New Construction Class - Bothell, WA

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Transcript of New Construction Class - Bothell, WA

  • 1. Buying New ConstructionNovember 23, 2013 Kathi Kelly-Billings Redfin Agent Slide 1 of 33

2. Agenda Finding New Construction Pros & Cons New Construction Types Process Upgrades & Changes Negotiating Preferred Lenders FAQ Q&ASlide 2 of 33 3. A Little Bit About Who We Are Redfin is a real estate brokerage that has helped over 20,000 people buy or sell a home; 97% would refer us to a friend. Customers, not commissions Informed decisions The right home for the right price No obligation Get back a portion of our commissionSlide 3 of 33 4. Your Agent. A Good Fit? Click here when you decideSee all deals & reviewsSlide 4 of 33 5. Finding new constructionSlide 5 of 33 6. How to locate new constructionSlide 6 of 33 7. Slide 7 of 33 8. Pre-Sale or Under Construction Pictures from the MLSSlide 8 of 33 9. Pre Sale or Under Construction ActuallySlide 9 of 33 10. Finding New Home Listings Builders may not list every home in a development on the MLS your agent can inquire about other homes A neighborhood may become available in phases sign up to be on a notification list with builder Notice of Proposed Land Use sign Builder websites, newspapers on Saturdays photo: vintageseattle.orgSlide 10 of 33 11. Local Builder Websites Local Builders Murray Franklyn murrayfranklyn.com William Buchan buchanhomes.com Burnstead burnstead.com Polygon Homes polygonhomes.com Westcott Homes westcotthomes.com Pacific Ridge Homes pacificridgehomes.com Quadrant quadranthomes.comNational Builders Centex Homes centexhomes.com DR Horton drhorton.com Toll Bros/CamWest tollbrothers.comSlide 11 of 33 12. Pros & ConsSlide 12 of 33 13. New vs. Resale? Buying new construction has its differences No inspection contingency in contract Earnest money amount is usually set by the builder and non-refundable Builders documents lean towards builder. Few to no outs for buyer without losing EM Less negotiation on price, other terms Longer closes, depending on the progress of home, builder can extend without penalty but buyer cant Slide 13 of 33 14. New Construction Pros You pick exactly what you want You pick the location of your home in a community Modern floor plans All major systems are new lower maintenance Higher energy efficiency Planned community parks, retail, harmonious architecture Warranty shorter term touch ups & longer term protection No fixing some prior owners mistakes or problemsSlide 14 of 33 15. New Construction Cons Usually the newer the house, the smaller the lot HOA may have lots of rules Houses look the similar Landscaping isnt mature yet Living with construction noise Process is more complicated Can be more expensive per square foot Builders may not be negotiable, depending on market If pre-sale, can take a long time up to 7 months, typically 4-5 mo. Builder may change the homes they are building in the future either the plans or the price Slide 15 of 33 16. The ProcessSlide 16 of 33 17. How far along is it? City permits Most options for changes and upgrades Longest timelinePresale HomeSlide 17 of 33Under Construction Limited changes Pick colors possibly Timeline varies No changes Upgrades limited Close quickly, like a resale homeCompleted Spec Home 18. Presale: Picking Your Lot When in the presale stage, you can choose your lot from lots that have been released at the time. Builders release lots in phases in a development and start the permitting process only on selected lots. Some floor plans will only fit on certain lots.Slide 18 of 33 19. Basic Build Process 4.5-7 months Permitting Process (floor plan and lot permitted by the city) Foundation poured Framing/Roof/Windows Stage (inspected by the city) (order for cabinets/plumbing fixtures/furnace/H2O tank, trim, doors) Exterior Siding/Painting Stage Electrical/Plumbing/Heating/Insulation Stage (re-inspected by the city) (order for flooring/appliances/fixtures) Drywall/Interior Painting/Doors/Millwork Stage Cabinets/Plumbing Fixtures/Other Fixtures Stage Flooring/Appliance/Landscaping Stage Clean-up COO (Final Certificate of Occupancy Certificate from the city) Private Inspection and Builder Blue Tape Walk-through with Buyer Slide 19 of 33 20. Builder contracts Builders have a package of documents: Builder addendum Full builder purchase agreement Neighborhood description documents Timeline advisories Warranty information HOA documentation These are non-standard forms that will override standard purchase agreement documents and must be read carefully. Slide 20 of 33 21. Common Provisions in Contracts Some common clauses in builder contracts are: No inspection contingency inspections are allowed and builder must fix code issues but you cant walk away Financing different timelines/clauses than buying a resale Builder walk through blue tape walk through to create a punch list right before closing Closing delays builder may automatically extend closing with no penalty if their process is delayed but if you delay with your lending there may be penalties Repairs after closing builder may be allowed to finish things after closing within a certain timeline Earnest money non-refundable after a certain period your earnest money may go hard Slide 21 of 33 22. Sewer Capacity Fees When a home hooks into the sewer system in King County its assessed. Paid over 15 years Entire amount is declared at closing On top of regular water/sewer bills Builder will require you assume it Rate locked in at time of construction currently $53.50 per month Will be assumed by the next buyer when you sell - NEVER PAY OFF!Slide 22 of 33 23. Upgrades & ChangesSlide 23 of 33 24. List Price = Builders Standard or Spec List price is for the builders standard specification of finishes Standard specs will vary from one builder to another Upgrades/options will add onto the price of the home Upgrade prices are the difference between the price of the standard and the actual cost of the upgrade Other options, such as air conditioning, or adding features are straight prices the builder charges You can easily spend 15-20K on upgrades/options, adding to the cost of the homeSlide 24 of 33 25. Model Homes If there is a model home, it will probably have a number of upgrades installed. Models often have upgraded tile work, upgraded countertops, extended hardwoods, upgraded paint. Models arent usually for sale until they sell out the development. Some upgrades are obvious: Upgraded/extended flooring Upgraded countertops Some are not: Window screens (Really? Yes, really!) Garage door openers (Huh?) Landscaping (Front yard is always included, rear yard is usually not) Appliances (Refrigerator, Washer, Dryer are NEVER included in the sales price of new homes, except, occasionally, in the model home) Blinds Model homes often have A/C to make viewing the home comfortable to buyersSlide 25 of 33 26. Paying for upgrades Every builder has different processes: Roll it into the purchase price Upfront deposit Upgrade deposits are non-refundable May be fees for getting quotes for making changes Every builder has a specific deadline for each house after which certain upgrades cannot be added or changed. Slide 26 of 33 27. Specifications List Every builder should be able to provide: A list of what upgrades are present in the model A standard list of specifications or specs for each home If the lot you are considering has any upgrades preselected and included in the priceThey may or may not have: A list of common upgrades A price list or master list of options/upgrades A cost associated with quoting custom finishes Limits on changes that they are willing to make Slide 27 of 33 28. NegotiatingSlide 28 of 33 29. Front End vs. Back End Front End means on the purchase price: an offer of $545,000 on a list price of $550,000Back End means on concessions or upgrades: an offer of $550,000 on a list price of $550,000 asking for the builder to include certain upgrades or credit a certain amount towards upgrades or closing costs.Slide 29 of 33 30. What works best? Builders prefer to negotiate on the back end. Why? Avoid setting a precedent of discounting for future sales Avoid upsetting prior purchasers who paid full price these are their customers and future referrals for their company May be able to control material and labor costs The best approach varies case by case. Builders often have certain styles. An experienced agent can lay out your options and make a recommendation.Slide 30 of 33 31. Negotiation Factors Market demand How many homes has the builder sold this month, last six months? What are the current market conditions? Phase of construction May be willing to negotiate more if an completed home has been sitting Health/size of builder Do they need to sell it? Some small builders dont have the flux of $ that larger builders have and are more willing to negotiate to sell a home Willingness to use a preferred lender Number of requested upgrades Slide 31 of 33 32. What can you get? Allowance some builders allow a buyer to specify a certain dollar amount in the offer that they can later specify how it will be spent. This amount will go up and down with the market. Most builders are giving very little away now. Redfin credit typically the rebate from Redfin must go towards your closing costs its good to keep that in mind during negotiations with the builder.Slide 32 of 33 33. Preferred Lenders & PromotionsSlide 33 of 33 34. Preferred Lenders Many builders will have a special relationship with a lender. Ownership may be owned by the same parent company, or may just be an institution the builder likes Concessions certain specials may be linked to you agreeing to use the specific lender Rates usually comparable, maybe not the very best deal you can find, may have longer term rate lock products (which you need for new construction