5 Things To Know When Buying A New Construction Home
Are you thinking of buying a new construction home but just don’t know all the details? There has been a big increase in new construction home building in Lake County from Antioch, Mundelein, Buffalo Grove and other locations in Lake County. Ryan Homes, K. Hovnanian, D.R. Horton and Lennar, to name a few, have been building single family and townhomes in different price ranges. The new construction buying process is different from a regular process and I hope this blog will answer most of your questions.
#1 Understanding New Construction pricing
So when you see a sign stating starting at $299,000, that is the base price for the smallest home with no upgrades. A lot of the time you will also have a lot premium and the price will very based on the desirability of the lot. If it facing an open field or other houses, that will make a difference on the cost. There are many other building options that will add on to the price as well, such as extensions to rooms, extra windows, different levels of cabinet, flooring, tile or counter tops to choose from which will all come with a different costs. You also want to be careful to not go overboard with your selections because you want to make sure the bank will appraise the home high enough to secure financing. If you order $120,000 in upgrades alone the home's cost may exceed the value and it could be difficult to finance the full amount. Keep in mind there are some things that you can do after the closing for possibly a cheaper price since you have the option to shop around. Making smart decisions up front can help save you some hassle during the whole process.
#2 Use a realtor
Sometimes the sales representative on the new construction site might tell you that you don’t need an agent since that is a cost that the builder would pay. They are working for the builder and even though they can answer all of your questions they are still representing the builder and not you. My advice to you is to get an agent that will represent your own interest! I do recommend having your agent selected before you register with the new construction builder because if you put down you don’t have a realtor and later on get representation the builder might not want to compensate the agent since they were not there from the beginning of the process and it’s a cost that the builder pays.
You want to get mortgage pre approval before you start looking at new construction homes because that will give a better idea on what options to select based on your budget.
A new construction representative will try to get you to use their bank by providing closing cost credits which are higher for a new construction build, however the interest rate could be higher than an outside bank. It'a important to do your research to compare rates, closing costs and points. Also be prepared, some builders might require a deposit and that amount could be significantly larger than the common 1% earnest money on a resale home.
Builders typically don’t like to negotiate on the base price since they are trying to keep the selling price for the other units more uniformed but where there could be room for negotiations is on the upgrades or closing credits. Of course it all depends on the builder and the popularity for the subdivision however a builders will sometimes have move in ready units where you could negotiate on that price vs if you're getting it build.
#5 How long does it take?
The construction can be from 4-6 months and even though the builder wants to deliver on time the Illinois weather can make that difficult sometimes so be prepared for a possible delay on your closing, as long as your aware of that possibility and have a backup plan for what you would do if you couldn’t move on that day, it will make the situation a lot less stressful.
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