THE BUILDING PROCESS
Building a new home can be a very rewarding experience. Getting to pick everything just the way you want it. Not having to live in a home someone else has lived in. Trailblazing in a neat new area. Whatever the reason, I wish you the best of luck.
I will cover true custom building in another section. For this section we will assume you are dealing with a national or regional builder with a model home and lots in different areas of town. These builders have two types of homes…Specs and to be builts. Specs are speculative homes they start building before a buyer comes along. To be built homes are those where you choose a lot and then a floor plan to build on it. They may also call this “building from scratch” If you are buying a spec home, depending on what stage it is in, you may get to make some of the selections going in the home. But most of the time the builder has already made the selections and you are just going to wait till they finish so you can move in.
Building a new home is a different experience than buying an existing home in many ways. It is a more complex transaction because nothing but the lot is there. I can’t go over everything in this limited space but I will give you a thumbnail sketch of how the process works.
First remember that the each builder has their own contract form. The state does not mandate all builders use the same contract, like they do for resale homes. Each builders contract is different.
GETTING STARTED
To get started you will probably walk thru the builders model home. Make sure you understand what comes with the home as standard, and what is an “optional feature or upgrade”…i.e. not included. This is a constant source of misunderstandings. REMEMBER THIS: if it is not in the contract, it won’t be included in the home. If you leave something out or think something is standard when it is not, it won’t be in the home. The home is built according to what is turned in the contract package.
You will now start making decisions, lots of decisions, in a relatively short time frame. We need to pick a floor plan and a lot to put it on. Some of the time you can see a completed home like the one you want, either in the neighborhood you are buying in, or another neighborhood. But sometime you can’t, do you build it if you can’t see it? That will be up to you.
Builders make a lot of money on the options and upgrades they provide. They also make money on the lot premiums. All lots are not the same price. Builders typically charge more for corner lots, cul-de-sac, large lots, treed lots, view lots, greenbelt lots, well you get the picture. Who decides which lots have special designation, and how much is charged? Usually the sales manager or division president will ride the area, maybe with the salesperson, and set the premiums. The setting of premiums is not rocket science.
Remember if the builder developed their own lots, every lot costs the same. What??? That’s right, they all cost the same. The lot premium is just “gravy” to the builder. Oh, some oversize lots may require a little more fencing or sod but in general they cost the same. And on uneven terrain, the slabs may cost considerably more. Don’t ever pay a slab premium on a lot unless it has something special, a view or is heavily wooded. Another thing that drives buyers crazy, is paying a premium for trees. And then the builder knocks them down…happens a lot.
What about if the builder is buying lots from a developer? They may still be paying the same price for all the lots. Or they may split the lot premiums with the developer. Or he may charge them more for the lot. You will probably not ever know.
You will get with the builders representative and write up the contract. I cannot stress enough…make sure you know exactly what is going in the home. If you want, take the contract home and go over all the options in a relaxed atmosphere, and make sure you have not forgotten anything. Most builders will let you hold a lot for 24-48 hours at least to think about it.
You are going to be selecting the brick color, paint color, roof color etc…plus all of the options and upgrades you want. It is a good idea to get a copy of the options and upgrade lists on any neighborhood you are serious about to take home and study.
THE DECO CENTER
Most builders have their own deco center. If they don’t, you will probably go to an interior designer’s place of business and make your selections. Depending on the price of the home, you will have multiple visits that you can schedule to make your selections. Here are a few suggestions.
• You may want a wall paint to match a bedspread, or flooring to match a piece of furniture or something along those lines. If so, bring it with you to match colors. Or at least take a very good photo. You are going to feel very embarrassed if you pick a special color and it does not match up.
• Don’t go in cold. By this I mean you are going to pick everything from the floors to the faucets & everything in between. Do some homework, if your first visit is to select cabinets & flooring, then go see some selections before you get there.
• Have a plan and agree on it. By this I mean if you want earth tones, and your spouse wants blues & grays, this needs to be worked out before you go to the deco center. The decorator does not want to stand around while you try and talk each other into changing your color preferences.
• Even if your brother-in-law is the best tile guy in town, he won’t get to do your home. Everyone knows someone who is in some phase of the building business. Your neighbor’s son owns a carpet store, the boss’s daughter owns a lighting store, they will not get a one time shot to do your home. There are about a dozen reasons why builders don’t allow this (wrong insurance, don’t show up on time etc…). If your builder allows them to work on your home…be very afraid.
• Have a budget for decorating. It is sooo easy to spend more than you think you are going to. Now if money is no object, don’t worry about this. If it is, set down & decide on a number before you get there.
• “I can buy this _____ at Home Depot for less than the builder has priced it to me” That will be true on some things, but the builder will not meet Home Depot’s price. If you don’t like that, try having Home Depot build you a whole house, instead of just selling you the pieces. The builder knows this.
• The deco center is a big event, treat it like one. Don’t schedule your appointment for Saturday at 10 a.m., and roll outa bed at 9:15 and just show up. If you pick a great tree covered lot, put a beautifully designed home on the lot, you will only see this outside scene a couple of times a day. But you will see the inside of your home all the time. So take some time to make sure it looks as good as the outside. If you are not a pro at mixing and matching colors (and most people are not). You can spend a couple of hundred dollars for an hour or two with an interior designer of your choice. Let them come to your existing home and show them the furniture you want to keep & what you ideas on the next home are.
• The deco center is a big profit center for the builder! Read this first sentence again. This is why they will not match Home Depot’s price on whatever it was you showed them. The more expensive a home, the more money the deco center generates. Remember, some things you can actually do after closing for less yourself or with an outside contractor. I nearly always recommend letting the builder do anything that requires foundation work. Large porches or additions, I want tied into the existing slab of the home. And remember most lenders require that the home be finished to close and fund your loan. So you cannot in most cases do flooring or other major items after you close. Here is one little trick…let’s say you don’t want to pay the builders price on an upgrade. But you still want to do it. Find the subcontractor in the neighborhood doing the work for the builder and see if he will do the work after closing.
• Again make sure before you sign off, that you understand exactly what you just bought in options. Your will make a lot of selections in a short period of time. You or the decorator will be writing down a lot of numbers denoting your selections. It is not a bad idea to go thru those numbers and make sure they match up. Was your backsplash tile number 9714 or 9741. If you are there for several hours it is easy to make a mistake. And what is turned in today, will be what is in your home. You transpose the 1 and 4 on the tile and it is your fault.
• You have made all your selections, sit back your home is about to start.
NEGOTIATING WITH THE BUILDER
You will notice that I have not gone over how to negotiate with the builder. That is on purpose. If you want to save money on buying a new home, & make the whole process less stressful, you can hire me. I would be happy to represent you. But don’t wait till the last minute to decide to hire me. Many times the builders will only allow you to use an agent if you come and register with that agent. It is usually a good idea to say you have an agent if they ask you.
I will tell you one other little secret. The only real reason many people are not using an agent is you think you can get the builder to delete the normal 3% commission they pay us. The secret is there is not a 3% commission to save. Here is how the builders plan their budgets for the year.
Let’s say they have a neighborhood and they have one hundred lots and they think they will sell all one hundred in one year. They know that not all of the one hundred homes will have a real estate agent involved. They will plan their budget that about 50% will have a real estate agent. So there is only 1.5% budgeted for each home on average for realtor fees. I can save you a lot more than that. When I was a manager I used to always have someone who thought he was a top notch negotiator. And the commission was the first thing he tried to negotiate away. I then had to explain that there was never 3% for you to save to start with.
SOME CLOSING THOUGHTS & QUESTIONS
* Who builds the best home in town, and how do I find out? The answer will surprise you.
* What is the worst home in the neighborhood to buy?
* If you only pay for one inspection on the home, which one should it be?
* As you go up in price, the selection of the lot becomes more important. Many people pay for upgraded lots and then don’t take full advantage of it. Sounds simple but it’s one of the most common mistakes.
* Do you or someone in your family suffer from severe allergies? We need to talk about that.
* There is vacant land behind my new home, should I be worried.
* Why doesn’t my home look like the one I saw and wanted mine to look like?
* Is there a best time to buy a home from a builder?
* What is all this talk about green building, it is worth it? Or is this just more money for stuff I don’t need and won’t pay me back on?
* How do I get great service from the builders?
* Should I use the builders mortgage company and title company?
* If I don’t use a realtor, will the builder knock their commission off the price?
* How do you negotiate with the builders? And how do I know if I am getting a great deal?
* The builder we are buying from is moving out of Austin, and not building here any more. Is it ok to buy a home from them?
* How do I get free upgrades for doing almost nothing.
