Great news – your offer was accepted on a new construction home. But what happens next? The process is different than it is with a resale home (see our blog post for details on that.) For new construction, the next steps vary on whether it's a custom build with construction loans handled by you (the buyer) or a new home where the builder is either building the house on speculation or financing the construction themselves.
t Harbor Club, our real estate team adeptly handles all of these scenarios and more. Sales Director Kathy Phillips recently shared this helpful list of additional steps when buying a new construction home:
Find your favorites
If not already, pick out your favorite homesite and floor plan. Look closely at both and make the builder aware of any upgrades you'd like to have over the standard specifications. Then, have the builder provide pricing with all upgrades included.
Line up loans
Talk with your lender and get pre-approved for a loan for the property. Follow up in supplying what your lender needs to process the loan. And if you're securing a new construction loan, be sure to qualify and obtain the construction funding as soon as possible so that the building process can begin. Also, be aware that construction deposits are typically 10% on a pre-sale home or anywhere from $15-$25k on speculative homes already well under construction. If you are planning to obtain a construction loan, only certain lenders do these kinds of loans, and they typically require 20% of the contract price upfront.
Look at long-term rate locks
Keep in mind that most lenders will only lock in an interest rate for your loan 30-60 days prior to closing. Discuss the potential of a closing date delay with your lender and strategize the best timing to lock in your rate. Many lenders are offering longer-term rate locks, which require additional funds in advance that go toward your down payment. If you want more peace of mind, it's well worth the step.
Decide on designs
Visit your builder's design studio to make your design selections within the timeline they require. You'll typically pick paint colors, roof, brick, window styles, door styles, plumbing fixtures, appliance packages, tile, countertops, and lighting. But keep in mind any homes that have already begun construction may have limitations on what the builder will allow you to select.
Establish electrical needs
Your builder will schedule a walkthrough of the house with an electrician and low-voltage technician. This step helps determine the best locations for your outlets and switches and ensures you can obtain any other needed electrical components.
Depending on what stage the home is in at the time of the request, builders might be able to allow changes for additional upgrades. However, builders often charge anywhere from $250 to $500 per change order for administrative costs associated with them.
Be aware that, unlike with a resale, contingencies are not part of a new construction contract. Builders' contracts typically don't allow for contingencies, including those that tie to financing, appraisal, or due diligence.
Involve an inspector
For peace of mind, hire a qualified inspector experienced in new home construction. Once the inspection is complete, share the resulting report with the builder. If items reported are in keeping with their building practices and code standards, the builder will use the inspection report as part of their punch list for completion. These reports are usually done two weeks before closing.
Prepare a plan B
Note that for all new construction contracts, closing dates for the home are estimated. Especially with today's supply chain issues, builders are running into delays with materials, which have a domino effect on the rest of the construction schedule. Therefore, builders make their best guess on a completion date based on the current supply chain. It's a good idea to have a plan B if the house isn't ready by the estimated closing date. The builder will provide updates during the construction process as to the timeline of the home and if any snags could delay closing.
Walk the walk
The builder will set an orientation and walkthrough with you approximately one week prior to closing. The house should be substantially complete and initially "punched out" by the builder before that time. This walkthrough is the best time for you to learn all about your new home and identify any additional items that require completion.
Communicate with the closing attorney to schedule your closing time and ensure your lender has provided the attorney with the loan documents they need. On closing day, your new home should have a Certificate of Occupancy, and you will do a final walkthrough with the builder. At that time, if any construction items are not yet completed, they'll be identified and signed off on by all parties to ensure they are resolved beyond closing day.
No matter which type of home you buy, always ask for the assistance of a licensed REALTOR® who is highly experienced and knowledgeable in either resales or new construction (or both.) They'll provide the expert advice you need to navigate these processes with ease. That's how it is when you purchase a home at Harbor Club. Our real estate expert, Kathy Phillips, makes it a simple, seamless process – from consultation to contract to close. Plus, when you visit, you'll soon understand why Southern Living chose Harbor Club as one of its highly-esteemed Inspired Communities. Contact us today to learn more and schedule an exclusive tour. You'll be glad you did.