Buying a New Construction Home? 5 Tips You Need To Know
Many homeowners have come away from what should be a wonderful experience – building a new home – with a bitter taste in their mouths. We’ve read dozens of online reviews of builders from shellshocked homeowners who relate their awful experiences with their builder and builder quality. After helping dozens of our clients through their new construction projects, we thought it would be helpful to share these simple tips if you decide to go for it and build new:
HAVE AN EXPERIENCED NEW CONSTRUCTION REAL ESTATE AGENT ON YOUR SIDE
Don’t make the mistake of walking into a builder’s sales office without a buyer agent. It’s too easy for the builder’s showrooms to “wow” you into a rushed decision. Remember that the representatives in the sales office represent the builder, NOT YOU. Their first loyalty is to the builder, NOT YOU. Don’t believe that they will take care of you throughout the construction process. Other than preparing the details of your purchase agreement, having all the parties sign, and sometimes providing basic communication during the construction process, the sales reps take care of the builder, NOT YOU.
If you’re planning to build, make sure you involve a strong buyer agent from Day One. Do you know that most builders have a very strict policy to forego paying commission to a buyer agent unless that agent is present at the buyers’ first visit? Yes, that is true. Wonder why? It is because so many builders have witnessed buyer agents bail out of the picture after contract signing, so they figure, “Why pay a commission if the agent’s primary (or sole) purpose is to bring the buyer to us?” This is often even the case with online registration too. Some builders won’t recognize a buyer agent when prospective buyers register themselves with the builder online. With these kind of policies in place, do you think the builder could really be on your side?
Make sure your buyer agent is experienced with new construction and stays involved throughout the process. Ask the agent up front what his or her experience with new construction is, and what they’ll do for you throughout the process. Don’t rely on a realtor pal to help you unless you know he or she regularly works on new construction. Experience is key. Among other services, an experienced buyer agent will: ask for concessions from the builder and the builder’s lender; keep tabs on the build; attend key meetings with the construction manager; guide clients to ask questions of the construction manager (since many builders prohibit buyer agents from messaging construction managers directly); ensure clients recognize the critical opportunities for a third-party inspection; seek repairs and recognize band-aids versus true fixes; periodically visit the build to keep an eye on things; generally always work on the client’s behalf. Most commissions are good money. Make sure your buyer agent earns it. It won’t hurt a responsible agent’s feelings. Or do you want to handle the whole process on your own, knowing that the construction manager’s first loyalty is also to the builder?
DO YOUR DUE DILIGENCE ON THE BUILDER
You’d be surprised how often builders with the most beautiful showrooms or models have the most terrible online reviews. True, critics are more likely to write a review than advocates, especially when reviewing a company rather than an individual. But it is also often true that where there’s smoke, there’s fire. Check the online reviews. Are there a significant number of reviews, and are they overwhelmingly negative? If so, run. Read the reviews carefully. Sometimes you’ll see names named and can determine which construction managers in the community are fine and which are ones to watch, because, yes, you will find differences in performance between construction managers in almost every community. Ask the builder what has become of so-and-so construction manager, and even what opportunity you will have to provide feedback or share any concerns during the construction process.
Before you sign the purchase agreement, find out what the communication process with the construction team will be. Will you get emails directly from construction, or is your contact through the sales rep? Will you get weekly updates, every other week, or at no set schedule? Photos or no photos? How often can you visit the site or talk to the construction manager? Of course, you don’t want to annoy or pester anybody, nor do builders want that. But you shouldn’t be shut out from contacting the construction team directly if you need to. Get a feel for how the communications will work. If it doesn’t leave you feeling comfortable, get the construction superintendent’s contact info too, just in case.
Don’t be your builder’s guinea pig. Make sure your builder is experienced, has built in other communities locally, and will stay solvent. You don’t want to be the buyer who puts down a large deposit only to see construction bog down over permitting with the county, have a labor shortage or just disappear into insolvency with your money altogether. Sadly, it happens, especially with smaller builders.
BE PREPARED TO BE INVOLVED
As much as we’d like to believe that a huge expense for a new home means you’re at the top of the builder’s priorities, don’t be fooled. Unless you are building custom (and sometimes even then), odds are the builder has several other homes to build same time as yours. With a large national builder, for example, it is common for a construction manager to have a couple dozen homes to oversee. With all the moving parts involved – multiple crews and crew leads for the different trades, material suppliers, and delivery logistics, along with the corporate obligations and customer updates – you can imagine it is a lot to handle. It is rare for new home builds to proceed without problems, rescheduling or changes of some type.
While you should lean on your buyer agent for support, be your own advocate. It may not be to your liking, but the reality is your agent cannot be there to oversee every aspect of construction. Moreover, many builders and/or construction managers put the buyer agent “on ice"…they won’t communicate nor respond to us directly, and often we’re going through the buyer to get updated information. At any given time, the buyer will have at least as much information on the home construction as the buyer agent, if not more.
You may notice that many of the worst online reviews of builders are written by homeowners who seemed relatively hands-off throughout the construction process. Don’t let that be you. Don’t be afraid to visit the site periodically, ask questions, or strike up a dialogue with your construction manager. Rapport leads to a greater sense of accountability. If you’re not prepared to commit your time and effort in this way, then new construction may not be for you. A great agent can help, yes. But there is only so much even a great agent can do. With your big money on the line, don’t be shy about advocating for yourself too.
TRUST BUT VERIFY
It’s never the intention of a builder to have poor quality with new construction. Your construction manager may be the nicest, most experienced, and responsible person in the world. But with all the sub-contractors and details involved with a home build, things happen.
“Our quality is proven because we have to pass many county inspections.” Though new construction requires multiple inspections by the county throughout the build, don’t think that this guarantees you a quality home. The homes of everyone who has written a negative review online likewise had to pass multiple county inspections. Literature on quality control will tell you that even 100% inspection is only 80% effective because of the natural tendency to tire and lose focus on detail. What happens when county inspectors arrive at a community to inspect one house after another, often at the same stage of construction? In some hot markets, county inspectors are known to spend just 15-20 minutes per inspection, delivering far less than a 100% inspection. The tendency becomes to focus on meeting minimum construction standards rather than best industry practices. Enter bad reviews…
There’s too much that can go wrong under the walls. So be sure to hire a third-party inspector to review the house before the walls go up, that is, before drywall or sheetrock is installed. We call this a pre-drywall inspection. You will be stunned to learn how many issues can be found…many never caught by county inspection. In my experience, the #1 most common problem has been damaged trusses, which can affect not only your roof, but also lead to bowing in your ceilings. You’ll need an expert eye to catch this. Bowed studs, missing foundation bolts and hurricane ties, improper sealing, gaps in sheathing…nothing is out of the ordinary. Hire a third-party, pre-drywall inspector to find these issues for you. Builders will give you a song and dance to avoid fixing a few things. But they’ll take care of 90% or more of the items that come up in a third-party inspection.
Another opportunity to inspect would be once the home is complete, but before closing. At this point, your inspector will check for everything from the roof to foundation to property grading, HVAC, water heater, fixtures, flooring, installed appliances, cabinets, drawers, etc., etc.. Your builder is likely to provide you with a warranty that can cover some of the items that will be found at a final inspection. But do you really want to wait to learn after closing that your shower isn’t draining, or one of your toilets is loose, or there is some bowing in your roof or a damaged gutter that you can’t even see? Some of our clients forego this second inspection because it is roughly double the cost of the pre-drywall inspection. But you’ll be shocked just how long the inspection reports are for a final inspection, so if you want to be cautious, do it. It’s a small expense to ensure the quality of your major investment.
EXPECT THE UNEXPECTED
The housing industry has been especially tested during the pandemic era. Though thankfully, we seem to be through the worst of it, supply chain issues still periodically impact builders. No builder stockpiles materials and many housing components are build-to-order for suppliers. Cabinets, HVAC ductwork, drywall, and appliances are among the items we’ve seen delayed in our market. Of course, illness has also impacted construction crews. Keep after your construction manager to update you in a timely manner. Construction managers are closest to the job and responsible not only for tracking their performance to schedule but for updating you as well as their own management on progress.
Learn what the trigger point is for your builder to lock into a closing date. The builder may, for instance, trigger off the installation of cabinets and countertops – the last major material deliveries – to establish and share a firm closing date. Until then, don’t lock yourself into the estimate provided by the builder at contract. Certainly, no one wants to be wrong on the timing. But it happens. For your own peace of mind, develop contingencies. If you must sell your current home before closing on your new one, be prepared to sell earlier or perhaps later than expected. Prepare early and be flexible. The unexpected will happen. The more you gather and use the available information, the better you can plan and control your own new construction experience.
In a nutshell, to have the best new construction experience, be proactive. Whether it’s with regards to build quality, communications, timing, or accountability, be involved and work with a real estate agent who will help you be involved with the construction project. Building a new home can be a terrific experience. There’s no feeling quite like making such a major investment and moving into a brand new, beautiful home that is yours. But don’t take anything for granted. It will take your active involvement, and perhaps a little more financial investment for inspections, to ensure you get the most out of the experience. It’ll be worth it.
Albert Alvarez is a REALTOR®/Broker with The Ally Group Real Estate in Charlotte and has extensive experience in new construction homes. Contact him at 704-957-2232 or email at [email protected] Visit their website at https://www.livingingreatercharlotte.com/ or their YouTube Channel