馃攳
Buying New Construction: What You Need To Know - YouTube
Channel: Win The House You Love
[0]
Hey, Kyle here with
winthehouseyoulove.com today.
[2]
We're talking about the ins and outs
of purchasing a new construction home.
[6]
So you're going to learn
three things in this video.
[9]
Number one, we're going to
talk through the process.
[11]
So what's the order of everything
that's going to happen.
[13]
Number two, we're going
to talk about the numbers.
[15]
So what kind of down payment,
earnest money, and rate are you
[18]
going to expect in new construction?
[20]
And then finally, we're going to talk
about incentives of purchasing with
[23]
new construction over an existing home.
[27]
So let's go ahead and dive into this.
[28]
We first need to talk about the difference
between new and existing and specifically
[34]
what we're talking about here in this
video is we're talking about a home with
[41]
a builder who already has a home built.
[43]
It's a prefabrication and normally
what you do is you go, you talk to
[47]
them and you customize the home and
then they build it and then you buy it.
[50]
Okay.
[51]
This is not for custom built homes.
[54]
Okay.
[54]
So, what do you need to first consider
is looking around and exploring if
[60]
building a home might be a very similar
price to purchasing, especially in
[65]
this market when home values are
continuing to grow and grow building
[69]
might actually be very similar.
[71]
I have a video that I'm going
to link at the end with Scott
[74]
Smith, sharing his experience of
purchasing a new construction home.
[79]
And he actually talks about how building
was actually the same cost as purchasing
[84]
a home for the exact same specs that
they were looking for in their area.
[88]
So consider as an option building
might not be as far out as you
[91]
expect, especially if you're not
going with a custom build routes.
[96]
Okay.
[96]
Now, what you also want to do, is you
want to talk to an agent about how
[101]
a build might have a resale value.
[104]
Okay.
[104]
And this is all going to
depend on your market.
[106]
It's impossible to say as a blanket
statement, all builds are better
[111]
than existing homes or all existing
homes are better than builds
[114]
in terms of the resale value.
[116]
It's just not a fair
comparison to do that.
[118]
So talk with a real estate agency,
see if that market is expanding and
[122]
growing to make sure that if you
purchase a new home, and you're going
[125]
to be in there for a couple of years
that you'll see that value come back.
[129]
All right.
[129]
So before we dive into the
next one, what I want to do is
[131]
jump into a quick CalmMoment.
[133]
And the reason why is because if you're
looking at a new build, you're probably
[137]
feeling the pressure of the really
low inventory happening right now.
[142]
We are in a crazy sellers
market nationally.
[145]
And this is where sellers have
the control, home prices are
[148]
continuing to increase and there
aren't a lot of houses available.
[152]
So if you're putting in offers,
you're probably seeing multiple
[155]
offer situations, you might be
getting beat out by other buyers.
[158]
And if so, I don't want you to look
at construction or new construction
[163]
just as this last ditch effort
to try to get the ball rolling.
[166]
It's okay to slow down, to put the
brakes on things if what's happening
[169]
right now isn't working for you.
[171]
So if you're in that situation, explore
new construction as an option, but
[175]
don't feel like you have to push into
anything that's available just because
[181]
you're feeling discouraged by what's
happening in the market right now.
[184]
Okay.
[185]
So we covered new versus existing.
[188]
Now what we need to
tackle is representation.
[191]
So when you're looking at getting a
new build, you could go with a realtor.
[195]
Or you could just stick
with the builders sales rep.
[198]
So normally when you talk with
the builder, you're going to be
[200]
interacting with the sales rep.
[201]
So it's the person who
works for the builder.
[203]
They represent the builder.
[205]
All right.
[205]
So if we're talking about who do
they represent, it's the builder.
[207]
And what they're going to do is they're
going to talk with you about customizing
[210]
and the process and everything like that.
[213]
So what you want to be careful of,
or be mindful of is that you're
[217]
not getting pushed into any upsells
from a sales person like this.
[223]
So consider using a realtor.
[226]
Now, what you can do is you can
actually talk to the builder and say,
[229]
Hey, if I don't use a realtor, is
it possible to get any cost savings?
[234]
Because sometimes builders will
actually build in the cost of paying a
[238]
buyer's realtor in the purchase price.
[240]
So if you're not using a realtor,
they might be able to decrease
[243]
that purchase price for you.
[244]
It's not a guarantee,
but it's worth an ask.
[246]
Just know that a realtor does have a
significant benefit for you, especially
[250]
considering how much earnest money
might be required in the build.
[253]
And we'll talk about that here in a
second, but a realtor is going to help you
[256]
navigate the process, help you negotiate
incentives or credits, and really make
[261]
sure that you're represented through
the contract the entire way through,
[263]
because it can be a little overwhelming
to manage this all by yourself.
[268]
Okay.
[270]
So, what you also want to do
during this stage is you want
[273]
to ask a lot of questions.
[275]
So basically anything that you see,
just ask questions, either that's to
[278]
your realtor or your sales rep, the
more that you can understand about
[281]
the process, the more potential you're
going to have to make sure that you
[285]
have a not an overwhelming time or a
stressful time, and you might be able
[289]
to explore extra credits or incentives
as you walk through that process.
[293]
Okay.
[294]
So that is a huge benefit of being
able to ask these questions is you get
[299]
to explore, especially with a sales
rep, if there's any extra credits
[303]
that they might have when you are
looking at building maybe potential
[308]
add-ons or concessions that they'll
give you towards your closing costs.
[312]
So.
[313]
You've chosen your representation.
[315]
So who's going to represent you a
realtor or as a sales rep, going to be
[318]
the main person you're working with.
[320]
Then what you want to do is you
want to customize that home.
[324]
Now, not all builders are going
to have customization options,
[326]
but most are going to allow you
to choose from a few selections.
[331]
So obviously you're not custom
building a home, but you might be
[334]
able to choose a couple, maybe out
of three kitchens, you get to choose
[339]
an option or, you get to choose
flooring out of four different options.
[344]
Maybe you get to choose a
couple of different layouts.
[346]
Okay.
[347]
So there's a little bit of
customization that can go on here.
[349]
And what you'll want to do is
you want to talk with that sales
[352]
rep about your customization.
[354]
Now this process probably is
only going to take about an hour.
[357]
It's not going to be super in-depth
because again, you only have a
[359]
few options to go through here.
[362]
Now what to be careful of is a
lot of these builders are going
[365]
to advertise to get people to come
into the door and see their homes.
[369]
So you'll most likely see these
ads where it says, you know, new
[372]
homes starting in the $200ks.
[374]
now obviously that's going
to be the base model.
[377]
It's probably not going to
have any added things to it.
[380]
The models that you actually go tour
in the very beginning probably are not
[384]
going to be the one that's $200,000.
[386]
So be very careful that when you're
exploring these homes and you're
[391]
actually going in and seeing them that
you understand what the value of that
[395]
home is and what it's being sold for.
[397]
Because just because it says it starts
in the two hundreds, that might not be a
[400]
home that you want to purchase, because
it's probably a very bare bones model.
[404]
So with that you want to
watch for expensive upgrades.
[407]
So upgrades are fine, right?
[409]
Because if you're looking at a home
and you know, a neighborhood that's
[412]
starting in the two hundreds, most
likely though the average home is
[416]
probably going closer to 300,000.
[418]
So you just want to be careful that
you don't get so far in the process
[423]
and then realize, Oh, the home that
we actually toured as a lot more
[426]
expensive than the $200,000 price
tag that we saw on the street.
[431]
Okay.
[431]
So make sure you're touring several
different models that they have.
[437]
And also maybe look at touring
several different types of builders.
[442]
Okay.
[443]
You might have one neighborhood
that's being developed over here,
[446]
but you might also have another
development growing across the street.
[451]
Even if you know you're wanting to
stick in one specific development
[453]
or one specific builder, it might
be worth it just to explore what's
[457]
happening in your local market.
[460]
And then finally be patient through this
process, because as you're customizing
[464]
it, and every lender is different,
all of these prefab lenders are
[468]
different, but I'm sorry, not lender.
[470]
Every builder, every prefab
builder is a little bit different.
[474]
So, you might get through the
customization phase and then
[477]
you might have to wait months
like six to eight months before
[480]
that home actually gets built.
[482]
So again, this is where you can talk
with that sales rep or with your
[486]
realtor, get a realistic idea of what
you can expect through the process.
[491]
Okay.
[491]
So then you have your deposit.
[495]
Now, each builder is going
to be different, with the
[500]
contracts that they have.
[502]
But what we first want to understand
is is this home a prefab or is it not?
[507]
Sometimes the new construction
isn't necessarily sold by a builder.
[511]
It might be sold by an independent party.
[513]
And if so, then they might not have
an earnest money requirement, but
[516]
most often, if it's sold by a builder,
normally in their contract, they
[521]
want to have earnest money deposited.
[524]
Okay.
[524]
Or a builder's deposit.
[526]
They're the same thing.
[527]
Basically what it's doing is you're
putting money up front to say
[530]
you're going to follow through with
the contract because keep in mind
[533]
what's happening with the builder.
[534]
The builder is actually the one who is
financing the construction of the home.
[539]
You're only purchasing the
home after it's billed.
[542]
So they could go build this home for you.
[544]
It's not custom, but you selected options.
[546]
And maybe some upgrades that were
more expensive for them to put in.
[549]
And then if you walk away at the end,
they now have this home that they have to
[552]
try to sell and find another buyer for.
[555]
So that money commits you to
that contract with that builder.
[558]
And make sure you read in there to see.
[561]
Is there an option for you to get
out of this, and get your earning
[564]
earnest on money back if you need it.
[566]
And this is where having a realtor can
be helpful because they're going to
[568]
help you negotiate and, and figure out
the way that, you can protect yourself
[573]
if you need to in that contract.
[575]
Okay.
[575]
So, again, all builders are different,
but you're probably going to run into
[580]
an earnest money deposit around 5%.
[583]
Now this is a lot higher than the average
that you see on an existing home purchase.
[587]
An existing home purchase
is closer to the 1% range.
[591]
New construction is going to
be closer to the 5% range.
[594]
It could be higher or lower
depending on the builder.
[599]
So now let's talk about the loans
you're going to get with this.
[602]
A new construction loan is
what's called an end loan.
[606]
So think of loans in kind of two
different categories for right now.
[609]
On one side, we have construction loans
and the other side, we have end loans
[614]
and think of an end loan as, you know,
it's the category of the four main
[619]
types of loans, Conventional FHA VA, and
USDA, a construction loan is going to
[625]
be a loan that's going to actually fund
the construction during the process.
[628]
So it's going to give money to,
the contractors to do the work.
[634]
Then once the building is complete,
then you have a loan that takes over
[639]
after the building's actually complete
for the rest of the term, which is,
[643]
you know, maybe 15, 30 year mortgage.
[645]
Okay.
[646]
So what we're talking about
here is actually an end loan.
[649]
So new construction loans you can
purchase with any loan that you can
[654]
purchase a regular home with, right?
[656]
Conventional, FHA, VA, and USDA.
[660]
And they're all going to be the exact
same rate that you get on an existing home
[664]
and the exact same downpayments that you
would get on an existing home as well.
[668]
So if you're a veteran, you can go
0% down on a new construction home.
[672]
If it's in USDA eligible area, you can
go 0% down on a new construction home.
[676]
So this is fantastic.
[677]
You don't have any special constraints
with this new construction.
[681]
Now, if you're getting an actual
construction loan, so maybe you're
[684]
working with a custom builder, then
you're probably going to be seeing
[688]
a larger down payment, closer to 25%
to 35% down on a construction loan.
[694]
But since the builder actually
financed the building of the
[698]
home until it was complete and
we're just taking an end loan.
[701]
We can actually just use a regular loan.
[704]
Okay.
[705]
So the builder funds the construction.
[707]
Now, something you want to
keep in mind is the builder
[710]
normally has an in-house lender.
[713]
And since they have a partnership,
you normally can actually get
[715]
incentives from that lender.
[718]
Sometimes it's incentives
in closing cost credit.
[722]
So maybe the builder or the lender
pays a portion of your closing
[724]
costs and the incentives might be.
[727]
In terms of, discounts that you get on the
home or add ons that you get on the home.
[732]
So for instance, I've seen, if
somebody uses the preferred lender
[737]
that, you know, they would get
like a $4,000 add on, in a kitchen.
[742]
So you get incentives.
[743]
And this is where you want to talk to your
sales rep or your realtor about hey, can
[747]
we explore what options we have available,
when we work with these two together.
[753]
Okay.
[753]
So, I know that anytime we've tried to
go up and compete with a loan against a
[759]
builder, or with a builder's preferred
lender, it's incredibly difficult.
[763]
They have a relationship
that's a lot tighter.
[766]
And since they, often are kind of
owned by parent companies, they can,
[772]
do elements of some revenue sharing,
which allows them to cut down on
[775]
some of their margins a little bit.
[777]
So.
[779]
That being said, this is a
good segue into our sponsor.
[782]
Might be worth a look if you are
looking at a preferred lender
[786]
or an outside source as well.
[788]
The simplest thing you can do is
compare rates from multiple lenders.
[791]
So the following is an advertisement
from our sponsor, Credible that
[795]
operates a mortgage comparison website.
[797]
At Credible, you can check pre-qualified
rates and no charge to you.
[800]
Because there are multiple lenders
competing on Credible's marketplace
[803]
you can compare great rates and choose
the loan option that's best for you.
[807]
It's simple, just visit Credible's
website, enter a few pieces of
[810]
information, which takes just a few
minutes and then Credible will present
[813]
you with actual pre-qualified rates from
different lenders so you can compare.
[817]
Credible's pre-qualification
process is easy to use.
[820]
It takes only a few minutes and
checking pre-qualified rates
[823]
doesn't affect your credit score.
[824]
So if you want to learn more and
see what mortgage rates that you may
[827]
qualify for, check out the link to
Credible.com and the description below.
[832]
So Credible, it does pay Win The
House You Love an advertising fee
[836]
when you submit a prequalification
request, Credible Operations, Inc.
[839]
NMLS 1681276, not available in all states.
[842]
So you went ahead and
you got representation.
[846]
You customized things, you put your
earnest money down, and now the
[850]
building is actually going to start.
[852]
And again, this is not a custom
built home, but probably the
[856]
building isn't completed yet.
[858]
All right.
[858]
So a general contractor is
going to be working on actually,
[861]
putting your home together.
[863]
And, again, at the end, I'm going
to link a video from my friend,
[867]
Scott, who just went through
purchasing a new construction home.
[870]
And one of his biggest pieces of advice
is to develop a good relationship
[875]
with the general contractor.
[876]
The general contractor is going
to be the one who's out there,
[879]
overviewing the build for you.
[880]
So they're going to be finding any
problems and correcting that for you.
[884]
So establish good rapport with them.
[886]
Connect with them in the beginning.
[888]
Just let them know that you're
there and, you'd love to be a
[892]
little bit part of the process.
[893]
Obviously don't annoy them.
[895]
Don't, you know, always follow
up with them every week, but
[898]
stay in good touch with them.
[899]
Keep good communication.
[901]
And most likely you'll actually
be able to visit the site.
[905]
And it might be worth going out to
the construction site you know, once
[909]
or two times just to explore how
everything is coming along, because
[913]
you're most likely going to be eager
to move into that home very soon.
[917]
Now, tax assessment, this is a huge
thing that people do not realize
[922]
when they purchase new construction.
[924]
All right.
[924]
So when you pay property taxes,
you're paying based on the
[929]
assessed value of the home.
[931]
All right.
[931]
So if somebody came out and they
assessed the value, and then you pay
[935]
taxes based on the assessed value.
[938]
So this only happens normally once
a year, your home gets reassessed.
[943]
So keep in mind that home, when
it was last assessed was, most
[949]
likely just a plot of land.
[951]
So it's value is very low.
[953]
And so there aren't a lot of
taxes requiring to be paid on it.
[957]
Now.
[957]
When that home is built and he
gets reassessed, that assessed
[960]
value is going to skyrocket.
[962]
All right.
[963]
And now you're going to
have a larger tax bill due.
[965]
So where this trips up people is,
they'll close on their loan and
[969]
see the monthly payment without
having the new tax value in there.
[973]
And there's no way really for you
to, you know, for a lender to put
[977]
in and collect escrows of what they
think your taxes are going to be.
[981]
They're going to go
off the assessed value.
[983]
So keep that in mind.
[985]
What might be beneficial for you
to do is to, maybe talk to people
[989]
who are already in that development
who have been there for awhile.
[992]
Talk to the sales rep, get an idea of
what taxes are going to be, because
[995]
you're not going to be able to estimate
them on your own and your lender won't
[998]
be able to estimate them before you.
[1000]
What you'll have to do is be prepared
for when that bill comes due.
[1003]
Because the last thing that you want
is to expect, Hey, our taxes were only,
[1006]
you know, 30 bucks a month, but in
reality, they're closer to $400 a month,
[1011]
$500 a month because your assessed
value went up after it got reassessed,
[1015]
because it went from a plot of land to
now land with a new home on top of it.
[1020]
All right.
[1021]
So cross out that section, and
then finally, what we want to do
[1025]
is we want to manage expectations.
[1028]
So when you purchase a new
home, it doesn't mean that
[1031]
it's going to be perfect.
[1032]
All right.
[1033]
Even a new custom built home that's
a million dollars is going to
[1036]
have things that's wrong with it.
[1038]
So you need to have those expectations.
[1040]
So this is where it's really
helpful to hold on to anything
[1042]
that the builder gives you about
any warranty that you might have.
[1046]
And it might be really good to have to
go with a warranty option if they give
[1050]
it to you, even though it's a new home,
you want a warranty to cover things if it
[1054]
wasn't installed correctly, or there are
just some things that need patched up.
[1058]
Okay.
[1060]
So, if you want to hear, some firsthand
experience of someone who's actually
[1064]
gone through new construction recently,
this video over here is going to be
[1069]
a video from my friend Scott, and he
just went through this with his family.
[1072]
He's going to cover some of
the ins and outs for you from
[1074]
his firsthand experience.
Most Recent Videos:
You can go back to the homepage right here: Homepage