With a new house, you’re starting fresh and you don’t have to undo what that other person thought was important.
By DANA DRATCH | Bankrate.com
Buying a new house brings up different issues than buying a pre-owned home. You have access to more information on building materials and systems than a subsequent buyer. But unknowns lurk: What will the completed neighborhood look like? Will it include all the features promised in the brochure?
Bottom line: Buyers need to research a different set of questions before making an offer on a new house.
If you’re vowing “out with the old and in with the new,” here are some tips to help you make a smart buy on a new house.
What if you love the house, except for the wallpaper in the powder room or the carpet in the den.
You might be able to persuade the builder to change a few things before you move in, says Stephen Melman, director of economic services for the National Association of Home Builders.
With an existing home, alterations are often negotiated with the seller, he says. That can be uncomfortable. But with a new home in an unfinished neighborhood, the labor and materials are still on site, so “it’s no big deal.”
Most builders are flexible and provide a greater range of choices in things such as appliances, flooring and paint — “the kind of choices that didn’t exist 10 years ago,” Melman says.
If your changes aren’t finished by the time you close, “it’s probably a really good idea to escrow some money” so the builder has incentive to do the work, says Ron Phipps, immediate past president of the National Association of Realtors.
Builders often work with banks and, as a result, may be able to offer financing options, Melman says.
So, while you still want to get prequalified with a lender before you start shopping for a home, it makes sense to weigh all of your options. And you can always try to use the offer of builder financing to drive a better deal with your own lender.
Phipps says that with a new house, “you’re starting fresh, its economic life is longer, you get to personalize it, and you don’t have to undo what that other person thought was important.”
Where will you likely save some money?
The power bills. Those new appliances and systems in new homes often equate to lower power bills, says Barry Zigas, housing policy director for the Consumer Federation of America.
Even with a new home, you’ll want a warranty. It often means the builder will come back and fix problems, Melman says. “You’re not going to have that in an existing home.”
Warranties vary widely, so read the fine print, says David Jaffe, vice president in the office of the general counsel for the National Association of Home Builders. Typically, they run from as little as one year to as many as five years.
Some builders include arbitration clauses in contracts, in which buyers give up their rights to file lawsuits. Instead, they use a dispute-resolution process designated by the builder.
While arbitration can be a quicker and less expensive way to solve problems for buyers, much depends on how the arbitration is handled and who picks the arbitrators, Zigas says. Check the track record of the arbitration company if one is specified, he says. Does it have a reputation of being consumer-friendly?
And before you sign a contract, it’s smart to have your own lawyer review all the documents.
If you’re buying in a community built around certain amenities — such as a pool, golf course or tennis court — that’s part of the value of your purchase, Phipps says. If the amenities are still on the drawing board, do a little due diligence if you’re banking on their completion.
“Anything that involves new construction or phased development means you’re at risk of the developer running out of money,” Zigas says.