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| Mark M. Hancock / © DFWmark.com A new home is framed while under construction at Trinity Falls in McKinney. |
1) From the dirt. The buyer gets to select everything including premium lots - at premium prices. These homes take the longest to build for major builders. The normal range is from three months for mass-produced, smaller homes to a year or more for luxury homes.
Premium lots are often larger, located on a corner (fewer shared boundaries), or have better views of water, woodlands or city views. The lot premium may eventually translate into a faster sale rather than more money at sale. However, the homeowner should enjoy the benefits of the premium lot during their residency. The builder pays a premium to the developer for those lots but may also apply a markup.
Buyers will need to anticipate a 10 percent total down payment plus 20 percent down for any upgrades throughout the process.
2) Structurally completed. This house is already a shell on a plot of land. The buyer doesn’t choose the home style or lot. The buyer may get to choose all the finishes and packages. Builders will include lighting, window and/or appliance upgrades to get buyers off the fence. It will take three months or more before it's move-in ready.
3) Inventory homes. This is a completed, move-in-ready home. It typically has some upgrades included to motivate buyers. The builder must pay the bank to keep them in inventory. Consequently, the builders want to move these homes fast and will offer additional incentives (appliance packages, etc.).
While most inventory and near-completion homes won't be in the MLS, some are. You can search for homes built in the current year or the previous year. Often, these same builders will have additional properties nearby in all phases of completion.
Upgrades
Builders add a markup to each upgrade. This creates a cost buffer for many builders. Consequently, they will encourage buyers to get lots of upgrades. When you’re considering upgrades, ask your Realtor to research after-market prices on these same upgrades.
Items such as lighting fixtures are relatively simple to change. Have the builder complete the electrical wiring but go with the base lighting option and upgrade later to save a little money. It’s important to remember that these upgrades are going into your mortgage and will have compounded interest until the entire home is paid off.
That said, real wood floors - often called “hand-scraped” - are almost always a good investment. The high-quality wood floors available from builders require time and successive layers of work. It’s best if this is done from the beginning. Attempting to add these floors after the home is built requires the removal and reset of all baseboards, re-leveling the floors, as well as sawing the bottoms off all affected doors. Few flooring companies will do this level of service when the home has residents and will charge hefty fees to do it.
Custom Homes
Custom homes are exactly what you want with no compromises. However, they are extremely expensive and require detailed decisions on literally every tiny part of the structure. Depending on the builder, they can also be slow to build because there is no automation for a unique structure on a unique piece of land.
The landowner must hire architects, engineers and specialists for each part of the construction. Nothing can move forward until the prerequisite step is completed. Additionally, labor and material costs can be volatile depending on the season and other market forces.
If you have the vision, time and finances to create a one-of-a-kind dream home, do it! However, understand what you’ll face before you start.
Model Homes
There may be some model homes mixed in with the inventory homes. If so, they will have a little wear and tear, but they will have tons of upgrades. Sometimes these upgrades are one-of-a-kind “test” features. They can be a great bargain if you appreciate the upgrades. For comparables, treat them more like preowned homes rather than new-built homes - although the builder will want to treat this heavily trafficked home as "new."
Protect Yourself
You need to read Want to Buy a New-Built House?. It lets you know how to leverage our brokerage to get a better deal and this major issue of caution: do NOT register at the builder without your agent present. Otherwise, you’ll probably lose your right to a no-cost Realtor, who will protect your best interests. While builders’ agents are pleasant and helpful to everyone, they are obliged to act in the best interest of the builder. Don't pay for services you don't get. You need someone to protect you.
I’ve Got Your Six!
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