The Bargain Hunter’s Guide to Buying a New-Construction Home By Realtor.com

Today, nearly 1 in 3 homes for sale is new construction—and in certain areas, homebuyers can get a lot more bang for their buck because these brand-new builds are cheaper than older homes.

The reason for this is due to several factors, says Cliff Johnson, vice president of new homes and rentals at Realtor.com®.

“The most obvious is the continued rise of existing-home values due to inventory scarcity,” says Johnson. “Builders have seen the affordability issue on the horizon for quite some time, so many have adapted and responded with homes that are more reasonably priced.”

And with recent high mortgage and interest rates—before the Fed’s historic rate cut this week— discouraging some homebuyers from getting out there, builders who have properties to sell are offering a range of incentives to entice buyers.

“Homebuyers who are looking for that ‘new-home smell’ may be in a relatively friendlier market than times past when new homes were considerably more expensive than used ones,” says Realtor.com senior economist Ralph McLaughlin.

Yet, landing these shiny new deals isn’t always straightforward or easy. To help you navigate this new territory, Realtor.com has put together this bargain hunter’s guide to buying a brand-new house.

Here’s how—and where—to find affordable new-construction listings, pinpoint builder incentives that can help you lower the price, as well as pick up some negotiation tactics to get some sweet freebies thrown in to maximize your home purchase.

Explore builder incentives

Developers often drive sales by offering special incentives that amount to a discount on the house. Those deals might include the builder offering to pay some of a buyer’s closing costs, offering free upgrades on materials, or even offering a mortgage rate buy-down, which allows buyers to obtain a reduced interest rate by paying a one-time fee upfront.

Typically, these incentives are offered only if you agree to work with the builder’s preferred lenders, but that can be well worth it, particularly if you find numerous incentives bundled together. Realtor.com makes that easy with its Days of Deals home shopping portal by giving buyers an instant look at all the incentives offered on various properties in their area.

Even if you don’t see certain incentives advertised, it’s worth asking if they can be added in to sweeten the deal.

“Some of the incentives I have been able to negotiate for buyers at various points in time include elements of closing costs—like transfer taxes, mansion tax—and concessions on storage and parking,” says Nikki Beauchamp, an associate broker at Sotheby’s International Realty in New York City who deals extensively with development properties and has been able to work that to her clients’ advantage.

“In a recent transaction, I was able to get concessions for storage—which is usually purchased—and a discount on a parking spot,” she says.

“Occasionally, builders may have some wiggle room to provide to a buyer something like a refrigerator—new construction doesn’t always include one—or blinds, or something along those lines, to incentivize a buyer further to make a move during a specific time frame, like by the end of the month or quarter,” says Kimberly Mackey, founder of New Homes Solutions and a sales and marketing management consultant specializing in residential homebuilding. “If the builder has it, the builder’s sales representatives will know how to handle the question, and they are generally happy to help the buyer as much as possible.”

Time your home purchase right

Getting a bargain on a new-construction property is all about timing.

Homebuyers who aren’t in dire need of a home right away might consider buying in a new development that hasn’t yet been completed. Developers often incentivize getting in early. Buyers should also remember that builders are most busy during the spring and summer months, and deals are to be had in colder months.

Not being on a strict timeline can also give buyers more freedom of choice.

“One tip I have for buyers looking into new construction is to not be afraid to be picky,” says Seamus Nally, CEO of real estate management company TurboTenant. “Buyers have often had to be a bit more aggressive with their offers these past few years due to demand outweighing supply. But with areas that have a lot of new construction, that ratio isn’t nearly as stark. You may just succeed in securing an offer that’s below asking price.”

“Sometimes a builder will provide incentives at the end of their fiscal year, which is late fall of the end of the calendar year for most builders,” says Bob Seeman, vice president of sales, new homes for Realtor.com. “They want to show strong results for the whole year, and [once] the summer buying season has ended, the incentives are often in place to extend that buying season.”

Know the difference between custom vs. production builds

Production builders, who are building multiple lots within a subdivision or development, often finance differently from custom builders and have different financing structures.

With production builders, they “usually have financing secured for their subdivisions and build on their own dime, selling the completed homes,” says Christina McCollum, a producing market leader at Churchill Mortgages. “Custom builders, however, require you to purchase the land and set up a drawing account with your lender, from which funds are used to build the home according to your specifications.”

While production builds tend to be cheaper, this doesn’t mean you’re getting a “cookie cutter” home that can’t be customized. It can, although your options will be limited.

“When using a production builder, you choose from their available lots and floor plans, which limits customization options,” says McCollum. “In contrast, custom builders allow you to select your own land and customize your home to meet your specific needs.”

Think carefully before signing on for pricey upgrades

It can be tempting to go with the top-of-the-line everything as you pick out finishes for your new-construction home, but that can quickly spiral out of control. Don’t be a victim of the upsell, warns McCollum.

“With any purchase, try to stay within your budget. It can be exciting to make selections with new construction, and I am sure that you can unknowingly pick items that balloon the sale price,” she says. “Ultimately, you need to understand the difference between wants and needs and make selections that work for your budget.”

Sometimes, the fancier, bespoke finishes aren’t worth it.

“A few years ago, we noticed buyer satisfaction was the lowest for buyers who picked out finishes and colors they could not see or feel before purchasing,” says Dale Wills, owner and founder of Centra Companies, a group of real estate development, construction, and investment organizations based in Minneapolis. “My advice for homebuyers is to be cautious of picking finishes and colors you can’t see or touch before purchasing.”

Hire an agent with new-build know-how

Beauchamp recommends that buyers looking at new construction should try to work with a buyer’s agent who often works in this area. Working with an experienced agent can also help get you early access to developments in the pre-sale or just-launched phase.

“They can share the context of what elements might be most negotiable and at what point in the cycle,” she says, noting that experienced agents will be able to connect buyers with preferred lenders.

"Call Eli Torres at (832) 430-2107, for your home buying and selling needs."

Source: www.realtor.com