Home Buying in 20895>Question Details

Sandy Garrett, Home Buyer in Rockville, MD

What are the main dangers of buying a new construction?

Asked by Sandy Garrett, Rockville, MD Sat Oct 25, 2008

We are considering what looks to be a very nice looking new construction in our neighborhood. It went up relatively quickly (well under a year) and so we are concerned about the quality of the work. I don't know how much a home inspection will be able to find or tell us in this circumstance. Does anyone have advice regarding buying a new construction?

Thanks!

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As advised below, working with your own agent, rather than relying on builder salespeople, is very important to help protect your interests. You wouldn't trust a for-sale-by-owner's hired hand; why on earth would you trust a hired hand for a builder?

From a mortgage perspective (my area of expertise), you should be aware that the risks in new construction deals have proven to be much greater than in existing home sales. Mortgage fraud (inflated appraisals, falsifications in applications, etc) is more of a problem, and there's also downstream risk to the property value (i..e, the collateral) from the builder going under or the development not being finished or successful for whatever reason. As a result, you can expect more scrutiny in underwriting if the property is new construction, and you may well find that the loan program rules are tighter. For instance, the jumbo loan program that's arguably the best in the country recently instituted a rule that any loans on new construction properties require a 15% higher down payment; in other words, a loan scenario that might ordinarly require a 20% down payment would require a 35% down payment if the subject property is new construction. That's something to think about.

We do business in Maryland. Feel free to contact me if you'd like to discuss any what-if's.
1 vote Thank Flag Link Sat Oct 25, 2008
When buying new construction, always try to get a home inspection before the close in of the walls so that the inspector can see the plumbing and electrical wiring as well as the bare bones. You should also have a final inspection once the work is complete. Investigate the builder thoroughly. His or her performance on other homes is a real tell as to the quality of the latest product. I would expect a quality builder to complete a home in well under a year.
0 votes Thank Flag Link Sat Dec 28, 2013
New construction, does not mean there are no problems. Make sure you get an excellent home inspector to check out the home. Sometimes contractors skip things or make errors. Always have every home you buy inspected.
I would not worry about the process taking less than a year. I used to work for a custom builder and we often completed houses in a year or less. I am talking about 5000SF+ homes with top of the line finishes. If you get someone that knows what they are doing it is not hard to do. Make sure to find out about the builders warranty?
Sincerely,
Betina
0 votes Thank Flag Link Wed Nov 12, 2008
Sandy, as someone who represents many builders and customers, the basic answer to your question involves protecting the value of your investment, and to insure the quality of your new prospective home. The quality issue can be researched and answered by hiring a certified home inspector (prefer certified engineer), researching any complaints on the builder from the local home building association, or better business bureau. If there are complaints on the builder, you need to be realistic if they were an isolated incident, or a continuing problem. Regarding price within the community, is the Builder being realistic with the market in your area? if you do not know the answer to this question, or do not feel confident in your knowledge, then it is time to help get you educated on the market by consulting with your own buyer broker representative. Upon engaging your buyer broker representative, you need to explain your desire to purchase the new home, and discuss the intentions for your current home. Have your buyer broker research and provide you with recent sales in the community, not to exceed six months previous if possible. Equally, as decreased builder sales volume has questioned some builders ability to continue in the future, added protection would be to request a third party home warranty product to be purchased by the builder as part of your sales offer, to assist in protecting you from any maintenance concerns should your builder incur financial problems during your first year of ownership, or longer dependent upon the warranty product provided. Hope this helps.
0 votes Thank Flag Link Sat Oct 25, 2008
Hi Sandy,

First, congratulations in advance on your new home! What a great time to buy--I am sure you can get a great deal. That brings me to my first piece of advice--GET A BUYER'S AGENT!!! I don't know who the builder is, but most of them will coop with agents. Builders are unfortunately notorious for brushing off the buyer's desire for their own agent. The fact is, the sales agent works ONLY for the builder. As nice and friendly as they may be--they have one goal and that is to get the most amount of money for the builder. Many buyer's think an agent will be of little or no assistance--again this is not true. An agent is an unemotional third party who is skilled in negotiating to get the most for the client at the lowest cost possible.

I sold a new construction property to some clients a few months ago and was able to save them tens of thousands of dollars. If I can be of any assitance to you, please don't hesitate to contact me at LDevnew@cbmove.com or at 410-615-0990.

Best of luck to you!
Lisa Devnew
0 votes Thank Flag Link Sat Oct 25, 2008
Sandy,

Our recommendation is to do your homework and find out who the builder was. For a home this is like a pedigree. There are builderst that have a reputation for doing quality work and have stood the test of time.

The identity of the builder and their reputation is as important as a home inspector's report. The home inspector will examine various home elements ie. roof, plumbing, electricial, appliances,etc. The inspector is limited with regards to evaluating the buildings infrastructure because of obvious visibility issues.

If this home is a very recent construction and built buy a builder that stands behind their work, a warranty may be in place and possibly, could be transferred to you with the sale.

IMPORTANT: regardless of how new the home is, it is very important to have the home inspected. Brand new construction is notorious for needing many repairs.

We hope this information is helpful.

The "Eckler Team"
Michael Saunders & Company
billeckler@michaelsaunders.com
941-408-5363
0 votes Thank Flag Link Sat Oct 25, 2008
Sandy,
Check that the builder is registered with the homebuilders' association. If so, there is a 10 year warranty on new homes. Always have an independent inspection, even though the house is new. Inspectors have plenty of new home stories. If the construction plan was efficient and well planned, within one year is not too fast to be well done.
If you need an inspector recommendation, I will gladly send a couple to you.
Best of luck!
0 votes Thank Flag Link Sat Oct 25, 2008
that is not an abnormal time frame. tupically a builder can have a complete house done in 4 months form start to finish. so a year is actually long. you would need a home inspector who specializes in new construction, they will check everything as anormal home inspection checking roof, siding, windows, fondation, electric panel, heating system and looking for cracks in the fondation walls and floors. checking tiosee if the house is level, doors and windows open and close naturally with no sticking or swaying. new construction has alot mor pluses than minuses, especially if the house is complete.
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Sat Oct 25, 2008
Sandy,

I would definitely make your offer contingent on a satisfactory home inspection. A good home inspector will be able to tell you a lot by doing a thorough inspection of the property. Additionally, I would recommend researching the builder. See what other projects they have done recently. Check to see if they are members of the Homebuilders Associaton of Maryland, http://www.homebuilders.org. There are also many additional tools that you can use, so do your homework! Finally, if you are not currently working with a Realtor, I would recommend finding one to represent your interest.

Best of Luck!

Dennis Skelly
Ricker Realty
202.438.2091 (c)
dennis.skelly@verizon.net
0 votes Thank Flag Link Sat Oct 25, 2008
Hi Sandy,

A builder that's well managed with material and skilled labor can build a home very quickly, so I wouldn't be specifically concerned about quick construction. Still, with any purchase - new or resale - have it inspected by an experienced home inspector. Don't assume that because it's "new" it doesn't have flaws.

Another plus with new construction can be that the builder may have a warranty in place that covers leaks, foundation issues, etc.

Good luck - get a great deal!
Web Reference: http://www.lemieuxhomes.com
0 votes Thank Flag Link Sat Oct 25, 2008
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