Real Estate Tips: What to Ask Your Builder Before You Sign on That Dotted Line

Buying New – Part 2

By Mike LaRuffa
 
                               In my last blog post, I mapped out questions to ask your builder about the community when buying new construction. Now that you have settled on a location and community, I will help you, the buyer; determine what questions to ask about your future home. There is nothing like doing a little investigation on the builder first. Remember this is the biggest investment you will probably ever make so do your homework. The internet is a great place to start. Try Google, Facebook and even Twitter to see what is being said about the builder you are considering.  Also, do a thorough examination of the builder’s website. Reputable builders will let you know who they are and what they have done.  That said, the best research you can do is ride around a neighborhood on a weekend and chat with the neighbors…they will give you the real skinny on the builder. Once you are satisfied with the builder’s reputation, formulate a list of questions that you would like answered by the on-site sales person. This will be helpful since you will get distracted during the sales process looking at the variety of homes and options that are available and may forget to ask something very important. Any questions you have about the builder will be welcomed and expected. Now that you know all there is not know about your builder, let’s get to the questions. There is no particular order in which to ask these questions but you should get answers to all of them:
  • Is the builder offering any special incentives? These could be on inventory homes, base price, options or financing?
  • What kind of warranty does the builder offer?
  • What is the earnest money deposit, is it refundable under any circumstances, who holds the deposit and is it used by the builder as money or funds to build the home?
  • How much deposit is required for options and is that money refundable under any circumstances?
  • What happens if the appraisal comes in lower than the contract price?  
  • How long will it take to complete the home and what does the contract say about delays in completion?
  • What is builder’s policy on changes after the house is started and can you walk through the house while it is under construction?
  • What is the service policy after you close on the property and who do you call if you have a problem?
These questions seem to be the most asked and also cause the most problems in new home transactions. I would highly recommend that you get a copy of the agreement of sale and take it home and review every single paragraph so that you know what you are getting into. If contracts are not your thing, enlist the help of an experienced Realtor or an attorney to review and explain anything that may be unfamiliar to you. The cost of this or the extra time spent in reviewing all the paper work will be well worth your time effort and money! Contact us toaday, so we can get started on your house hunt!   

Real Estate Tips: What Questions Should You Be Asking Your Builder?

Buying New – Part 1

By Mike LaRuffa
 
Whether you are using the assistance of an experienced Realtor or going it alone, there are some questions that you need to ask before you sign on the dotted line when buying new construction. Location typically plays a large role in the decision making process, so let’s explore questions you would want to ask if you are considering a development. First things first, make sure to find out who owns the development. Do not assume that the builder on the sign owns the development because often times the land is owned by a developer who is selling lots to the builder.               In that case you would want to know who the developer is and are they financially sound?  Those great looking entrance features, manicured common areas and community amenities are the responsibility of the developer until the majority of the development is completed. If the amenities and common areas do not look vibrant and well maintained, that could be the sign of a financially troubled developer. Your section may look good because the builder is subsidizing the maintenance in the section they are building but what happens when that builder is gone? Another question to ask is if amenities are planned. If amenities are planned but are not yet completed, be sure to ask when they will be finished. In these economic times, developers may not have the money to complete amenities until a certain number of homes are occupied. This is not uncommon today, but I would suggest trying to get a firm answer regarding a completion date. In some cases developers are required to post a completion bond on planned amenities, which is like an insurance policy for the homeowners that insure amenities will be completed if the developer does not have the means to do so. Ask to see a copy of the Covenants, Conditions and Restrictions or CCR’s. These are the “laws” of the community that dictate everything from changing the color of your home and putting up a fence, to parking certain types of vehicles on your property. A violation of the CCR’s may subject the offender to fines or even liens against the property. These restrictions are seldom changed to accommodate your situation so read them thoroughly and ask questions. Last but not least, make sure that you understand the financial condition of the HOA. Ask the sales rep for a current copy of the financial statement. The law requires builders to provide this to you when you are ready to sign a contract. But there is no sense in getting that far down the road, ask for it early in the process. Also check the local government web site to see if there are any liens, lawsuits or judgments filed against the HOA. This is important since you will be a member of the HOA. If any of the above has been filed, your dues can be affected and you can be charged with a special assessment to cover a judgment filed prior to you ever living in the development. Stayed tuned for Part 2

Real Estate Tips: Do You Know How to Negotiate with a Builder?

Get The Most Bang For Your Buck

By Mike LaRuffa
 

Today, buyers have the luxury of being able to negotiate prices on homes. However, that strategy for negotiating changes when it comes to buying new from a builder rather than purchasing a re-sale. What is the biggest difference?  A re-sale seller is dealing with equity, the difference between what they paid for the home and what they can sell it for. A builder is dealing with materials, land, overhead, plus profit, for a builder, equals sales price. The typical builder has the following expenses that all add up to 100%… land 18%, materials 50%, overhead expenses 15%, marketing 6%, permits, fees, warranty 3% and profit 8%. So, for a $200,000 house, the profit is only $16,000, not the mega bucks that most buyers think a builder makes. All the other costs are essentially fixed, meaning that the only place to negotiate for the builder is their profit line. If you are looking at a home that has to be built, be mindful that the builder is less likely to discount the base price of the home since they are building it to current values. Instead of jumping the negotiating gun, ask about the incentives being offered that have been factored into the pricing. This is a good place to get the biggest bang for your buck.  Builders have a markup on options so giving them away has less impact to their bottom line than reducing the overall base price. Furthermore it helps preserve appraised values that reflect general value in the neighborhood and are important to you when you are getting your loan.

If you are looking at an existing inventory home, your negotiating strategy may be a bit different. First, determine when the house was completed. This is importance because builders factor in some interest (overhead expenses) to carry the house until sold. When that runs out, builders start to eat into their profit, so they may be more willing to negotiate. Dropping the bottom out of the price even on aged inventory is still not a preferred strategy due to degrading appraised values. You may want to suggest items that can be added to the home that you would purchase anyway after you move in…additional landscaping, appliances such as refrigerators or washer/dryer, decorator items such as shutters, blinds or special paint colors. In closing, keep in mind that even though builders are eager to sell their homes; they also need to turn a profit. In your house hunting travels you may find that the builders that are still in business today have survived because they offer a good value at a fair price and they stand behind their product when you need them!