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When I started MissAdventures in Adulting, I honestly did not think I would be writing about Real Estate at all. I was so over Real Estate, and, having been burned by it, wanted to get as far away from it as possible. Now that the dust has settled and I’ve been asked by several Real Estate companies to help write some articles for their blogs, I feel a bit better about talking about it. Besides, when I think about adulting (which is part of the core of my blog), one of the most grown-up, adultish things you can do is buy or build a home! I’ve known far too many people who have entered into the home buying process, only to muck it up and have their own missteps and misadventures in it…which ends up being a VERY expensive mistake in the end. I spent over a decade of my career selling homes for builders, every weekend in the models waiting for that next sale, and I thought it was about time I shared some of my insider tips with you!
It’s FINALLY spring! The leaves are turning green, flowers blooming, the sun is shining, and in the Real Estate World it’s also known Selling Season! Whether it’s the beautiful weather that gets people out looking for a new home, fresh gardens that make their resale pictures pop, or the desire to move over summer break, this is the time when most families start to seriously look for their next home.
To builders, this means that they will make at least 75% of their projected income, if not more, in the months of March-August. If they have finished out last year and planned accordingly, they’ll have the majority of their inventory homes at or nearing completion for summer move-ins. They should be getting their model homes touched up and freshened up right about now in anticipation of spring buyers coming through their doors. Their Sales Representatives are highly trained and eagerly waiting for your arrival!
The industry has certainly changed in the last 5-10 years. New Home Communities no longer have vast model home parks with 10+ model homes to tour through right in a row. Buyers don’t necessarily just go out for a drive and follow the bandit signs anymore. Most buyers are doing the bulk of their research upfront, and have already had their first or even second impression of a builder long before they walk through a model home door. However, the amount of reliable information that is out there is slim, to say the least. Most builders have a fairly user-friendly website now, but there isn’t exactly a central, non-biased hub of facts and information about each one. You probably have heard horror stories from some friends about build processes and other stories from others who would never buy used again because they loved their build so much. What information is correct? What do you need to know before walking into a model home and purchasing a new home?
When you first walk in the model door and the Sales Rep says, “How can I help you today?” They really mean it. They want to help you achieve your goal. Tell them what your goal is. Few things are more frustrating as a builder’s rep than hearing “I’m just looking,” because we know you aren’t just looking (and we’re told from management not to believe that line). You didn’t take time out of your Saturday, with your kids in tow, drive out of the way from everything else you’re doing that day to just wander. Speak up. Tell the rep “I’m a year out but wanted to see what this looked like,” or “I only have 15 minutes but am looking for a home soon.” The Sales Rep has a lot on their plate, believe me, they will be incredibly grateful if you simply tell them what you’re after so they can get it to you without the guessing games.
I know full well that there are a lot of people who do like to look at model homes just for decorating ideas or inspiration. Here is the thing, you can get a lot more ideas from a magazine than you can 2-3 homes, and you won’t waste someone else’s time in the process. I know, that doesn’t sound very nice, but think about what you do for a living for a minute. Do you have in your day to mess around with someone who is just dreaming? Nope! If you want to just wander, that’s great, but maybe don’t do it while they’re super busy on a weekend or right when they’re trying to open or close. Try wandering on a Wed afternoon when they’re slow and caught up on their work. They’re probably looking for someone to talk to at that point anyway!
Every-time, you ask that Sales Person “what color is that paint?” or “Where did that tile come from?” not only are you taking time out of their busy day but if you’re visiting a large production builder there is a very good chance whatever they have in their model home is from a line that is specifically named and/or designed for them. You can probably find the same thing somewhere, but it won’t typically have the same name.
Did you know that the builders reps do not get paid until your home closes? That means if you’re going to start construction with ABC Builder, that salesperson is probably going to spend at least 6-9 months with you before they ever see a dime. Very few buyers make their home decision in the first visit or two, so that salesperson will probably work with you for about a month, for free, before you even sign the contract. Their goal is to keep you on contract, engaged, and HAPPY until your home is completed and you close. If you aren’t happy, they won’t get paid, so they are not your enemy to fight with. If they’re telling you no on something, it’s because that’s come from management.
If you’re being told no to an option or upgrade, one of two things are happening: either the Sales Counselor knows you can’t afford it and will not add it to your price and push you out of your approval price, or they just don’t offer that option. Many times, purchasing departments make deals with vendors for specific sets of options and upgrades. It is not a simple task to just hunt down a specific type or color of an option and start offering it. If a specific type of flooring is a deal breaker for you and the sales person has told you no, that’s probably not the right builder for you!
I can’t tell you how many times I’ve been screamed at over the years for something completely out of my control. One time I was cussed out by a man who swore we were allowing our trades to smoke in his home. Every weekend he would come in yelling that his home smelled and that there were cigarettes and beer cans everywhere. It got so bad that none of our team would meet with him alone, so one day myself, my builder and my warranty rep all agreed to meet him at the house. While he was tearing into us (and I was wondering if that commission was really worth it at this point), someone who lived in the neighborhood walked in, just being nosy, with a cigarette and beer in hand! We all saw it. They buyer never did apologize but he did stop yelling about his job site, finally understanding that we couldn’t control other people, and that we weren’t actually out to get him.
Before you ever walk into a builder’s model, sit down and really think through what you need and what you want. I would say that at least half of the people who walked in my door would say something like “I’m not sure what I’m looking for,” or “I’ll know it when I see it.”
As a Sales Counselor, I know that you are looking because something isn’t working for you about where you live now. Either its too small, too big, poor location, or you’re just over the decor and want something new.
If you’re looking for a home you know a few things:
1) Something about where you are now isn’t working for you. Figure out what that is and write it down in a notebook.
2) You live with X number of people, you need at least that many sleeping spaces.
3) Somewhere in your head, there is a vision of colors, finish out, and at least a few specific spaces like an office or media room, otherwise, you wouldn’t be looking.
If you sit down and think it through, you know you need at least 3-4 beds, a study, big yard or little yard, formal spaces or no formals… you get the picture. Share that with the onsite person, if for no other reason than they won’t give you a packet full of floorplans you don’t need or want. Save a few trees and only take the floorplans that fit your needs.
The second most irritating thing you can tell a builder’s rep is that you wanted to look to see what you wanted before talking a lender. You’re working backward this way. In the average Metro area (DFW for example, since that’s where I am) within 5 square miles, you can find new homes ranging from $200,000 all the way to $2,000,000, many times in the same community!
Getting a quick Pre-Qualification WITH A CREDIT CHECK goes a very long way in narrowing down the scope of home choices for you. The credit check portion of this is imperative. I have lost more deals over the years with people who had their basic Pre-Qualifications but had no idea there was an old collection or that all those “save 20% today with our card” offers would come back to haunt them.
There few things more heartbreaking in Real Estate than losing your dream home because you can’t qualify for it.
Going out with your full Pre-Qualification will also save you so much time in the end. You will not waste time looking at communities you can’t afford, or lower end homes when you can afford more, and knowing what you can afford gives you the upper hand when you start to negotiate with the builder.
Before you speak with the Builder’s Lender (or a Sales Rep’s personal referral) you should know that your information is not confidential!
Read that again… let it sink in… Yes, legally your information should be confidential, but it’s not. The Builder’s Lender (in-house or just preferred) is bound to keeping that salesperson and that builder happy. They have a vested interest in closing your deal, but they’re also going to be the first one to drop you like a hot potato if they can’t get it done, or cover their own rears if their relationship with you is going south.
What does that mean? It means if something is going wrong, the first call your sales person is going to make is to the lender. They are going to ask what is going on, and they are going to keep asking and keep pestering the lender until they finally just say “I can’t get the deal done because their credit score is a 490, they have 17 credit cards that are maxed out and their car was repossessed last year! Now if you get them to pay off 12 of those, dispute these 9 claims, and get the repossession cleared up, I can probably help them in 3 months.”
That’s an extreme example, but just go into a deal with a builder’s lender knowing several people who shouldn’t probably know your credit score and how much debt you have before the end! The only deals that I knew very little of their financial information about were the ones who had no lending hiccups, and who I could safely assume had an 800 credit score and loads of cash in the bank.
It can become really overwhelming when you get down to comparing builders; so much so that you’ll probably end up only comparing incentives because you understand numbers. In fact, a lot of builders are hoping you’ll do just that! But does it really matter if Builder A is willing to give you $20,000 in upgrades while Builder B will only give you $5,000 if you’re having to add $30,000 to Builder A’s home just to get it comparable to Builder B?
You’ll probably even hear a sales rep or two say “It’s not like comparing apples to apples,” if you ask how they stand up to Builder B. You do have several tools at your disposal to make comparing the builders easier, if you know how to use them, and it’s not the incentive. Put the incentive away for later!
Start with the Standard Features Sheet, Included Upgrades, or whatever else they’re calling it. Every builder should give you a page that states what all is included at the base price, or “for free.” Don’t be afraid to get a little nerdy and create some kind of a spreadsheet for your top 3-5 choices so you can really line up who is giving you what. Then, assign a dollar item to those upgrades that some include but others don’t and subtract that from their Incentive or discounts to make them all really compare apples to apples. Now, who is offering the better deal? You may be surprised that it’s not actually the builder with the biggest incentive.
Other items to take into account while comparing: lender incentives (with and without their lender), what is included in the warranty (ask to see a warranty manual), brand names they use and how they hold up over time, and energy features.
***Pro-Tip: when assigning a dollar value to an upgrade, get it directly from the builders in writing! If it’s something commonly asked for like granite, or wood floors, that sales rep should at least know a good estimate. Every builder will be different with up to a 40% swing on upgrade prices so get them individually. There is literally no rhyme or reason to why some charge more for some things but not others. If they will not give you pricing before you contract, walk away, don’t do business with them. You want it in writing so that you have the number when you contract. If something comes in much higher than the sales rep quoted, make them stand by their original quote.
The other way to compare builders is by researching reviews. You probably read reviews on the last phone you purchased, researched safety features of your car, and probably even read reviews before booking your last vacation hotel, so of course, you should do this before buying a new home! The internet is a powerful tool, and you absolutely should use it, but you also need to understand what you’re looking at. People are far more likely to post the bad over the good, so keep that in mind when researching reviews. Every builder will probably have something bad out there about them, take the onesie-twosie remarks with a grain of salt.
What you’re looking for are trends. If you come across page up on page of reviews about builders not honoring their warranty, cracks in walls after closing, etc. you need to pay attention to those, especially if those remarks are showing up in your particular area.
Take a walk around the neighborhood and meet your potential new neighbors. I used to love it when my prospective buyers did this because I knew, for the most part, my closed buyers loved me and would ease any concerns a customer had about me with ease. Likewise, if I had a competitor that no one liked in my community, their buyers would be sure customers heard every detail of their bad experience.
What do you do if you still really want that home and the builder has bad reviews? Grill that sales rep, and ask to speak to a warranty representative or manager who can give you more information about those specific issues. Don’t be afraid to walk away if they don’t give you an answer that makes you comfortable. If you have to walk away, its because you were not meant to be in that house and there is a better one waiting for you!
While some master planned communities continue for years upon years, most are only 3-5 year build out plans. If you’re considering a smaller community, take a good look around at the resale in it. If the community is under 3 years old, you shouldn’t see a whole lot of turn over at that point. Sure, things happen and people are relocated or life circumstances change, but if there is a home for sale on every street, people are trying to get out. Try to find out why!
It would also benefit you to walk through those homes when they’re being held open. Doing so will allow you to see what a realistic finish out looks like for the community. The model homes are beautiful, and are designed to “WOW” all those who walk in, but can you afford all that bling? Probably not! If you can, is it smart in that particular market? What are people actually putting into their homes? Check out a few resales to find out!
Likewise, how many rentals can you find in the community? Investors approach builders constantly trying to get them to sell off a bulk of inventory for lower prices. This will kill your appraisal weeks before you’re set to close, forcing you to make up the difference, and will hurt your resale value for the long term. With the exception of the market crash of 2008, I was rarely allowed to sell to investors. Occasionally, one or two would sneak in without telling me, usually on a completed inventory home, but if you see more than a small handful of rentals in a brand new community, you can bet that one of the builders is dumping homes off to investors. Don’t buy there.
Most builders have some form of advertised incentive. Sometimes these are corporate generated, which you’ll see published on their website, but many times these are community specific. Managers will take the price of the home, and the average amount people add in upgrades and use that to figure out a bottom line. Things like incentives and commissions will then be added on top of that bottom line. Most of the time, my managers at each builder would tell me “you have X percent to play with” or “your incentive is up to $15k.” I would then structure my community incentive around that. If I was working with $15,000, my incentive would be around $10,000 so I’d have room to negotiate from there.
With the exception of a few “take it or leave it” type builders or new community openings where the demand is super high, you will have anywhere from 2-5% on top of the given incentive to play with. You need to use this to get what you want in the negotiations, and you need to package it in a smart way. The reason why you see most builder incentives tied to upgrades is because they mark upgrades up a lot more than the base house. Giving you $10,000 in upgrades may only cost the builder $6,000. So, you’re going to get more by asking for more in upgrades than you will if you just ask for $5,000 off. Not to mention that your $5,000 over 30 years is really a drop in the bucket on your monthly, so only works for you if you have to get that price lower for your loan qualification (but please don’t max your loan out! That’s another topic for another day!).
When negotiating your extras, it is also important to go to that builder with the facts in check. Any sales rep who is remotely good at what they do shops their competition regularly. I would recruit a friend or a new hire at least every 3 months to go and shop my top competition, getting their features, incentives and even finding out how far they can push them in negotiations. If a customer came to me and tried to negotiate another $20,000 off because the other builder was offering that, I knew with pretty certain accuracy if that was feasible or not. If I wasn’t sure, you could be my assistant was headed out to figure it out ASAP. If they know you’re bluffing, you’ve immediately lost the negotiation.
It always amazed me at how many people would sign a contract without reading it. By signing a Real Estate contract, you are legally binding yourself to purchase that home. You need to know what you’re getting into. However, with 40+ pages stacked up, it’s easy to look at that sales rep or your kids who are overdue for lunch, and think “I’m not going to be that guy, let’s just get this done.” Take it home. Study it. Really think about it. Once you sign, the odds of getting your money back are slim to none!
As you read through the contract, you need to pay attention to what you are obligated to and to what the builder is obligated to. Chances are they aren’t obligated to much, and you’re obligated to a whole lot. What happens when something goes wrong? At what point can you get your money back? What if the home doesn’t appraise? Once that train starts rolling and they have your deposit money, you could be out tens of thousands of dollars if you want to back out next month.
Send the sales counselor and your Realtor any questions you have about it BEFORE agreeing to a final number.
How many homes have you bought and sold over your lifetime? Very few, I’m sure, and if you have sold very many, you’re probably not reading this anyway! I know a lot of Realtors get a bad rap, but you really should use one who has lot of experience with new homes to complete your transaction. An EXPERIENCED Realtor who knows what they are doing will know the right questions to ask, where to push for more, and where to back off. They will also help you along the way to understand what is normal and what isn’t.
Just like with your builder, research your Realtors, and even interview a few. They are bound to represent you and your best interests. You don’t want to use one you randomly met somewhere without knowing they come highly recommended. So many times people would tell me they weren’t using one because their last one didn’t really do much. My first question to them was “well, where did you meet the last one?” Most often it would be in an open house, or they received a flyer from them. They didn’t research the agent and find out their stats on helping buyers first, so no wonder they wound up with a dud!
Whatever you do, do NOT fall for the “Oh you don’t have an agent? I’ll give you 3% off.” Or “I’ll put this agent on the deal and they’ll give you their full commission.” trick!!! (Unless that agent happens to be very well known for taking care of their customers). Once a Realtor is not being paid for the work they do for you, they are no longer working for you. They are working for that builder. I always made sure, when recommending Realtors, that it was someone whom I knew personally, and would not hesitate to use on my own home, but I still advised that my customers interview several agents and see if they clicked someone.
Do NOT let whatever kickback you do or do not receive from an agent become part of your negotiation. If they want to give you something, that’s wonderful, but do not let that make or break your deal.
Once you sign, set aside some money to hire 3rd party inspectors and have your home inspected at at least the Pre-Sheetrock and Completion Stages. Most builders have city inspectors that come out and a few other 3rd parties but those are bound to the builder, and they’re just one dude looking at a lot of frames each day. In over 10 years, I never had a buyer’s inspector walk a home and not find a few things that needed attention. Sometimes they were minor, but other times they were huge oversights!
Make sure you have direct contact with the actual Builder. Once your home starts, your sales rep is more or less out of the picture. You need to communicate directly with the builder. If the company requires you to go through the sales rep, think twice about signing.
DO NOT rely on the initial completion date and plan your life around it. Building is extremely unpredictable. It relies on perfect weather, trades to show up when they say they will, money to show up when it should, and the right products to arrive and not the wrong ones. Delays and mistakes will happen. Do NOT… I repeat, DO NOT, plan to be out of a lease, or your current home, or hotel, or to have your things out of storage on your close date. If you make that your plan, I promise you it won’t happen. Your loan will blow up, the home will fail inspections, or something else will happen that will cause a delay at the last minute. I don’t know what it was, but every one of my buyers who gave themselves at least 2 weeks buffer room, always had smooth closings!
Do you have your great-aunt’s dining set that is huge and you cannot part with it? Is your 13-year-old sleeping in a family heirloom, king-sized bed?
you will never make a new home fit to your old furniture. Builders are not designing homes for the ways that people lived 20+ years ago. Your great-aunt’s set that needs a 17×20 dining space is not going to find a home with a production builder. You may need to consider an older fixer-upper if you really have to hold onto it.
That being said, if a builder is still offering plans with huge formal dining & living spaces that do fit Great-Aunt Martha’s dining table, fireplaces in the middle of the room, closed off kitchens, or anything else that was popular 20+ years ago, you can guarantee that they have not refreshed their plans. They may tweak a thing or two here and there but they have not invested in a whole plan refresh and are out of touch with buyers in your market. Odds are, you won’t find too many modern touches at the design center either, and if you do they will be really expensive!
Visit your home regularly but not too regularly. Limit yourself to once a week or every other week. It’s easy to want to go out every day, but then you get caught up in everything that’s wrong and miss everything that is exciting.
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