#1 – CAPTURE REAL VALUE – First, it is critical to understand and follow Warren Buffet’s stock picking advice when investing in your home.
“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” Warren Buffett
This really pertains to all long term purchases. Essentially, realize that getting a great deal from a poor builder or on a house that doesn’t fit your needs, ultimately isn’t a great deal.
#2 – AVOID PITFALLS — Second, what makes a great builder? What is their reputation? Pay attention to many aspects of the builder. For example, are they financially sound? Have they stood behind their homes’ construction quality and warranties? Do they have up-to-date / timeless designs? How is their customer service before the sale, during construction and afterwards? How do they treat their employees, Realtors and customers? Is the company known for being honest and having a desire to do the right thing? A great realtor is “in the know”! Realtors must be well connected and have the desire to continually investigate nearly everything… by discussing things with their fellow Realtors, great title company representatives, other builder contacts, and staying current on periodicals, your Realtor should be able to offer critical insight on which builders are best for each situation. The truth is that in almost every house build issues will come up. There are perhaps 30,000 individual steps to building a house…. something is bound to need to be corrected during the construction process; so the question is which builders will do the right thing and correct problems the right way!
#3 – LEVERAGE IS POWER — In addition to providing sound advice in selecting your community, builder, lot location, house plan and advising on upgrades, a great realtor who sells a lot of new homes also provides you with something very important in relation to your builder… LEVERAGE! As I indicated above, issues will arise. The very best builders will always do the right thing… but for many good builders, choices come down to business decisions. One unhappy customer can write one bad yelp review. They could truly be an unreasonable buyer who complains about everything and is never satisfied… or they could be characterized this way by a builder. However a Realtor who represents dozens of future sales, and who is well connected to hundreds of other Realtors in the city can now impact potentially hundreds of future sales. If the Realtor sees their role as one to fiercely fight for and protect their clients, that realtor can now mean the difference between the builder correcting your problem quickly versus you pulling your hair out and contemplating hiring a lawyer. Leverage is power!
#4—CAPITALIZE THROUGH KNOWLEDGE — Great New Home Deals! Each builder has a different financial calendar… and deals often correlate to squeezing in a few more sales for the quarter or year. Some builders or communities operate with higher list prices and expect to come down on price significantly during negotiations. Others have more aggressive list prices and don’t negotiate down. Some builders have lower base prices and lower standard features and you may wind up at higher prices once you add in the upgrades that you want.
#5—CALCULATE ALL THE COSTS — Closing costs are not all created equal! Does your builder pay for the owner’s title policy? This is an important question as it can be 0.6 – 0.8% of your house purchase price…. or $3000 on a $500,000 house. Are the other closing cost numbers inflated? For example the escrow fee that some title companies charge could be as low as $225 while others can be $400-$500. There are several small items like this and they can add up.
#6–CHOOSE YOUR LENDER FREELY–Are you free to shop lenders and choose the one you want who has the lowest rates and fees? Many builders tie the sales incentives to using their preferred lender. Which may be fine if the lender is also offering the best deal. Shopping for excellent lenders could certainly be an entire article itself. Lender fees and charges and closing costs can vary tremendously… it is not only about the interest rate.
#7–CONSIDER LOCATION, LOCATION, LOCATION — Most people have heard of these 3 most important aspects of real estate. They absolutely pertain to new construction. Your house location will impact the quality of the schools, the money and time you spend commuting, your quality of life and your home’s future price appreciation.
#8 –UNDERSTAND THE MARKET — Comparable Home Sales Information is just as important in new construction. It is important to be aware of the house values in the immediate subdivision, by the same builder and even in neighboring communities.
#9– ASSESS REAL ESTATE TAXES AND HOME OWNER ASSOCIATION FEES — These can range significantly! Savvy buyers will definitely assess the tax rate and hoa fees in their cost to own calculations. One house maybe $20,000 more but with a lower tax rate, it could have a lower cost to own over 5 years.
Please note that this is a summary list to get you started. There is much more substance to discuss and investigate.
Seth Koppel studied business and marketing at the Wharton School of Business and at Columbia University. He is the broker of TexHomes Realty, a boutique real estate firm that only hires well educated, hard working and extremely ethical real estate agents. TexHomes has sold hundreds of brand new houses with all of the major builders in central Texas. Give them a call today to leverage their expertise for all of your real estate needs.