Guide to New Construction
New homes may not be marketed in the local MLS. Unlike a normal seller who lists their home with a local real estate agent, home builders often have their own sales employees working for them on location. This is done to have more control and also to cut costs.
The builder may be more likely to advertise online, in the paper or with billboards. Therefore if you’re interested in newly built homes, work with Nick & Cindy Davis, we have the ability through our MLS to query just the new construction homes available in the Tampa Bay and surrounding areas.
New homes are often sold before they’re built
A builder will probably get financing lined up, and map out both a construction and a sales process. Meaning they’ll try to sell as many homes as possible, before they’re even built.
To accomplish this, they’ll build out model homes and allow buyers to go into and review floor plans, fixtures and finishes as the homes are under construction. Depending on the state, builders need to get through several of the approvals process before they can actually start signing contracts.
In most cases, you can get a sense of what your new home would look and feel like, and where it’s going to be located in the community. All set to move forward? You’ll likely have to put down a deposit, from a few thousand dollars to 10 percent of the purchase price.
Be aware that whether or not there are actually 100 homes in the community, they won’t all be available at once. Home builders tend to release the homes gradually. If the first five homes sell quickly at the asking price, and the market continues to do well, the builder can raise the prices on the second or third phase.
Also, the sales cycle for the new community may take years. The last phase could end up being priced 10 percent or more compared to the first, simply because the real estate market has appreciated.
The first buyers may get the best discounts
A home builder, especially early in the sales process, wants to get a few homes under contract quickly. If the builder can announce they have 10 homes under contract in a few months, the project can seem more desirable to future buyers.
Also, builders like to go back to their lenders with positive news concerning the project along with their investment. To accomplish this, they need early buyers to sign contracts.
For buyers, this means that at the beginning of the sales process there might be room to negotiate the price down. However with the reward, there is potential risk. By being an early buyer, you’re committed to the project. If for whatever reason sales don’t manifest, or you don’t want to move ahead before the house is built, you risk losing your down payment. As an example, right after the previous housing downturn, some buyers were stuck under contract on new homes where sales had stalled.
Builders don’t have a personal attachment for the home
A typical seller has lived in their home for several years, and raised their family or built memories there. So if it’s time to sell, the owner may go through all sorts of issues, questions and uncertainties, which can come out in the negotiation and purchase process.
The seller may unconsciously price the home way too high because they’re not ready to emotionally detach from it. They may want to know more to do with you, or what your plans are for the house. If given a choice between two buyers, the seller may choose one over the other for non-financial reasons.
With a home builder, it’s simply a numbers game. They’re focused more on spreadsheets than sentiment. They want to ensure you’re qualified and can get a loan. They set the prices according to their inventory, though there may be a little room for negotiations.
Discounts may be available in the form of upgrades
Is the project you’re interested in nearing the end of its sales cycle, with many homes already sold? If so, the builder may be a little more in a position to negotiate with you – not so much on price, but on upgrades. Whenever they lower the price on your home and the sale closes, then that selling price becomes public record. However, if they offered you an upgrade package (hardwood floors as opposed to carpet, or higher-end appliances), there isn’t any way to track that.
What could amount to thousands of dollars in upgrades could end up being a better deal than merely receiving a price reduction.
For many first-time buyers, new construction could be a plan of action. So if you are considering new construction, remember to have someone representing you and you alone. The representative at the model home, does work for the builder. Nick & Cindy Davis are available to assist you. We can always be reached at 813-300-7116 or simply click here and we will be in touch.