professional and reliable Realtor before you begin visiting model homes. The emotions of purchasing something so expensive and personal can often cloud our business judgment. In Colorado the Realtor’s Brokerage commission is usually paid by the seller, therefore there is no cost to you to have professional representation. Builders like all sellers account for the commission they will pay a Buyers’ agent in the price of the home. They do not “discount” the home for you if you don’t have a Realtor, instead they will pay their Listing Agent the full commission. Builders will not pay a Realtor commission after you have visited the model homes unaccompanied by your Realtor or without providing the name of your Realtor. This is important information because without a professional negotiator on your team you may not be as prepared to navigate through this complicated process which may cost you tens of thousands of dollars.
Below I created a list of 5 items that you must know BEFORE you visit model homes. Also, make sure to visit Inside Edge’s New Construction Page for more information on the new construction.
1. Interview 2-3 Realtors to ensure your Realtor has experience with the new home construction process, working with the different Colorado Springs builders and can provide you with professional referrals to help you create your new construction home buying Team. Buying a new construction will be stressful and will test your patience so it’s wise to mentally prepare yourself for the roller coaster of emotions you will experience during the 6-12 months of construction. You will find having a reputable Realtor to talk with during this process invaluable.
2. Decide how much you want to invest in a home to create a budget and stick to it. Get pre-approved for the loan amount within your budget. Understand what is standard and what are “extra.” Decide what you can’t live with the moment you receive the keys to your new home, and what you can add afterwards. You will be able to save thousands of dollars throughout the course of the loan by installing a few things after you close, such as window treatment, fence, landscaping, etc. Builders rake in the cash on upgrades because they can get parts and labor relatively cheap. The markup is huge, so investigate each option you're considering to see whether it would be more more cost-effective to bid it out after you move in.
3. Research the builder’s online reputation. Drive around the neighborhood and talk with the homeowners about their experience with the builder. They are usually very open about discussing their experience and you can gain a lot of insight by these casual conversations. Keep a journal to capture your notes and thoughts. Ask the developer about potential HOA fees and rules. Check with the City to ensure there are no liens against the builder. Find out how long the builder will be building after you have moved into your home so you are prepared for the potential noise and traffic that comes with new construction.
4. Know What's Standard and What's Extra. Upgrades refer to added features or items you pay extra for to enhance your home, like certain types of flooring or appliances. If you don't understand exactly what the builder is offering, ask and take notes before the building process begins. Making changes to your home after the building process has begun may cost you money in “change order fees” the builder imposes on the buyer.
5. Get an Inspection and Home Warranty. Make your sales contract contingent on a final home inspection by a professional you hire. Never assume that because a home is newly constructed, it isn't going to have defects. Regional Building inspectors look for code violations and are not as thorough as an independent professional home inspector. Protect yourself with warranties. All new homes come with warranties from the builder stipulating that any major defect of the structural integrity of the home must be repaired. Ask for a builder's warranty for a period of time following move-in that covers any defects in craftsmanship.