You are in good company if you are dreaming of owning a new construction home. The current real estate market has driven many home buyers to consider new construction instead of an existing home. New construction has several advantages:
1. You don’t have to compete with other buyers. Colorado Springs still has a low home inventory and a growing economy. Buyers continue to push into the market. Builders have adjusted to the market demands by building homes on smaller lots or without basements, while offering lower rates to accommodate buyers’ affordability issues.
2. You can pick your own style. You have more options than you would with an existing home. Builders offer several styles and layouts, and you can pick your own lot. Note: if you are hoping to buy in an older, established neighborhood, buying an existing home is typically the only way to go unless you find a fill in construction.
3. You have a full year guarantee for nearly everything in the home. Most builders provide a one-year warranty. Usually appliances are excluded from this warranty, but everything else will be repaired or replaced if there are issues.
4. You get a new home.
5. You will probably get a high-performance home. This can keep the cost of owning your home to a minimum. Even homes built 5 years ago are not as efficient as homes built in the last 12 months. Regional building standards have recently been updated and this can make a big difference in your utility bills.
A new construction home is a great option if you have the time to build or if you are able to find a home already under construction.
But how do you know if your builder constructs a solid home and provides excellent service after closing? Here are some tips to help you choose a builder.
Choose a Neighborhood
If you are planning to build in a subdivision and your home is not custom, your first step is to find out which builders are available in your preferred subdivision. You can also get in touch with the developer of the specific area and ask if you can bring in your own builder.
Since location, location, location is still the most important motto in purchasing a home, your research will likely be narrowed down to the builders that are available in the neighborhoods you that like.
The greatest insight you can gather about builders is usually from new home owners who built with them. Ask the builders for the names of customers. But it’s important to get some unfiltered and unscripted opinions as well. We recommend driving through the neighborhood on Saturdays when many home owners are outside. Stop and ask questions. Many people are very open and happy to tell you about their experience. You will likely get the most helpful insight from these homeowners.
Questions for Neighbors:
- How was the construction manager? Were they easy to work with?
- Were you kept informed throughout the process?
- Were you nickeled and dimed?
- Was your builder on time?
- Did you go over budget?
- Was the builder pushy or accommodating?
- Were finances clear and transparent?
- Was the project organized?
- How do you feel about the quality of the construction?
- How is the follow up with the warranty department?
Research the Builder
In addition to gathering information from the builder’s former clients, you will still need to research and interview the builders. Here are some questions you should ask:
- Is the builder a member of the local HBA (Home Builder Association)?
- Is the builder a member of the BBB?
- Research the builder’s credentials and standing with the State Contractors Board. More importantly, ask if the builder held a license in other states. Research the builders current or old standing in those states. Check to see if there are unresolved claims with the board.
- How many homes is the builder constructing in a year?
- How fast are they building?
- Search the internet for online reviews of the builder.
- Ask us about builders that we have worked with.
- How long has the builder been building in the area? You will want a builder that has been in town for at least 5 years. This will indicate that they have experience navigating the local building codes and permits.
- Ask the builder about the crews and trades they are using. Are they on time with construction? Are they running behind?
- How long has the builder been working with the trades on the new construction projects? Relationships are important. Solid relationships between the trades and contractors with the builder indicate a solid business foundation.
- Who is managing the construction? How many homes does this person supervise?
- What guarantees and warranties does the builder provide?
- Go to the model home to get a feel for the quality of the home.
- Get a list of all inclusions that come with the home. You will not get anything in your home that is not mentioned in that list. Feel free to ask to see a model even if it is not quite finished with minimal upgrades.
- How does the builder communicate during the construction? How often do they meet with you?
- How long is the production process?
- Do they build high performing homes? What are the green features of the home? What is the HERS (Home Energy Rating System) value on the homes they build?
- Can you source your own appliances, fixtures or other features? Is there an up-charge?
- What’s the up-charge of all products that the builder is sourcing?
- Is there a description of the construction process?
- Go to the sites of current construction and see if subcontractors adhere to OSHA requirements. Is everyone insured? Is the builder hiring undocumented workers?
- Builder or sales associate use high pressure sales tactics
- Lack of insurance
- Employment of undocumented workers
- Builder uses poorly written contract
- Requirement for a large down payment (besides upgrades and custom work)
1. Builders use their own contracts that are written up in their favor. Read contracts carefully and have your lawyer review it. If something doesn’t sound right, consider a request to strike it. There is a chance that the builder will not agree to strike it, but you then have a choice to decline to work with them.
2. Enlist the services of a REALTOR to advocate for your best interests. The builder’s sales person, regardless of whether they are a real estate professional, is working for the builder. Relying on them would be similar to using the seller’s agent in an existing home purchase. An experienced buyer’s agent can advise you, make recommendations, and ask questions that you might not know to ask. Builders have the cost of your real estate agent built into the cost of the home. You’re already paying for an agent. Opting to build a home without a real estate agent means you are not represented, but the builder still receives that money.
Builders will not offer you a better deal if you are NOT working with an agent. They are well aware that they depend on the REALTOR relationship for their success.
You will be asked to register at any model home you visit. We highly recommend opting out of registration or telling the sales rep that you haven’t yet selected a REALTOR but you will use one. This will ensure that you retain the right for representation.
Related Reading: 5 Reasons to Use a REALTOR for Your New Construction Home
3. Make sure that you are provided with exact details at the time of signing: A contract, black lines (possibly with red line corrections), builder inclusions, already known and client requested upgrades, any state disclosure forms, and possibly a survey of the lot or soils tests.
4. Do not close with a Temporary Certificate of Occupancy unless you are a 100% sure the builder will follow through!
5. Never skip title insurance and an Owners Extended Coverage. This is especially important when the builder only offers a Special Warranty Deed and not a General Warranty Deed.
6. Save some money by requesting that home builder pay for their own closing. This means closing services fees for the closing entity should be split 50/50.
7. Avoid being swooned by monetary incentives and promotions. Ask about what is available. Take what you can, but think twice about a builder’s incentive to use a preferred lender. Builders love it when you use their preferred lender because they have a working relationship with these lenders. What does that mean for you? The builder has better control of your ability to close. Some incentives are substantial, but be aware that you will probably pay for them in another way. Shop around for lenders. Present potential lenders with the builder’s lender fee worksheet and have them compete for your business.
Related Reading: Lender Recommendations
8. It’s easy to get hung up on drywall scratches and paint nicks during the final walk through before closing. Have a professional inspector inspect the home to find any deficiencies. You’ll have peace of mind that the inspector might find items that you wouldn’t otherwise know about. The builder may try to say an inspection isn’t necessary because the home comes with a warranty. But it’s important to bring in a third party to inspect the home before move in. Ask if your builder scopes the sewer lines before closing. This is important because construction debris can get into the sewer lines and cause damage. Hire someone to do a sewer scope if the builder doesn’t perform one. This will allow an opportunity to have any debris removed and avoid costly damage to your new home from a sewer back up.