Buying A New Home - Get What You Pay For

Buying a brand new home from a builder offers a lot of advantages. You can customize your finishes, tweak your floor plan and ensure that the home you get is exactly what you want. However, building a home doesn’t always go smoothly. As a buyer, it’s vital that you read the purchase contract very closely, so you know what you’re really getting. Model homes are full of optional features and upgrades, and if you’re not careful, the home you get may not be the home you want.

Look Out for Optional Upgrades

Optional upgrades are the number one cause of problems when buying a new home. When you look at a model home, it typically has every upgrade to show the home at its best. But the price you’re quoted is for a basic model without the upgrades. If you want your home to be like the model home, you’ll have to pay for those upgrades. When you sign your purchase agreement, make sure you have the upgrades you think you’re getting. Make sure you understand the language around upgrades and options; if you want it, make sure you have it, and if you don’t want it, make sure you didn’t pay for it.

Check Frequently and Put Changes in Writing

Even if the purchase contract is perfectly clear, builders can make mistakes. It’s a good idea to check the home frequently during the building process to make sure you’re getting the features you want. When you notice something isn’t the way you want it, address it immediately with the builder; the longer you wait, the more you might pay to get it the way you want it. Make sure you document any changes in writing, whether it’s a mistake the builder has made or a change you want to make once you see the home. Building sites can be quite chaotic and hectic, and if you don’t get it in writing, you might not get the home you want.

Buying a home direct from owners can be a tempting option. Most buyers believe that buying direct from sellers eliminates the “middle man” of working with a real estate agent, and therefore makes the home a better deal or cheaper than buying through an agent. However, this isn’t always the case. Buying a home direct from owners can carry hidden costs, and you’ll also be expected to do a lot of the homework and research yourself. You can occasionally find a good deal when you buy direct from owners, but make sure you do the research and are getting what you think you’re getting.

You Give Up the Services Agents Provide

Keep in mind that when you opt not to use an agent, you’re giving up the services that an agent usually provides. Good real estate agents do a lot for their clients, from helping them find a home to dealing with negotiation, financing and closing. When you opt not to use an agent, you’re on your own to find listings, research the homes and set up showings. You’ll probably have access to fewer listings when you don’t use an agent, and you’ll spend a lot more time doing research.

Additionally, when you don’t use an agent, you’ll have to do your own negotiating – which means you’ll have to do a lot of research about the market, comparable home sales, and the home’s value; work that an agent typically does. Without doing this research, however, you could end up paying far too much for your home. You can do many of the things an agent does, but it will take you a lot of hours and there’s a cost in time.

Beware of Easy Seller Financing

If you do decide to buy a home directly from homeowners, beware of easy seller financing. Seller financing is often handled through a third-party investor, and may contain unfavorable terms or be offered on a problem property or overpriced property. When you buy directly from a seller, make sure you know if the terms you’re offered are favorable and whether you’re paying too much for a home.

For most people, when you buy a home, you’re not just buying the structure; you’re buying the neighborhood, and in some cases, you’re buying a view. Always wanted to live in the country? Maybe you’re thinking of purchasing a nice rural home with views of rolling hills and dense forests. Love an ocean view? Some pristine ocean neighborhoods are still undeveloped, and provide a great view. The thing that many homeowners forget, however, when they buy these views is that views can change. If the view is important to you, do your research when buying a home.

Great Views May Be Fleeting

Development is the great killer of views. Rural homes that are near a growing city don’t stay rural forever; you may find yourself a part of a suburb someday, or even in an urban setting if you stay in your home long enough. If you’re buying a home in a development, beware of multi-phase projects. The views may be great during an early phase, but can change during subsequent phases. Check your developer’s long-term plans to see if your view is going to change substantially. Beware of buying near the edges of a city if you want a rural view, as development can change that setting.

Protected Views are Worth Paying For

If the view is really important to you and you’re willing to pay a premium to be located near a certain view, look for protected views that are safe from development. Zoning laws can help ensure your views are protected. Commercially-zoned areas are more prone to development, or residential areas may be heavily developed if a city is growing. Keep in mind that zoning laws can change, however, so check local trends to see whether the zoning laws are likely to protect your view.

Things like government-owned land, national parks and reserves are typically safe from development. If you can buy adjacent to these types of properties, you may pay a premium, but your views are more likely to be protected.

To get the best deal and find the perfect home, it’s natural for buyers to give real estate agents all of the information about their needs, career, financing and other pertinent data. The more data that an agent has, the better he or she can assist the buyer to find the perfect home. However, it isn’t always in your best interest as a buyer to tell the agent everything. If your agent is working for the seller, information that you disclose may be used to get a better deal for the sellers – not for you. Make sure you know who the agent is working for, and know what information to disclose and what to keep to yourself.

Your Real Estate Agent may Disclose Information

Most home buyers don’t think about it, but real estate agents may disclose information during the purchase process. Sometimes this may be simple information that helps your cause, such as telling the sellers that you have financing in place. However, if your agent is actually representing the sellers, or even if you’re working with a dual-agency real estate professional, the agent could tell the seller things that strengthen their negotiation against you. When you work with a buyers’ agent, your agent keeps your information confidential.

Play Your Cards Close

When working with a real estate agent, buyers’ agents are preferable because they can give you information that could help your negotiation, while keeping your information confidential. If the buyers’ agent knows the sellers’ have to sell because they’re moving, that could help you get a better price on a deal. If you work without a buyers’ agent, make sure you keep your information confidential. Sellers’ agents or dual agents could use the information you provide to kill your deal, or prevent you from getting the best deal possible. For example, if you tell a sellers’ agent that you’re in a big hurry to move or that you love their home and would pay their asking price just to get it, the agent could disclose this information to the sellers.

If you’re like most home buyers, you’re looking for the perfect home. You want a home with certain amenities, in a good location, with an easy commute to work, and with good schools if you have children. You might have more specific criteria, such as certain colors, finishes or layouts. This is completely normal. However, beware of falling into a hidden trap; focus on possibilities, not problems. Many things about a home can be changed, so it’s important not to pass on a near-perfect home if the potential is there to make it your dream home.

Before You Reject a Home, Evaluate Its Possibilities

If you’re shopping for a home, you’ll do yourself a huge favor to recognize as early as possible that there is no such thing as a perfect house. Stop looking for one. A house may be near-perfect, but lack one or two things that could be easily added. Decorating is easy to change, and even things like appliances or some layout elements can be modified to meet your specifications with a little more expense. Don’t pass on a great deal if it’s not perfect; instead, ask if you can make it perfect and whether it’ll cost more than the difference in price.

Decide Which Problems are Deal-Breakers

Think about your home-buying criteria, and ask yourself which items are preferences, and which are deal-breakers. Some things would be nice but you could ultimately live without, while other things can make or break your willingness to buy. Decide which is which before you get too far into the shopping process. Make a list of the items you’re looking for in a home, and decide where you’re willing to compromise and where you’ll hold firm. Then research what can be easily changed, so you’ll know which homes to reject and which homes you can consider – even if they don’t currently have the amenities or features you demand.

Buying a home is a huge undertaking, financially. When you buy, you need a down payment, financing for the remainder of the home, and money to make improvements, decorate, or make new-home-related purchases. Because buying a home requires such a large financial output, it can be tempting to try to cut corners elsewhere to save money. One thing that some home buyers attempt to do without is an agent. If a homeowner is tight on cash, the agent fee can seem like a lot of money that isn’t necessary to spend. However, when you try to buy without an agent, you may end up paying more than you expect.

Agent Fees are Straightforward

Real estate agent fees are straightforward, and you shouldn’t be surprised by an agent’s costs. In most cases, you sign a fee disclosure when you begin working with an agent, agreeing to pay the agent’s rate. Agent fees are often a fixed percentage of the home’s total costs, and depending on the type of agent and the state, a buyers’ agent fee may be split with the sellers’ agent. As a buyer, you may be tempted to avoid paying a real estate agent’s fees, which can add up to thousands of dollars. In some cases, you can negotiate directly with the sellers and save thousands of dollars – but keep in mind that forgoing an agent may present hidden costs.

Evaluate Hidden Costs

The hidden costs of buying without an agent can add up to more than the agent fees you’d pay with an agent. With a competent agent, you can avoid paying too much for a home, get help with the negotiating process and can help you find the perfect home. Agents typically have access to more listings, giving you a wider selection. Agents do much of the footwork in a home buying process, saving you valuable hours. Even if you forego an agent, you should know that for sale by owner homes don’t always sell at a lower price. In some cases, homeowners have an inflated idea of what their home is worth and you could end up paying more for a home without an agent. It is possible to buy a home successfully without an agent, bit make sure you evaluate the hidden costs and are actually getting the deal you want.

Getting a good deal on a home is about more than finding a home that’s priced low and ready to sell. Price is only a part of the equation of getting a great deal. Strategically, there are things you can do to position yourself favorably as a buyer and get a positive reaction from the seller. Start by finding out what the sellers really want, and then use these strategies to get a better deal on your dream home.

What do the Sellers Really Want?

What do the sellers really want? Sellers who don’t really want to sell aren’t likely to come down in price and therefore may be a poor deal or waste of time. However, motivated sellers who really want to move a property may be more likely to deal. Are the sellers relocating or doing something else that makes them less invested in their home? These things are good for you as a buyer to know because they tell you whether you have any leverage against the sellers.

Establish Rapport

Establish a rapport with the sellers. Empathize with their struggles, or celebrate their victories. Are the sellers moving because they got a big promotion or a new job? Congratulate them. Are they starting a family? Talk about your own kids or your future plans to start a family with your spouse. Anything you can do to establish a rapport with the sellers only helps your case as a buyer.

Get Concessions Before You Begin Negotiations

Concessions are the most often overlooked part of negotiations, and the best time to get concessions is before negotiations begin. Seller concessions may take the form of a percentage rate buy down, paying some or all of the closing fees, absorption of moving expenses, space remodeling, repairs or things like condo fees or gym memberships. Concession can take a wide variety of forms, and represent hidden value above and beyond the deal you get on your home. Get concessions before you begin negotiating, and you’re more likely to win the concessions you want.

Repairs and Renovations may Lead to Other Necessary Costs

One of the biggest problems that many homeowners run into when they begin repair or renovation projects is underlying costs. In many cases, one thing leads to another; you may plan a bathroom renovation, for example, but then discover that the sub-floor and plumbing in your bathroom needs to be replaced once the contractors start tearing things up.

Things like wiring and plumbing upgrades or improvements are the biggest expenses that homeowners fail to anticipate when planning a simple renovations. However, sub-par construction, termites, mold and other problems that aren’t visible on the surface can lead to big costs once you get into a project.

Get a Full Picture Before You Begin a Project

The single most important thing you can do when you’re thinking about doing renovations or home improvements is to get a full picture of what’s involved before you begin a project. Have the contractors actually come to your home to provide you an estimate. Research the most likely problems and how much they could cost before you begin your project.

Get estimates from multiple contractors, and it may be worthwhile to have an electrician or plumber come to inspect your home before you begin a major project. Getting an accurate idea of your costs isn’t always possible, but the more information you have, the better you can plan for the true costs of your “simple” improvement project

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A newly-remodeled home can be a thing of beauty. You might be tempted by that new sunroom, the third bedroom that was recently added or the landscaping that the homeowners added just a month ago. What you might not realize when you look at newly-remodeled homes is that you could end up paying the bill. Don’t assume that home improvements aren’t going to cost you – verify that all improvements are paid in full or you could end up paying the bill yourself or getting a lien against your home. 

Contractors can File Liens Even for Prior Owners’ Improvements
Every state has laws that protect contractors and enable them to file liens against a home for unpaid bills. Laws vary from state to state; some states give contractors 60 days to file a lien, while others allow contractors to file liens as much as 180 days after a job. When you see new improvements on a home, get receipts to confirm that the seller has paid the contractors. Even with receipts, it’s a good idea to verify that the contractors have been paid directly with the contractors, and to ask the sellers to sign an affidavit confirming that they’ve paid.

You Could Get Stuck with the Bill
In most circumstances, you’d have grounds to sue a prior homeowner who failed to pay a remodeling bill that resulted in a lien against your new home. Practically speaking, though, you’re the person who the lien truly hurts. A lien against your home prevents you from selling or refinancing your home, as you wouldn’t hold clear title. If there’s a lien, the only way to get it removed in many circumstances is to pay it.

For you as a homeowner, this means you can’t refinance or sell your home unless you can get the seller to pay promptly and get the lien removed. However, if a seller has left you with a lien, it could take months or years to get a seller to pay – or the seller might refuse to pay at all.

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After a long search, you’ve found the perfect house in the perfect neighborhood, an easy, short commute from work and with plenty of local amenities. You don’t need to see it again – you make an offer immediately upon viewing it for the first time. Be careful with this sort of mentality – it might turn out to be a mistake. Without visiting a property multiple times and getting a feel for the neighborhood, your perfect neighborhood could turn out to be a wild party zone that drives you crazy and makes you miserable for the next 10 years. 

Think About Your Lifestyle

Before you buy, think about the lifestyle you currently have and the lifestyle you want to live. Do you work a traditional office job and retire at 10:30PM every night? Or do you work the night shift and need to be able to sleep during the day? Your lifestyle choices and needs dictate the ideal environment for you, so make sure you think about when you’ll be home when you’re considering the neighborhood. Different times of day can make a drastic difference in a neighborhood.

Beware of Unpleasant Surprises

When you consider a neighborhood, look for proximity to things that are incompatible with your lifestyle. Is there a college campus nearby, or a lot of bars and cheap restaurants in your neighborhood? If so, there might be an influx of college kids in the evening and lots of weekend parties that could disturb your peace.

In a more suburban setting, you might find your perfect home in a neighborhood with lots of children who will be out playing and making noise during the day. Look for toys, swing sets and playthings in nearby yards that can indicate kids will be out during the day, and ideally visit the home at different times and on different days to see what conditions will be like on a regular basis.