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Real Estate Joe | Q&A: New Construction Homes | Myths vs Facts

Real Estate Joe | Q&A: New Construction Homes | Myths vs Facts

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Real Estate Joe answers questions about new construction homes and new builders. These are the most asked questions over the years received from various sources.

Question: Is it true that if I buy a home without a Realtor, the builder will sell the home cheaper?

Answer: No. Not true. If you are dealing with a reputable, large builder you are not getting a better deal. The only thing you are receiving is no representation.

Question: I thought the people in the model homes (new homes sales agent) represent me as the Buyer’s Agent and Representative?

Answer: The nice folks who welcome you to the model homes are typically sales agents and they represent the builder; they do not represent you as the home buyer.

Question: Many home builders have trade-in programs or a preferred Realtor. What is the benefit of any and should I use the preferred Realtor?

Answer: I am unaware of any benefits with builder trade-in programs. I am aware that builder trade-in programs exist.

Question: If I am purchasing a new home from the home builder, should I use the builder’s preferred Realtor?

Answer: I would highly suggest getting a second opinion. But ask yourself, what is the benefit for a builder to have a preferred Realtor? I don’t know for a fact, but I would venture to say that the builder wants to make sure the home is priced accordingly so the home sells in a timely fashion.

Question: Do builders offer a swimming pool as an upgrade option and will they wrap it into the same mortgage as the home.

Answer: Certain builders will have a preferred pool builder and in most cases will let you start constructing your pool before you close. With certain lenders, they can take the cost of the pool and have it included in their loan. There is a disclosure that needs to be made. If you choose to go down this road, and the appraisal comes in under the total cost, then you as the buyer will have to make up the difference.

As an example, let’s you purchased a home for $370,000. You are building a pool with the home builder’s preferred pool company and you are able to include the cost of the pool into your loan. The pool costs $30,000. So your total cost is $400,000. Let’s say in the hypothetical situation you putting 20%. That means your down payment would $80,000. What if the appraisal came back at $390,000. In this situation, that means the lender will only lend on the appraised of $390,000. If your total cost is $400,000, you will need to bring an additional $10,000 on top of the 20% of what the lender is willing to lend to you.

Question: What is a spec home?

Answer: A spec home or inventory home is either a home that the builder has started in attempts to meet the demands for a new home for quicker delivery or a home that another buyer had started but canceled. When dealing with a spec home or inventory home, some, most or all of the selections have already been made and cannot be changed. Depending on the builder and how far along the house is under construction will determine what options and selections you can make as a buyer.

Question: Is it worth paying a premium price for a specific lot in a new build community?

Answer: This is actually a heated debate. Every single situation is unique. If I am your Realtor I would ask you why? Why do you like this lot? Are the reasons why you are willing to pay a premium for a specific lot for personal benefit and not financial? The reality is typically you will not see a full return on the price of the lot premium you paid when you sell. There are times where as a Realtor I can rationalize paying a premium for a certain lot, but most of the time I can’t.

Question: How concerned should I be when it comes to the neighborhood build-out time when purchasing a new home?

Answer: Wow. This is a challenging question. As a Realtor, I always look at both short and long term cycles. But putting that aside, as a general rule, I rather have my clients buy at the beginning of a new development or neighborhood so they can realize and enjoy the increase in value as the builder gradually increases pricing as they sell more and more homes and as the neighborhood is being built and completed. When you purchase a home at build-out, you are purchasing one of the final homes in the neighborhood. You may get the benefit of owning a new home, but you don’t get to enjoy the appreciation that others who purchased before did.

Question: What is a turn-key home?

Answer: It is a completed new home. All the options have already been made and the home is ready to be moved in within 30 days.

Question: Do I get a warranty when I purchase new construction home?

Answer: Yes, there are usually two types of warranties.

The first is typically called a builder or bumper to bumper warranty which typically covers most things in the house such as workmanship, materials and mechanical systems that was do to builder error, not homeowner damage. The builder warranty or bumper-to-bumper warranty is typically a year. There is one builder in town who is currently offering a 3-year builder warranty.

The other warranty that exists for a new home is the structural warranty, which under Arizona law is currently 8 years. This is to cover latent defects.

Question: What is a post-tension slab, and do all builders in Arizona use them?

Answer: A post-tension slab is a concrete slab with rebar or steel cables that are run in a crisscross pattern. Concrete is poured, and after a curing period, the rebar inside the slab is tightened to create tension (+/- 33,000 pounds of pressure). This is created to less cracking.

Do all builders in AZ use post-tension slabs? No. Post-tension slabs became more common practice in the early to mid-2000s. In the East Valley, where expansive soil is known to exist, post-tension slabs are commonly used. Does it hurt to have a post-tension slab? Absolutely not.

Question: Are both front and back landscaping included with a new home construction?

Answer: So this answered is going to be varied. There’s been some changes going on in our marketplace here. In the past, most builders included the front landscaping when you purchased a brand new home, but all you got in the back was a dirt lot. I am now seeing more of a trend where some builders are even taking care of your front landscaping.

There are still some builders that are taking care of your front yard. I’m starting to see some builders here and there that say no, we’re not covering any landscaping whatsoever. Now there are some, and I mean there are very few builders in town, and they typically tend to focus on more affordable building where they’re offering packages. And one of the packages you can purchase is the standard landscaping package, that includes both the front and the back.

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