Buying New Homes

Types of new construction

Spec Homes
Spec homes can be a great value! Why? Because the builders are paying for the loans they took out to build the house. The longer the house sits vacant, the more it costs the seller in interest. Generally the further along the construction is, the better deal you can negotiate. One negative of buying a spec home is that you may be locked out of choices such as colors, options, etc. Since a spec home is usually already under construction, the time you will have to wait for the home to be ready is greatly reduced. You don't have to wait for plans to be drawn up, permits to be issued or construction to begin.

Pre-Construction
Prices for homes are always lower at pre-construction phase of a project. The earlier in the project you buy, the lower the price will be. This is not for everybody. Some people are able to envision the house based on the floor plans alone, others need to see a similar model, while others need to see a completed model.

Builders Close-out
This can be one of the best ways to buy new construction if done properly. When a builder completes a development he may not have sold all the units in the development. Since the development is completed and the builder is moving on to the next project, they don't want to sit on the one or two remaining unsold units in the development. Keep in mind that the builder wants to close the sales office at the completed development and move the staff and equipment to the next location. A successful builder will generally always have the "next" development going when the newly completed development is winding down. If you can find a situation like this and a home that you like, it is an excellent time to make a "low ball" offer and ask for some extras on one of these last remaining units. If things like the appliances are not already in the unit, you may be able to get them included or upgraded. The down side is that the unit is complete, all the color choices have generally been made, options have been chosen, and the flooring has been put down.

Taxes
When buying new construction, make sure the builder is contractually obligated to pay his fair pro-rata share of the taxes. This is especially important when buying a spec home because once the home is finished the taxes will accrue at "completed home" rates.

New home warranties
Implied warranties vs. extended warranties. Most states have laws which give the buyer protection against the shoddy workmanship of cheap builders that cut corners.  The implied warranty will normally cover defects in materials and workmanship.  Extended warranties are purchased by the buyer and cover the same type of defects but for longer periods of time.

Inspections
Before closing on the home you will be allowed a walk through inspection of your home where you will create a list of defects that the builder agrees to fix after closing.  Since most of us are not professional home inspectors, it may be wise to hire an inspector to participate in the walk through with you.  Online resources to help you find a qualified inspector include The American society of home inspectors (ASHI) and the National Institute of Building inspectors (NIBI).