Twice in one week I’ve heard clients say they want new construction “because new is better.” Brand new homes come with some nice perks, but a well-maintained existing home can be every bit as good, and sometimes better. A poorly executed new build can be a never-ending nightmare, lost money and a river of tears.
Be an informed buyer whether you are buying a new to you home or newly built home. Know what you are buying. Know that there is no perfect house.
- Get a home inspection. Let me say that again, get a home inspection, get a home inspection, get a home inspection! Even if you are buying a home “as-is,” get a home inspection so you know what you are getting, what works, and what doesn’t.
- Order a consumer CLUE report. This is a Comprehensive Loss Underwriting Exchange report used to rate insurance policies. It shows if any insurance claims have been filed on the house in the last 5-7 years.
- Knock on the neighbor’s doors. Introduce yourself, tell them you are thinking of buying the home, and ask if they know of anything of which you should be aware.
And don’t forget NEW homes.
You need a home inspection, even (especially) on new construction. A lot of buyers don’t realize this. You can and should have your new home inspected, before closing.
When all the tradesmen and subcontractors are working to finish a new build, things get a little hectic. Wires get crossed, literally. Your home inspector will check all the mechanical systems and evaluate the physical structure.
Home inspections make sure that new appliances work; that the electric is properly grounded; that the plumbing is properly vented. Even the little things matter, like ensuring that the small Allen wrench wasn’t left in the wrong place after the garbage disposal install.
Check the Contract
Home inspections are requested (or refused) in the purchase contract.
Inspection contingencies are standard in contracts for existing homes.
Be mindful if you are using a builder’s contract for a new home. Builder contracts may be silent regarding home inspections. The builder may offer a builder walk-thru or new home orientation. No matter, home inspections are different, and all buyers are entitled to one.
The bottom line on new construction — Request that a provision for a home inspection is included in the contract.
But What about My Appraisal?
An appraisal is not a substitute for a home inspection. An appraisal is a report that lenders require to estimate the market value of a home. If you are using a special financing program like VA or FHA, the appraisal will also determine if the house meets the minimum requirements of the program. The appraisal may comment on cosmetic issues like peeling paint, or stains on ceilings.
What you need to know — Appraisal do not evaluate the physical condition of the house, identify needed repairs nor estimate the remaining useful life of systems.
Walk-Throughs – Important, but NOT an Inspection
A builder walk-through, (also called Pre-Settlement Walk Through and New Home Orientation), is the time when the builder acquaints you with your new home and demonstrates how stuff like the new gas fireplace works.
A builder walk-through is not a substitute for a home inspection. The builder walk-through, ideally, should happen after the home inspection, but before closing.
At the walk-through, the builder also explains warranty information and required maintenance to keep everything in good working order.
This is your chance to make sure the home is up to your quality standards, both construction wise and cosmetic, before closing.
If necessary, ask your home inspector to attend the walk-through to verify corrections.
Getting the Fix
If closing day arrives and there are still issues with your new home, you have a few options:
- Delay closing until the issues are fixed.
- Close, but have the closing company hold some amount of payment in escrow. When the builder fixes the issues, the closing company then releases the escrowed amount.
- Proceed to closing and obtain a cash concession/settlement from the builder to compensate you for whatever issues remain. If you take a cash concession be aware the builder is then off the hook to make any repairs or fixes, as you have been compensated. It is up to you to then fix, repair, or live with it.
The old saying is that “knowledge is power.” That is absolutely true in real estate. Invest in a home inspection and ask questions when you are buying so you know what you are getting. New doesn’t always mean better, and existing doesn’t always mean bad. Happy House Hunting.