New home communities are more popular than ever! For good reason: New home builders are using popular open floor plans, which include appliances, lawns, and blinds, and help make it easier than ever to get into a new home with little or no money. New home transactions also often seem much easier. If a buyer so wishes, he could conduct a new home transaction without contacting anyone except the on-site listing agent! However, this would expose you to HUGE losses. Follow these simple steps to protect yourself in a new home transaction and ensure yours is a success.

1) Use a real estate agent who has experience selling new homes

Many people think that they can save money by not using or needing the services of a real estate agent when buying a new home. This could not be further from the truth! New home builders usually try to monopolize a transaction: they only give you their attractive incentive packages if you agree, in writing, to use your lender, your title company, and sometimes even your insurance company! A real estate agent will guide you through the transaction and make sure you are protected every step of the way. If you’ve agreed to use the builder’s lender, your real estate agent will make sure you get a fair interest rate and fair closing costs. Your real estate agent will know what the industry standards are and will make sure the builder doesn’t try to go beyond them. And best of all, a real estate agent with many new home transactions under their belt will have established relationships with their home builder. Because of this, the home builder will be on the “best behavior” of it. The home builder does not want to risk getting a bad reputation in the real estate community, which can potentially bring the builder many home buyers in the future.

2) Do not sign ANYTHING until you have worked out every detail of the sale

Buying a home can be very emotional, and it should be. You are not simply choosing a house; you are choosing where you will spend your holidays next year, where your parents will come to visit you, and where you will raise your children. However, the on-site listing agent will try to take advantage of this excitement and get you to “write the contract so no one else can get your house.” That’s fine, as long as you understand what you’re signing and everything is okay with you. Just remember: no matter what is said, everything will be done as described in the contract.

3) RECEIVE A HOME INSPECTION!

Most people who buy new construction homes don’t bother to get a home inspection. Most new homes come with a one-year “bumper-to-bumper” warranty that includes everything, and many buyers feel they can find out for construction flaws during those 12 months. The problem with this mindset is that many problems won’t arise until well after 12 months. Remember, your home was built by humans and humans make mistakes. And, no matter how much experience and reputation a builder brings to the table, it’s still nearly impossible for that builder to double-check every piece of work their subcontractors have completed. A licensed inspector will go through a very comprehensive checklist to make sure everything has been accounted for. At a minimum, get an inspection so you can sleep soundly at night, knowing that an independent third party has given your new home its stamp of approval.

4) I do not agree to use your lender

Production builders (builders who can develop entire communities on their own) are now large corporations, many of which are publicly traded. Corporations have realized that there is much more money to be made than simply selling you your new home; they will also try to sell you a loan. Builders will offer HUGE incentives to get you into your new home, sometimes up to 15% of the home’s value. However, they will usually put a BIG stipulation on those incentives: use your lender. There are many problems that will arise when you get stuck with a lender: higher rates and higher closing costs are the two biggest ones. The sales associates on the site will usually tell you that your hands are tied, you should use your lender to get the incentives. I can tell you from experience that this is rarely the case. Remember, the builder’s job, first and foremost, is to sell houses. If you refuse to sign on the dotted line unless this provision is removed, you will be successful, more often than not. On rare occasions, a builder will lose sight of the fact that he builds and sells houses, and will absolutely insist that you use his in-house lender. In these circumstances, walk away, no house is worth taking out a bad loan and paying THOUSANDS more for that house in the long run.

5) Investigate the Builder

Most builders are “good” builders. They take simple steps to protect their neighborhoods. Research your builder, or ask your real estate agent if your builder follows these simple steps to ensure your neighborhood doesn’t instantly lose value:

1) Limit the number of investor purchases: This ensures that the neighborhood does not become a “rental” neighborhood and allows “pride of ownership” to shine through.

2) Continue to build homes of equal or greater value in and around the same neighborhood. Builders who avoid doing this create a “hole” in home prices and instantly devalue new home purchases.

6) Choose your appraiser

You are going to pay for an appraisal one way or another! The lender will require that you have an appraisal in order to lend you the money for the house! Also, most appraisers charge about the same for the service, so why not choose your appraiser? Ask around until you have been referred to a good appraiser and request that they perform the service. Order a copy and read it! Call your appraiser if you have any questions. This will give you in-depth knowledge of the market area, and is something you’d pay for, regardless!

7) Research City Plans

New neighborhoods are often on the outskirts of the city: land is readily available and less expensive, meaning you can buy a larger house for the same amount of money. In these suburban communities, it is very important to know what the city has in store for roads, zoning, public transportation, parks, and schools. These factors will determine whether your new neighborhood will become the next “big thing” or the next “cheap thing.” If you have decided to use a trusted real estate agent, your job will be easy! Just ask your real estate agent and he/she will be able to tell you a lot about the city plans that have been approved and the city plans that are still being talked about.

There are many benefits to buying a new home, which is why they are so popular! Insure and protect yourself in any new housing transaction by using qualified professionals to protect your interests. This will ensure that you will not only love your new home, but also feel comfortable knowing that you are a winner in the transaction!