When is the Best Time to Buy a New Home?
When home builders market a new development, their goal is to generate interest quickly and maintain their momentum until every lot is purchased. Most builders work with borrowed money, so they don’t want to take the chance that unsold homes will linger on their books. Every day that passes costs them interest on the loans.
Builders begin marketing new developments with “pre-sale” and “invitation only” events as soon as a model is ready. Then they build excitement with a heavily advertised grand opening followed by sustained advertising and public relations. By selling as many homes as possible as quickly as possible, builders won’t have to build houses on “spec” and risk that unsold inventory will sit empty. “Spec” is short for a speculative home for sale. Builders are sometimes forced to build homes for sale with no particular buyer in mind.
So when is the best time for buyers to commit? Is it a good idea to sign a contract on new construction that is still just a blueprint and an empty lot on an empty street and that won’t be move-in ready for a matter of months? Should you wait until construction begins or wait even longer and take a chance that the builder will have several “spec” homes for sale and will be very motivated to do a deal?
The answers to these questions depend on several factors: your local real estate market, the builder and his success at moving his inventory and you, the buyer.
What’s your timeline? Is it worth taking a chance that you won’t get the house you want if you decide to wait? Do you feel confident that you can make a decision from blueprints and a model home or do you feel safer buying a home that is move-in ready? Which is more important to you: selecting the lot you want and selecting details before the house is built or getting a better price from a builder eager to close out the project?
Do your due diligence
Before considering any property, check out the builder. Visit other local projects and talk to owners. Find out as much as you can online. Look into their reputation regarding the quality of their work and their willingness to work with you if you decide to buy early.
Get to know the neighborhood. Do the schools, transportation, shopping, and recreational opportunities meet your criteria? Most of your research will be online, you can utilize Homes.com by searching a specific zip code or neighborhood to get answers to these questions.
Find out about the local market. Real estate is a very local business and market trends can vary by neighborhood. Homes.com has information on recent local sales and price trends. Look at values over the long term — you will want to buy where values are expected to appreciate over time.
Pros and cons of buying early
The earlier you buy, the better your chances will be to find a great location for your new home. When selecting the lot your home will be built on, be sure to consider where it’s located in the community. Lots near parks and pools may be more ideal, especially if you have children. You may also want to consider your home’s directional placement, paying close attention to the amount of sun exposure it may receive at any given the time of day. Some lots may come with a premium, depending on size and location.
Regarding design, builders seek to create homes that will appeal to the broadest market possible, so their tastes will be conservative. If you can commit to signing a contract early in the builder’s marketing cycle, you will be able to personalize your home by choosing from a selection of floor plans, elevations and finishes.
When selecting a floor plan, consider how you’ll be using your new spaces. Love to entertain? Pick a floor plan with large, open living areas or a plan with a large formal dining room. Have a big family? Select a plan that gives you extra storage or more rooms. With some floorplans, you can even select different build-out options, if available.
You may also be able to select an elevation or exterior. The later you purchase in the community’s development phases, the less likely you will be able to pick the style of the outside of your house. That’s because most builders try to prevent a row of the same style of houses, so each community still has a unique feeling. If having the first pick at elevation and color is vitally important to you, add yourself to the “interest list” for a community before its grand opening.
You will meet with the design center professionals to select from an assortment of finishes, including paint colors, flooring, tile, and counter-tops.
The construction timeline will depend on the size of your home, the geography of the site, the phase of the community’s development, the upgrades you have selected, weather, and type of foundation. Before you close on your brand new home, you’ll get what’s known as a “homeowner orientation.” Look for anything that may be amiss and note it so it can get fixed.
Pros and cons of buying “spec” homes
A spec home will have much of the design efforts already complete. Depending on how far along the building process is, it’s possible to make some of the selections. The builder has already made a lot of decisions regarding what will go into constructing the home. Special features that were built into the home may or may not be on your list of needs and wants, and those costs will already have been included in the sales price.
The three best things about spec homes are that you can see exactly what your money is buying. You don’t have to wait long to move in, and in the right market, you might be able to get a deal on the price.
When you are sure you want to go through with a purchase, despite whether or not you’re buying a spec home, you will need to put down earnest money to the developer in an escrow account to lock in the base price of the house and reserve the exact parcel or property you want to buy.
Once you decide to buy a new home, make your sales contract contingent on a final home inspection by a professional you hire. Never assume that because a home is newly constructed, it isn’t going to have defects. Municipal inspections for code violations are nowhere near as thorough as an independent professional inspection. If possible, have the home checked during each phase of building, when potential problems are easier to spot. If the builder objects to this, consider it a red flag.
Early buyers can save money by deciding upgrades to purchase, which you might install yourself or with your contractor after you have purchased the home and which to forgo. Some upgrades such as security wiring inside the walls are easier to do before construction. When picking options, keep in mind that all of that will likely be added to your mortgage. If it’s simple to do and you can afford to do it yourself after the house is built, it will cost you less in the long run. Still, there are a lot of things that will be expensive or difficult to do after the fact.
Some builders prefer to build spec homes in every development. In today’s strong real estate markets, they are going ahead and building spec houses when materials and contractors are available because they are confident they will be able to sell them. Despite today’s economy, other builders believe that specs can be a burden on builders if they languish on the market, so they build them only when they need to close out a phase of development.
When it comes to getting the best deal on a newly built home, you will probably find your builder is more amenable to adding upgrades than negotiating the final sale price. One reason is that should builders start agreeing to lower prices in a development, they could quickly lower the appraised values of homes they have sold to others. Smaller, local builders can be more flexible than national, publicly-held companies.
For the best opportunity to negotiate a deal, buy a spec home built by a local builder that is sitting empty at a time of the year when sales are slow, such as the holidays or mid-winter. Whether you are negotiating a sale price, upgrades or if you want to ensure that you are getting a home that will be headache-free and the best deal for your dollars, you would be well-advised by hiring a local Realtor who specializes in representing buyers and dealing with local builders.