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Buying or building a new home is a huge undertaking, with many questions to consider. Whether to purchase a newly built home or to undertake building with a contractor or within a new development.
In a planned development, there’s usually option levels, these depend upon the price point of the home or development. You may be able to up or downgrade any of these items. You will need to discuss with your builder how changes to their options packages will affect your sales price.
Builders often work with particular mortgage companies and will offer discounts on closing costs for using their “preferred” lender. Whether considering to use the builder’s lender or someone else, pre-approval for financing is necessary. If you are not financing, obtain proof of funds from your financial institution. Also, developers use their own contracts, these include additional terms specific to the building process.
Checking on every phase of construction is ideal to make sure that everything is done according to plans. Even the best builders have miscommunications, mix-ups on orders, or problems with installations. You should have the opportunity to go through the house with the builder shortly before closing to add items you notice to the punch list.
Even though your home is brand-new, you might still want to have a home inspection done. Sometimes an inspector will catch something that slipped past the contractor and code enforcement.
Closing day on new construction differs slightly from a pre-owned home. There is often a “punch list” of items the builder is responsible for finishing shortly afterwards. This may include cleaning, touch-up painting, installing landscaping, or changing out locks.
Types of New Construction
There are three types of new construction: spec (short for speculation) homes, tract (or production) homes, and custom homes.
Spec Homes: Homes “built on spec” is when the builder has purchased a single lot to built a home on it not knowing who will purchase the home. Typically, the builder will list the home with a real estate agent to market and sell. The home is usually almost finished, when it hits the market. At that point changes in features are unusual.
Tract Homes: Are homes built in a development where all the homes are built around the same time, or in phases. The builder has selected floor plans and uses the same features in each model. Buyers can purchase a tract home prior to completion and they may be able to make changes in the features within the builder’s budget or for an upgrade fee.
Custom Homes: A builder is contracted to build a home on the buyer’s land. The buyer contracts an architect to draw a floorplan for them. Buyer chooses all of the features, sometimes with assistance from the builder or an interior designer.