Welcome back! In our last article, we discussed wanting to provide as much information as we could about new home construction. In doing so, we decided that while the information coming from our perspective could certainly help many families, we wanted to make sure we obtained our potential customer’s perspective as well. So we contacted our past client’s, many of whom we now call friends if we did not prior to this shared experience.

After speaking with them, we came to a consensus of the information they said they felt would help families that have not started the process yet. We shared the benefits and the potential drawbacks of purchasing new home construction in last weeks article. We also described some benefits of purchasing a previously owned, or resale home. Finally, we alluded to why a family should never purchase a new home construction property on their own, without the assistance of a REALTOR®. The amount of information in just this portion of the article alone made the article so long that we felt most readers would need, or at least appreciate a break.

So this week we will continue and wrap up our new home construction information piece. The primary topic this week intends to help families set some reasonable expectations about the process. We also will speak to the difference between the homes builders, and the subcontractors they hire. Finally, we will talk about how to shop for new home construction, and at this point dive into why everyone should use a REALTOR®.

 

Setting Expectations For New Home Construction

The biggest expectation families need to set themselves regarding new home construction, across the board, included time. On a number of different levels. First and foremost includes the time it takes to build your home. A couple other considerations though – the time it takes to stay on top of the builder and the subcontractors, and the time invested after you close. We will touch on each below.

Build Time

Obviously, the time it takes to build your home could require extensions. Some causes include:

• County Permits take longer than expected
• Weather can affect build times
• Project/Construction Management issues
• Material Delivery issues

Many times, even the builder cannot control the need to extend. Also, remember that builders do not want to extend any more than you do. They do not get paid until you close on your home. With that in mind though, a few things you can do to help alleviate some potential delays would include:

• Shop around for the most reputable builder
• Inquire about how the builder hires subcontractors
• Ask the builder about the length of time it takes to get the county to send permits
• Request for a calendar of deadlines and delivery dates

Not all builders will provide all of the information. But it never hurts to ask. And another plug here… your REALTOR® can follow up with the county about the permits. They can also keep in touch with the builder about material order dates, delivery dates, and and inspection deadlines.

The big take-away here though – plan on the project taking longer than first anticipated. Many times the builder will finish on time, but you should prepare for delays, and so should your lender. Many builders encourage the use of their preferred lender, and you have every right to not choose that option. Just make sure your lender will work with potential delays with as little out of pocket cost to you as possible.

Hands On, Or Hands Off?

Most clients want to take the hands off approach, meaning they want nothing to do with the process. They simply want to walk into their brand new home whenever they close. Others want to take every picture imaginable, and share it with the world on social media. We encourage a mix of both, and believe the key idea should revolve around moderation.

Walking away and not having any communication with the builder until the completion of your home only leaves you in the dark.  However, daily pictures and communication with the builder can tax even the most resilient individual. You want to raise your family and make memories in this home, so keeping an eye on the construction of it will certainly benefit you. However again, the time cost of driving to the construction site daily, or calling the builder can have the opposite effect of the helpfulness you intended.  Our clients said we should encourage families to take pictures, as often as you deem appropriate, but within moderation.  Refer to your calendar, and  ensure you take pictures before and after specific milestones of the construction process.

One client said, after the experience, that they believed being too involved ruined the “new home” experience for them. Remember, you will only ever have your “first” new home construction once! While the family absolutely felt that taking and keeping all the pictures certainly assisted them down the road with the builder covering certain concerns, the stress ruined that experience they will never have again.  Their advice – “Take pictures. Keep records, and track everything.” But try not to let it ruin your experience.

The Fun Does Not Stop There

Many families expect zero issues since they went through the extended time it takes to purchase a new home construction property compared to a resale. They spent the additional cost on a brand new home, and expect that once they move in, the story has ended. A reasonable thought, but usually incorrect.

Something always goes wrong. We have no idea why. We have no logical explanation for this phenomenon. However, from our experience, something always goes wrong, so we encourage you to just plan for it. The obvious issues and concerns the builder will (should) cover, particularly within the first year of completion. The pictures and records we mentioned earlier help encourage the builder to see the errors and correct them. Most builders go out of their way to ensure their clients love their homes, and want to provide quality work/construction.  However, you need to shop for the builder, not just the location, which we cover later in the article.

As you can see, new home construction can consume a lot of time.  Even after the completion of construction and closing on your new home, you may still have time intensive situations crop.  The biggest takeaway from all of this from our clients perspective – new home construction take time.  Plan for it.  Stock up on that patience, like a bear going into hibernation for the winter!

New Home Construction Builders vs Subcontractors

We mentioned earlier that we wanted to make sure we explained the difference between the builder, and the subcontractor. The best explanation we have found comes from “howstuffworks.com” and says the following:

“Think of it like this. If you hire an event planner for a wedding, golden anniversary or other celebration, you don’t expect him or her to bake the cake, cook the meal, grow the flowers or play the music. You pay the planner to use his or her knowledge of the industry and organizational skills to bring together the best baker, caterer, florist and string quartet in a coordinated effort to make your event successful. The event planner is the contractor, and the people in his or her rolodex are trusted subcontractors.”

The average builder/contractor hires roughly 20-22 subcontractors to build a single family home according to our research. Builders/contractors typically subcontract out the same specific jobs, even if not all of the time, at least some of the time.

“Over 90 percent of builders said they always subcontracted concrete flatwork, masonry, drywall, foundations fireplaces, technology, plumbing, electrical wiring, HVAC, carpeting and security systems.”

Putting this into perspective, even if a good builder has fostered a great relationship with every subcontractor in their repertoire, coordinating 20+ other specialists to build a home, one can see the potential for delays. So while delays will absolutely frustrate you, and we understand 100%, we suggest you plan for them.

 

Shopping New Home Construction & Your REALTOR®

This final section will discuss some tips for shopping new home construction, as well as why having a REALTOR® can benefit you.

Shopping And Comparing

In order to help prevent as many delays as possible, and make this experience the most enjoyable, you will want to spend time researching. We have included some of the ways to accomplish this below:

• Visit different builders in the same area.  As with most verticals, builders try to differentiate themselves from their competition.  Visiting them will provide you an idea of how they want to differentiate themselves.  Style, price, materials, energy efficiency, space usage and floor plans, customization, and differences in base models and available features include just some.
• Visit different developments of the same builder. This will give you an idea of the different models the builder uses, as well as how the same model can have alternative options built into it.
• Research online. This we have to preface with the idea that the population tends to jump online to complain much faster than compliment. So while you should absolutely look at reviews and complaints about the different builders, we encourage you to concentrate on complaints in your area, and then focus on the volume of those complaints.
• Shop for incentives! Many builders offer many different types of incentives, depending on location and time of year. From paying closing costs and origination fees, to building a pool or giving you $20,000 worth of upgrades for choosing them. Shop around, and if you can purchase stock for the builder as a publicly traded company, find out their fiscal year end date. Talk to them a month or two before the end of their fiscal year to garner some massive negotiating power.

Our clients suggested that you talk to the neighbors in any development you could potentially see your family living in. Ask them about their experience with the builder. As an added bonus, you could meet your new neighbors and make some friends before ever even moving in!

 

Using a REALTOR®

Finally, my favorite section, and the part you have waited the entire 2 part article to get to:  Why you should use a REALTOR®!

“Have a really good realtor who does not have the builder’s interest at the forefront. I was fortunate to have an honest, upfront, and extremely helpful realtor, without that I think I would have lost much more hair in the process.” – John L., FL

Simply put, using a REALTOR® protects you, in so many ways, at no cost to you out of pocket (at least in Central Florida). Not having someone with your best interest in mind throughout the whole process can only benefit the builder.

The Builders Agent

Remember, the sales agents for builders have a fiduciary responsibility to the builder as employees. Even under Florida law, and Code of Ethics, they only have the following duties to you:

1. Deal honestly and fairly
2. Disclose all known facts that materially affect the value of the residential real property which are not readily observable to the buyer
3. Account for all funds entrusted to them

Meaning, they should not lie. They should tell you about any material issues that you cannot see for yourself. And they should know the exact location of your deposit money at all times.  They owe you nothing more.  Also remember – the home inspector they hire works for them as well!

Your REALTOR®

Your REALTOR®, again in most cases at no cost to you, does not work for the builder. The list of responsibilities for a REALTOR® working for you, unless otherwise disclosed and you sign off on include the exact same, and then some, but in your favor instead of the builders. And a good REALTOR® will not allow you to purchase even a new home construction property without suggesting that an independent third party inspector compete a full report on the property.

And aside from all of the protections a REALTOR® can provide you throughout the process, they can also assist with the research, with both the builder and specific developments. They can assist throughout the entire process, with follow up with the builder, the lender, the title company, and even the construction manager.  They can verify material order dates, and delivery dates, and deadlines. Most of all, they can act as a buffer between parties when things get down to the wire and personalities clash. Basically, a REALTOR® can provide protection, and guidance along with a level head to compliment their knowledge and experience.

All for no cost out of pocket to the buyer. Why would you not use a REALTOR®?  I’m just sayin…

 

Summary

As we wrap up this article, the most common theme seems to revolve around “plan for it”.  As with many different aspects of life, the common adage “hope for the best, plan for the worst” fits extremely well here.  With so many different components, all depending on so many other different components, not planning for delays essentially only sets you up for added stress and disappointment. So in closing:

• Compare and contrast new home construction and resale pros and cons
• Research different builders, and different developments of the same builder
• Talk to neighbors once you have narrowed down to an area and/or development
• Ask lots of questions
• Plan for delays, and choose a lender that understands and will work with you
• Take pictures, take notes, and keep all records
• Have an experienced REALTOR® in your corner

Good luck, and let us know if you have any questions in the comments below, or contact us directly!

Are you ready to find your #dreamhome?

http://eyeonhousing.org/2015/09/it-takes-22-subcontractors-to-build-the-average-home/

http://www.builderonline.com/money/home-building-dominated-by-subcontractors_o

http://home.howstuffworks.com/home-improvement/construction/planning/why-hire-a-contractor.htm