Buying a home in a hot seller’s market can be frustrating. With bidding wars and multiple offers above the list price, many are turning to buying a new construction home to avoid the hassle. But, buying a new build has its difficulties too.
If you’ve purchased a home before, buying a new construction home is a very different experience. Through our top 12 tips, you’ll have a clear picture of how to approach the home buying process, things to know when buying a new build, with advice from experienced real estate agents.
- Researching the community
- Contribute towards closing costs.
- Negotiation incentives
- Special and Local Improvement District (SID/LID) fees
- The sales price will be higher
- Using the builder’s lender
- The closing timeline
- Visiting the construction site
- Final walk-through
- Closing costs are higher
- Builder warranty
- Homeowners association rules
1. Research the planned projects and amenities around the new construction community.
Many developers build new home communities in undeveloped areas. Dirt lots, desert landscapes, or thick woods are common neighbors. Don’t expect it to stay that way for long.
Ask your real estate agent and new home sales consultant about known future developments. Then, research on your own. There are many great resources and tools to help.
Loopnet Commercial Real Estate – the Zillow of commercial.
is a fantastic resource for what shopping centers, office buildings, medical, or industrial may be coming soon. Through Loopnet, commercial brokers post listings for the sale or lease of properties.
Developers begin to solicit lease interest before breaking ground. By browsing upcoming listings, you can view what projects are coming soon.
Tax Assessors Website
Each county in the United States has a tax assessor. The tax records tell you key details of a property like square footage, acreage, and what the zoning is for parcels of land.
Types of zoning examples are:
- Residential Zoning – Includes single-family homes, apartments, co-ops, and condos.
- Commercial Zoning – Shopping centers, hotels, office buildings, malls, and restaurants.
- Industrial Zoning – Storage facilities, auto-repair, manufacturing.
- Agricultural Zoning – Restrictions for farmland use
- Rural Zoning – Farms and ranches, including some residential zoned for horses and other livestock.
- Historic Zoning – To prevent changes to the original structure of buildings and residences older than fifty years.
The is a great first resource to identify the zoning for neighboring parcels. The Assessors website should have maps or a search feature to determine zoning. If you’re searching for a home in a small county, you may have to contact the assessor’s office for parcel maps.
2. Your Realtor庐 may be willing to contribute towards your closing costs.
For real estate agents, the process of new construction is also very different. From start to finish, an agent is very involved in purchasing a resale home. The builder’s sales rep works directly with buyers for updates and timelines when buying a new home.
With less time spent on the transaction, agents will be more open to helping out with a contribution. First&Sold offers 15% of the commission as a rebate to help with closing costs.
You aren’t losing any incentives or paying more because you work with a Realtor庐. The most prominent builders are Realtor庐 friendly.
There’s one significant catch, however. By visiting the home site first 鈥� without your agent 鈥� your agent will not earn a commission. So, if you want to view new homes, be sure to ask your agent to join.
3. Price is less negotiable than incentives on new construction.
To protect the buyers who have already purchased, builders do not want to negotiate the home’s purchase price. Negotiating is always worth trying; however, your best bet is to focus on incentives, not price.
Remember that the price of the home is just a number. It’s what you get for the money that counts.
Builders are much more likely to negotiate on contributions, upgrades, and appliance packages. Contributions would include cash towards closing costs, like the transfer tax. Upgrades like top-of-the-line carpet padding. Or the standard white appliance package could be upgraded to stainless steel.
Supply and demand in the market will dictate how willing a builder is to offer incentives 鈥� or entertain negotiating the purchase price.
4. Ask if there’s a SID/LID and how much the payments are.
When building a new home community, specific infrastructure controlled by the City 鈥� like sidewalks, streets, and lamp posts 鈥� is requested to be constructed.
The municipality establishes a SID (Special Improvement District) or LID (Local Improvement District) to fund the project.
The SID/LID can be absorbed into the developer’s costs or passed along to homeowners. The amount is usually spread across 10 to 20 years with biannual payments when passed to homeowners.
SIDs and LIDs commonly range between $7,000 to $12,000, plus interest, creating biannual payments of $200 to $350. You can research SID/LID by parcel or address in Clark County, NV at .
5. Expect the purchase price to be 20% higher than the base price.
The price of a new construction home includes the base price, any lot premium, and the upgrades or additions you choose.
In past years, the prized corner lot or elevated lot with uninterrupted city views were the only lots subject to a premium. Most developers now add a lot premium to every parcel. The lowest premium in a neighborhood could still be 5% of the purchase price.
Upgrades in new construction are akin to popcorn and snacks to movie theaters. It’s where they make a lot of their profit. This is why some upgrades are best to complete yourself.
Some buyers accept the lowest cost carpet throughout with linoleum in the wet areas to easily upgrade the flooring after closing. Be aware that often the standard materials have a base price too.
What upgrades are worth the price tag?
- Structural upgrades and additions – Additional bedrooms, garages, or covered patios.
- Cabinets and countertops – Kitchens can be costly to remodel on your own.
The earnest money deposit when buying a new construction home is also higher and non-refundable. Some builders require 50% of the upgrade value and the lot premium upfront.
6. New home sales consultants will push you to use the builder’s preferred lender.
Builders always have preferred lenders for mortgages. Many of the largest homebuilders now own their own lending companies too.
A builder can require you to be pre-approved by their lender but cannot 鈥� by law 鈥� require you to use their lender.
The incentives always sound great. These incentives can be thousands in closing cost contributions. But, most lenders make up the contribution with a higher rate. You should always shop around and compare monthly payments to see your savings.
For example, Lender A offers $3,500 in incentives with a monthly payment of $2,200. Lender B has no incentives and a lower rate to give you a $2,000 monthly payment. In just 17.5 months, you’ve already paid an extra $3,500 in monthly payments. The question becomes, how long do you plan to live in the house?
7. The closing timeline can always change.
Pre-planning for a move when buying a new construction home can be frustrating, especially if you need to sell a house or end your lease.
If your lease ends soon, ask the landlord if you can continue with a month-to-month lease. You’ll still be required to give a 30-day notice.
When selling a home, timing the closing becomes much more difficult. Work closely with your Realtor to get a better idea of time on the market and the average escrow period in your area. Once your closing day is definitive, it can help you plan better. Stay in contact with the builder for updates; you don’t want to be surprised by a short window for closing.
You may also utilize a home buying company. If you need to sell quickly, companies like Opendoor and Offerpad make a cash offer on your property and close on your schedule. Fees range from 6% to 12%, not including a below-market offer.
Las Vegas homeowners can work with First&Sold to sell their homes through our trade-up program, saving thousands versus iBuyers.
8. Visit the construction site often to inspect the progress and take photos of the framing.
Most home sites have a dozen or more homes being built at once. You know the home you ordered better than the construction crew. Once framed, make sure you schedule a walk-through to catch early mistakes.
A framed house can be difficult to navigate 鈥� and you’re likely not a construction expert 鈥� so look for the structural upgrades you chose that are identifiable. This could be the dual-sided fireplace you paid extra for or the 12′ sliding glass doors.
While you’re in the framed home, take photos of the walls. Knowing the structure, plumbing, and electrical behind the walls will come in handy if you have future repairs, installations, or upgrades.
9. You can bring a home inspector for the final walk-through.
The final walk-through of your newly completed home 鈥� roll of blue painter’s tape in hand marking every little mark or scuff 鈥� is the fun part of buying a new construction home.
The purpose of a final walk-through is to note any cosmetic issues to be repaired, plus a tour of the features of your home. Your walk-through does not have to be just cosmetic, however.
You may hire a certified home inspector to complete a non-destructive inspection of the home. They can check roof tiles, the HVAC systems, plumbing, and electrical.
You will have a builder warranty, but it’s much easier to request large items to be fixed before you close.
10. Closing costs will be more expensive.
The seller pays the real property transfer tax in a traditional home sale. In Clark County, NV, it’s $2.55 for every $500 of the purchase price.
When buying a new construction home, the buyer pays the transfer tax. On a $500,000 purchase, that’s an additional $2,550.
You’ll pay the typical buyer closing costs along with the transfer tax. This includes escrow fees, lender’s title policy and origination fee, title charges and recording fees, HOA capital contribution, set-up fees and dues, and prepaid taxes, trash, and sewer.
Taking advantage of incentives, like the lender and Realtor庐 contributions, will help to reduce the extra costs.
11. You will have a builder warranty on the home.
One of the perks of a new construction home is the warranty that comes with it. The builder’s length of the warranty and what’s covered varies, but most warranties are for one to two years on mechanical and structural items and six months to a year on labor.
The warranty on labor will cover issues with drywall, roofing, doors, trim, and paint.
Mechanical warranties will cover your HVAC system which includes the air conditioning and heater, plumbing, and electrical.
Your appliances should have their own manufacturer warranty.
Some builders will include major mechanical issue coverage for 10-years. This could include a roof collapse or flooding caused by poor structural construction.
12. Get to know the homeowners association (HOA) rules.
A builder must provide all buyers with an HOA resale package to review 鈥� just like resale homes. By law, a buyer has the right to cancel 鈥� with no penalty 鈥� if they disapprove of the bylaws.
The HOA bylaws explain the rules of the community. The bylaws could include no street parking or what’s allowed in your front yard, even if two vehicles must fully utilize the garage.
Most homeowners associations in new developments require homeowners to complete the backyard landscaping. Landscaping must meet the community guidelines and be completed within an established period.
If required, the HOA resale package will detail the specifics, including what trees are allowed and how soon you must finish the landscaping after closing. Always take the time to read the HOA’s bylaws.
In Conclusion.
Buying a new construction home is exciting. You can design it the way you want and be the first to live there.
Like any transaction, read all the contracts and ask as many questions as possible. The builder’s sales consultant is available for updates or questions on the construction, and your agent is available to help you understand the next steps.
If you’re searching for a new construction home in Las Vegas, Schedule a new home site tour with one of our friendly agents and find your new dream home.
