Buying Builder Homes

The Recent Mortgage Meltdown
Has Impacted Builders

Caution Urged When Buying New Construction!

Today, it is more important than ever to work with a knowlegeable Buyer's Agent when buying new construction. There is a fine line between getting a great deal from a builder offering large incentives and buying trouble that could impact your finances for years. I know of at least one custom builder who has shut their doors and declared bankruptcy. There is also a whole community of partially built custom homes with numerous foreclosures. Anyone who bought in that neighborhood has been severely damaged financially - click here for details. There are a few production builders that are selling off their lots. If you use the builder's lender you may put yourself at greater risk. I work with a company that sells a large number of new custom and production built homes. I have a track record of negotiating great deals for my clients and I am in a better position to hear if a builder is in financial trouble before it ever hits the news.

Buying In a New Home Community

What You Need to Know BEFORE You Buy

The idea of buying a brand new home can be very exciting.  You get to make lots of choices and get a home just the way you want it.  Many Builders include blinds and complete appliance packages and, in certain price ranges, the Builder will usually pay all the closing costs, which makes the purchase easy and convenient.  You don’t have to spend time looking at lots of different resale homes in different neighborhoods and make written offers and negotiate with Sellers that may seem less than cooperative and pay for inspections and look forward to having to redecorate or do repairs.  Yes, buying a new home can be easy and I have sold lots of new homes; but before you buy a new home in the Austin area there are certain things you should know.

• The lower the price point of the community, the larger the number of foreclosures you are likely to see 2 – 5 years after the start of the community.  This occurs because 1^st time Buyers often need low down payment loans, which means if they need to sell in the first few years, they have no equity.  A large number of foreclosures in an area will depress the overall market price in that area.
  
• If a Builder sells to Investors, those Investors are going to want to rent their properties. Rental properties don’t usually show the same “pride-of-ownership” that owner occupied homes show.  Additionally, a large number of For Rent signs will depress the rental market and make it more difficult for homeowners to resell their properties.
  
• Even in a higher priced community it can be difficult to compete against the Builder if you need to resell.  The Builder has lots of houses to sell so the Builder can offer incentives to move inventory in a slow market without really affecting the Builder’s bottom line.  The homeowner has only one house to sell and may have to sell at a low price in order to compete with the Builder’s incentives, the lure of a “brand new house” and the ability of the Buyer to have choices.
  
• All of the above issues vary from Builder to Builder and community to community.  Specialty communities with uniquely situated lots or communities with high demand and no Builder inventory may be immune from these problems.  Decorating and Staging can make all the difference in any sale but especially when competing against new construction.
  
• Builders do not give discounts if you do not have a Buyer’s Agent.  Builders count on real estate agents to help sell their inventory and they know better than to bite the hand that feeds them.  The Buyer Agent’s commission is built into their marketing budget and that budget gets spent one way or another.
  
• If you are buying in a Planned Urban Development (PUD), look carefully at ALL the Builders building in the PUD.  If one Builder is having trouble making sales, that Builder may sell out to a less desirable builder and that action could affect the whole community.
  
• If the reputation of any of the Builders in the PUD differs significantly from the other Builders, look carefully at the location of each Builder’s assigned lots and evaluate how you might be affected in the future.
  

All of this doesn’t mean that you shouldn’t buy a new home from a Builder.  It just means that you should do so with your eyes wide open.  It also means that you should seek the help of an experienced Buyer’s Agent who examines and discusses all these factors with you.

A Buyer’s Agent can also keep you from making choices that will hurt your future ability to resell or, at the very least, give you a heads up that what you are doing might affect future resale value.  The following are some obvious examples:

• If you prefer electric cooking and the other homes have gas cooking, have the builder put in a gas line so that some future Buyer could switch to gas.
• Don’t spend money on granite counter tops and lots of high-end upgrades in a Starter Home Neighborhood with the expectation that you will get your money out when you resell.
• Avoid building a basic stripped down house in a high-end neighborhood or, if finances dictate that you must do so, put your money into things that are not easily changed later.
• If you pick a house with a large “foot print”, make sure you won’t be left with a tiny back yard even if you don’t care personally.
• If you get to choose your lot, pay attention to how steep the driveway will be and what the lot will back up to, especially if the land behind is vacant.
• Avoid having the largest most expensive house in the neighborhood.  Surprisingly, having the smallest, least expensive house in the neighborhood can sometimes hurt your ability to resell but the effect is more difficult to evaluate in advance.

Why You Need an Agent
When You Buy a Home From a Builder

• The On-Site Sales Agent represents the Builder, NOT YOU.
  Working with your own Buyer's Agent is one of the most important things a New Home Buyer can do. I can provide a range of services that the Builder's Sales Agent is not allowed to provide and I represent your interests.  
• Cost to You
  Nothing! Any compensation given to your Buyer's Agent is recognized by the builder as a marketing fee and has no impact on the final cost of your home. Builders desire, expect and encourage Buyer Agent participation.
• Savings to You
  Are you getting what you're entitled to have - both in quality and value? I know what you should receive and what "extras" might be available. Ask about my Move-Up Program if you have a home to sell.
• Resale, Appreciation & Profit
  Give your investment the best opportunity for appreciation at resale. Questions concerning site location, builder, design and decor are important. I know you are building not only for today ... but for tomorrow.
• You Are Represented
  When I am your Buyer's Agent, YOU are represented! My experience, knowledge, and reputation represent strength and leverage on your behalf.
• More Information
  The Home Builders Association of Greater Austin provides lots of useful information in their Guide to Buying a New Home.