One choice that buyers have to make as they navigate the market is whether or not they will purchase new construction, or whether they will purchase an older home that is being re-sold.
We have a friend who recently purchased a new build property after purchasing several older, re-sale homes in the past. She told us how surprised she was that the process was so different. And she is right- the new construction world is a whole different ball game. So what are the differences between buying new construction and buying a home that is being re-sold? Read on for answers!
What should home buyers keep in mind with regard to purchasing New Construction vs. a Re-sale property?
The biggest thing buyers should be aware of when purchasing new construction is that in the "New Build" world, the Builder is Boss. Buyers will have less control of timelines, will typically have less negotiating power, and will have to sign on to the builder's contracts which are less buyer protective, and much more builder protective.
Here's how the nuts and bolts break out:
Timelines: When buyers sign on to a builder's contract, they are giving up a lot of control when it comes to timelines. The builder could be building and selling dozens of homes at a time, and if weather delays or labor shortages push out the timeline for closing, buyers won't have any say in the matter. And that could be a real inconvenience or hardship for some buyers. Sometimes builders are selling homes that haven't been started yet and won't be done for almost a year, so working with a builder can be an exercise in patience!
On the other hand, homes that are being re-sold can typically be purchased within about 30-60 days so the timelines are typically much quicker.
Builder Contracts: Each builder drafts their own contracts, and as you can imagine, these contracts are much more builder protective, and not so much buyer protective. Builders give themselves tons of leeway with regard to timelines, pricing, and the control they have in the process. For the most part, once buyers sign on the dotted line, they won't have many, if any, opportunities to leave the contract without losing their earnest money deposit.
This is in stark contrast to the Colorado Real Estate Commission approved contract that all real estate agents use for re-sale properties. That contract is extremely buyer protective, and buyers have a multitude of opportunities to terminate the contract if needed and receive all of their deposit back.
Also, did you know that because builder contracts are not approved by the Colorado Real Estate Commission, real estate agents cannot legally interpret or advise their clients on them? If home buyers want legal advice on a builder contract, they need to hire a lawyer to review it for them.
Contingent Sales: One subset of buyers that might benefit from purchasing a new home is buyers that need to sell their current home in order to purchase their new one. Because of their long timelines, builders can be more amenable to accepting contingent contracts and waiting for the buyer to sell their home.
Home Warranties: One really nice thing about buying a new home is everything is...well... new. Appliances and mechanical systems will be covered under warranty for some time. And builders typically offer a one year home warranty on all of their workmanship. Home buyers can live in the home for up to a year, make a list of all the little items that may need fixing (think scuffed paint, that cabinet door that went a bit wonky, or the kitchen faucet that needs tightening up), and they can call the builder to come back out and fix those items. One thing that homeowners can run into after closing is that it isn't always easy to get builder's warranty departments scheduled to come back out. Just like everything else in the builder game, the buyer is one of many and at times, it can be frustrating.
At the end of the day, working with builders can be kind of tough because the ball is always in their court, however in return for jumping through the hoops, buyers can get a beautiful, bright and shiny, new home at the end of the process.