On the surface, it may seem like paying cash for your new home is the better option. But, with low rate mortgages available and your other financial obligations, is it wise to fork up all your cash.
The thought of buying a new construction home has likely crossed your mind dozens of times. The idea of having a home that you can call yours from the start and with no previous owners is like starting with a blank slate.
You do not have to deal with the headache of inheriting home problems such as faulty wirings, leaky pipes, and roof issues. New construction homes ooze with potential as you can customize each part of your home according to your personal preferences. However, that does not mean you are free from the problems associated with buying a home.
One quick Google search will show you numerous new construction home horror stories from homebuyers who had to deal with poor workmanship or builders not following through with the agreed-upon warranty terms.
There’s also the question of timing. Because of the global COVID-19 crisis, you may be having second thoughts and asking yourself if this is the right time to buy a new construction home. You are not alone. In fact, the latest data on new residential construction showed that builders started 22% fewer homes in March, indicating lower interest and builder confidence among homebuyers.
That said, we are on the road to recovery as several states are starting to reopen businesses and revitalize the paralyzed economy. A few weeks or months down the line, you may push through with your decision and start looking for home builders. Buying a new construction home is also an entirely different process from buying a pre-built or pre-owned one. The amenities and features that are available to you highly depend on the builder that you choose. In addition, there may be costs hidden in the contract that you may not be aware of.
Purchasing a new construction home is a huge investment so you need to come in prepared. That means asking the right questions. Here are some of the questions you need to ask before buying a new construction home during COVID-19.
1. How long will the construction process take?
One of the most important things that you need to know when starting a new construction build is how much time the building will take. This information is especially crucial if you want to sell your current house first or planning on renting over the duration of the construction.
With COVID-19 affecting multiple parts of the construction process, you should expect the project to be dragged out from the initial acquisition of the necessary permits and sourcing of construction materials to getting loans to finance your new construction home. At this point, it is pretty much impossible to get a definite schedule, but having a general idea of how long the build will be will help in the preparation.
2. Do you offer a warranty program? How does it work?
Almost all home builders issue a warranty on their work but the terms vary from one to another. The length of the warranty program also differs depending on the type of work. For instance, there is usually a one-year warranty for labor and materials, two years for heating, plumbing, and electrical issues, and around 10 years for structural defects.
Before proceeding with the project, it is important that you read the paperwork thoroughly in order to understand what is covered and what is excluded. Clarify with the home builder who is responsible for what problems. If possible, consult with a lawyer to get through the legal jargon and determine any deadlines you need to meet for your warranty claim to be valid.
3. Which features are considered standard finishes or upgrades?
When looking for a new construction home, home builders usually give you a price quote for your unit. If the price seems too good to be true for the features presented in the model home, it probably means not all finishes are included in the price.
Before you estimate the final cost of your property, it is important that you walk through the model home with a sales representative and ask which features are standard finishes and which are upgrades. Upgrades come at an additional cost, so it is crucial that you have an idea which features you want that can fit your budget.
4. How will you handle unanticipated costs?
New construction homes are notorious for surprising homebuyers with sudden, last-minute expenses. With COVID-19 aggravating the situation, it can be hard to anticipate sudden increases in the cost of materials and labor. If the terms are not settled before the project starts, you may be responsible for these extra expenses.
It is in your best interest to avoid any payment issues that can happen as these may result in a mechanics lien being filed against your property. So if you’d rather not deal with the headache of unanticipated costs, come into an agreement with the home builder and stipulate it in your contract.
Buying a new construction home especially in the time of COVID-19 is a daunting task for any homebuyer. Make sure you are well-equipped to make the right decision by getting as much information as you can from your chosen home builder.
Ready For Your Next Home?
When you’re ready to purchase your next home, get in touch with the experts at Sammamish Mortgage. We’ve been in the business of providing mortgage programs to borrowers in Washington, Oregon, Idaho, and Colorado since 1992, and we’d love the opportunity to help you too. Get in touch with Sammamish Mortgage today!
About the Author: Chris Woodard is the Co-Founder of Handle.com, where they build software that helps contractors, subcontractors, and material suppliers with late payments. Handle.com also provides funding for construction businesses in the form of invoice factoring, material supply trade credit, and mechanics lien purchasing.