5 Tips When Buying or Building New Construction

With Houston’s large growth rates and supply of land, around 30-40% of my business comes from new construction.

What’s important to know about a new construction home? I thought it would be helpful to lay out 5 tips.

1. There are good deals to be had.

Good deals can come in a few different forms. For one, sometimes builders offer good incentives if you work with their lender. These incentives can be towards closing costs, or my favorite: lowering the interest rate. Some builder lenders can offer interest rates an entire point off the market rate - which is huge! Other builders are offering a 2/1 buydown, which lowers your interest rate by 2% in the first year, and 1% the following year. See my recent video about that here, detailing how we did that with a client.

Another incentive that builders sometimes offer is a lump discount off the sales price of an inventory or pre-built home. We had another deal recently where we saved a client $150,000 off the original sales price. Occasionally, you can get great deals by building your home to suit, and there are ways I can help you negotiate, but odds are that the best deals are found on existing new builds.

2. Property Tax Trick

One potential negative with new builds is that they generally have higher tax rates than older homes with existing structure. But, one “trick” to keep in mind is that sometimes the new construction you are buying is assessed at lot value or partial build by the time you move in. Given that you are paying taxes in the arrears (meaning from the previous year), this could lead to a big discount in taxes in your first year of owning the home.

3. Some issues in the first year, but should be under warranty.

Some buyers are choosing new construction with the assumption that there won’t be any repairs or issues like there could be with buying a resale property. While that can be the case, you should still expect to have issues in the first year of owning your new build. New builds often have kinks to work out and potentially some things missed along the building process.

Keep in mind, it was a project built with a lot of moving parts, with many different trades coming through. The good news is that if issues arise, the costs should be all covered by the builder.

Keep in mind, though, you may still need to purchase window treatments, ceiling fans, and more.

4. Get an Inspection

Many clients that I work with on new builds are surprised by this recommendation. Like I said, a new build has a lot of moving parts and you should expect to have some issues. While builders do have quality control points, inspectors will often find a number of issues that won’t show up in the first year living in the home, but will show up when it’s time to sell. Think electrical, HVAC, etc. It’s generally well worth it to get an inspection and then have the builder fix the issues before moving in.

5. Have Representation

I can’t stress this one enough. There is a common misconception that you don’t need a realtor when building or buying new construction. But keep in mind, the sales reps represent the builder. Many of you wouldn't buy a resale house without having someone on your side, representing your best interests, so why would you buy a new construction without having representation on your side.

A good, skilled realtor can save you tons of money in new construction. We are in this world everyday negotiating and can ensure you are getting the very best possible deal, we will worki with your lender and you on financial scenarios to ensure your best possible monthly payment, we will review the contracts to ensure you are aware of all the terms, and using my 85 point process to ensure a smooth transaction while negotiating for your best interest every step of the way.

Jake