Buying a new home is a big decision, and buying brand new construction can make a buyer even more nervous. The biggest challenge with new home construction is fear of the unknown. You don’t know exactly how your house will look on that block until it’s built. You’ll pick out carpet, tile, paint, and other features without really seeing the whole package. Beyond the house, you will need to wonder if the schools to be built will actually be as good as they say they will. Will the amenity center really meet your needs? Will you like the community less if the new Whole Foods supermarket down the street never gets built? Here are some things to think about before you even get into your car to tour new home communities.
In 2016 data showed that the average time people live in a home is 8.7 years – If you’re going to wait 6-9 months to have your home built and then move in, you will probably be on the higher end of this average. Many people look at building a new home as their forever home, but jobs and family needs do change. At a minimum you should ask yourself if the home you’re building will suit your needs 6-8 years from now.
Before even looking at new construction, ask yourself if you can really afford it. It is not uncommon for new homes to have a 10-20% premium over existing homes of the same square footage. Also, keep in mind, if you need to sell your existing home, it can cost you as much as 10% of the sales price between commissions and closing fees. Do you know how much it will cost you to insure a new home in an area that gets bad hail? Use a Texas service like HelpInsure.com to get free home insurance estimates.
Of the things people regret when buying a home many people wish they would have opted for a larger house. This goes back to the prior point of affordability. If you can’t afford what you really need, does it make sense to wait a year to save up more money. If you do this, be realistic with how much you can save and how much more you can buy, especially in a hot market where homes may be going up 8% per year in value.
Remember that many things in new construction are negotiable and much easier to add into a home before foundation is poured. If you want extra space with a 3rd car garage (many do in Texas) – it may bring you $10,000 in additional home value while the builder may only charge you $6,000 for the option.
The model homes sells 40% of the time, because people can walk through the plan. If you really like a floorplan, make sure there is a model being built or one in another area that you can go tour. Also, be careful about flipping your house (mirror-image). Sometimes the lot location will require your home to be a mirror image of the model you walk through due to the garage swing. Not all buyers will be happy with having the plan reversed once they are in it.
While most homes can be built in a year, sometimes external factors can cause a delay for up to 2 years. This is perfectly legal if it’s in the contract, so be prepared to ask your builder what is the maximum time they can take to build your home.
If you’re working with a real estate agent (like us – smile), it is critical you tell the home sales rep on your first visit. The services offered to you by your agent may be compromised if the builder doesn’t recognize your agent as referring you.
New Home Construction Realtor vs. The New Home Sales Manager
The person in the model home can be called many things – Builder Sales Manager, New Home Sales Rep, New Home Consultant, or something else. Whatever the title, they have a lot of work to do for not just you, but every new home buyer in the community.
New Home Builder Sales Rep
New Home Construction Realtor
When we first moved to the Dallas area, we were surprised by how many subdivisions had homes where there were no driveways placed in the front of the house. Instead, homes back up to each other where an alley is used to access driveways and for the garbage trucks on garbage day. After almost four years in DFW, I am still not a fan of alleys behind homes, but it does present a nicer looking street when you see absolutely no cars parked down an entire block. Unfortunately as families get bigger, homeowners are forced to park some cars in front of the house as kids reach driving age and more cars are needed. If you do end up picking a neighborhood where garages are in the backs of the homes, here are some tips to help.
If you absolutely love the house, then these things might not matter, but go into your purchase with eyes wide open knowing the little things that may become big things after living there a few years.
The first time I heard the word “fungible” was in my college economics class. Fungible was one of those concepts that stuck with me because it seemed like such an odd word for what it really meant. There is nothing “fun” about something being fungible. It means something can be easily substituted – easily replaced with something of relatively equal value. If the gasoline at Costco is just as good as the gasoline at Chevron, but it’s $0.10 cheaper, most people will line up at Costco. Most people treat not only the brand of gasoline as fungible but even the grade of gasoline, putting regular in their cars when the engine may perform better on premium fuel. Too often many home buyers and sellers see real estate agents as fungible.
Real estate doesn’t allow you to go through a transaction 3 times with 3 different agents
The problem is particularly acute in real estate, because there are so many people with real estate licenses, and in a hot market where homes can easily sell themselves, people would just use their brother, sister, or cousin to sell their home. The extra benefits or slightly better sales price a more experienced agent “could have garnered” is minimized, because the general view is that agents get too much anyway for the amount of work they do. Real estate doesn’t allow you to go through a transaction 3 times with 3 different agents to see which scenario turns out the best.
Just recently I was working with a person who wanted to buy a newly built home. Her credit needed work and she needed to save money to get the down payment. After courting this buyer for several months (who assured me she was buying alone and not working with another Realtor®), I found out that she went ahead and tried to purchase the new home with two other buyers, listing another Realtor as their agent. My guess was that one of the other two buyers convinced her to use the name of another agent – maybe a family friend or someone that promised them other incentives. While I’ll never know the exact reason, the outcome was the same. I was considered fungible. My new home services are probably not matched by many agents in Texas, but that didn’t matter. The three buyers on the contract simply replaced me with another agent. I was substituted – my services were not deemed valuable enough to the three buyers, or at least two of them. This happens all the time especially with buyers who see agents as disposable at the first sign of trouble in the home buying process. Any hiccup they see is the fault of the agent, and they immediately look to find another one. Luckily, not everyone does this, but it happens more than you would think.
LESSONS FOR HOMEBUYERS
Stop using just anybody to purchase or sell a home. Interview agents and ask hard questions. Find out which agent is the most qualified and best fit for your personality. If the most qualified person doesn’t listen or acknowledge your spouse, or seem demeaning, find another agent.
You can’t spend 7 days to look for a home you’ll live in for 7 years.
Have patience and value relationships. Deciding to pick another agent because your current one was out of town for the weekend after showing you homes for 6 months is disingenuous. A trustworthy and qualified agent brings a good balance to discussions on why that dream home may not be so perfect. When home buyers get FOLP (fear of losing property) the buyer rep agent is often left with an angry buyer, an upset seller and listing agent, and no commission. There truly are multiple homes that will meet most buyers’ needs if the first choice is taken, but home buying requires patience. You can’t spend 7 days to look for a home you’ll live in for 7 years.
Value specialization and geography. If you want to buy a high-rise condo in the Post Oak area of Houston and your agent lives in a Post Oak condo, selling high-rise condos for the past ten years, you probably should use them to find you a place. If you’re buying a newly constructed home, find a new home specialist. If you’re buying beachfront property, find an agent that works almost exclusively with properties near (and on) the water.
Understand that working with a good real estate agent and sticking to their advice can pay dividends long after you’ve closed on your home. Savvy homebuyers that realize this have an agent on their life team just like a lawyer or a primary care doctor. That agent will help guide them through all kinds of real estate related issues and may even find a house for the buyer’s son or daughter years later.
Shiny things do get dull. Listen and ask questions. While it’s easy to get focused on the prettiest house, it’s critical to understand the other factors that help you avoid a money pit. And if the house is right, did you listen when your agent said there could be a mall built right down the street from the neighborhood you love, and traffic will triple in the next 5 years. There is so much more to consider than just the house. Even financially, buyers will purchase a home knowing that it will stretch them, only to lose the house 5 years later as taxes go up or other life events happen.
LESSONS FOR REAL ESTATE AGENTS - WHAT CAN WE DO BETTER?
Be honest about your specialty. Having a large circle of friends and family does not automatically qualify a person as a top real estate agent. But with the barrier of entry to real estate being so low, the industry is super-competitive. This leads to agents competing for every single deal even when they may have little to no experience in selling certain types of property. My wish for agents is to focus on being more specialized which brings more credibility to the industry. Trying to chase every deal over every area of the city spreads the agent’s time and expertise too thin, ultimately leading to unhappy buyers and sellers when deals fall through. Agents focused on certain types of property in a well-defined area, will tend to be able to better navigate through problems they see all the time.
Set better expectations with your buyers. Don’t promise a flawless transaction when so many variables are outside of your control. You don’t control the seller, their agent, the inspector, the mortgage lender, or the closing officer. Tell your buyers the problems you anticipate and the path around them. Good agents that have developed a good rapport with their buyer tend to have less lash back when things go wrong. An agent with tons of expertise but no personality will immediately get the blame when things go wrong.
The transaction doesn’t end at closing. The best agents will continue to provide value long after the sale. Even though I have a broker’s license, the agent who sold me my home when I wasn’t practicing years ago, still calls me up a few times a year to see how things are going. I’ve used his vendor list several times to get things done on my house.
Focus on educating your clients. Even for experienced homebuyers and sellers, most people don’t buy or sell a property every month. If it’s been more than 2 years since the client did a real estate transaction, chances are things have changed in the market. There may be new forms to complete at closing, new regulations. It’s easy to get focused on getting and closing the deal to move onto the next, but most clients will appreciate the extra insight and guidance along the way, even if they don’t verbally say it.
You can’t save everyone. Some people just won’t take advice – plain and simple. Some people are going to change their mind or contradict themselves twenty times. As an agent, you’ll need to set boundaries and decide when does it make sense to not have that person as your client.
The blog for everything about buying new home construction in Texas (and a little about resale homes too). Brought to you by the founder of RebateMyHome.