Jim Gilbert 4501 Spicewood Springs Rd. Suite 1029 Austin, TX 78759 Phone: (512) 342-8744 Mobile: (512) 913-1557 Email Jim

18 Tips for Protecting Yourself When Buying a New Home


Here are some tips (things to think about) for protecting and educating yourself when you are considering the purchase of a new home.

  1. Work with a Realtor® who can represent you (putting your interests first) and guide you through the process. As in any real estate transaction, having a professional on your side is wise. New home builders have their own sales reps, whose job is to sell homes, not to look out for you. They have their own lenders and preferred title companies, and often seek to tie any buyer purchase incentives to the use of their lender and title company. Builders, especially in slow markets, will often offer incentives such as higher commissions or trips to Realtors® if their clients buy one of the builder’s homes. I always let my clients know if there is such an offer on the builder’s table, and will not seek to sell a client on a home that will net me a higher commission. The decision of which home to buy is always yours.
  2. Find your agent before starting to visit new home developments. New home builders often require that your agent accompany you on your first visit to their community. Your agent can then go with you or notify the builder sales rep that you are working with him. You will pay the same amount for a new home that you would pay if you are working with a Realtor®. Who gets the commission that a Realtor® would have received for serving you?
  3. Determine not to purchase more home than you really can afford. If there is any lesson from the mortgage crisis of the past several months, it is this: you need to understand your financial situation. You also need to work with a Realtor® and a lending professional who will counsel you with your interests at heart. How many people who are facing foreclosure now, or have recently been through this process, wish that they had been given better counsel before they signed on the bottom line? 
  4. Do not automatically use the builder’s preferred lender and title company just to get the purchase incentives that builder is offering. Compare loans offered by other providers. If the loan fees and terms are better than those you can get with the builder’s lender, negotiate getting the condition removed, or find another builder who will remove it. The builder is in the business of selling homes. A loan with higher fees and a higher interest rate will cost you big money in the long run—money that goes to the builder’s company.
  5. Make sure that you and/or your Realtor® can visit the building site if your new home as your new home is being built. For safety and insurance reasons, some companies do not want visits until the home is completed. It is best to look in on the progress to be sure, for example, that inferior materials are not being used.
  6. Understand the builder’s contract before you sign it. Understand what “outs” you have with the builder’s contract. Most people are quite unfamiliar with purchase contracts. In Texas, there is a standardized, state-mandated contract for resale properties. New home builders each have their own contract. This is another reason to have your lawyer, or at least your Realtor®, review the contract with you.
  7. Understand the warranty  (what is covered and for how long) on the home, and the process for obtaining warranty service from the builder. The State of Texas has established minimum warranty requirements for the construction of new homes. Get a copy of the builder’s warranty.
  8. Hire a home inspector. Trusting that the builder’s own inspector will look at the property with your interests in mind may not be wise. Some some builders do use a third-party inspector to check out their homes. Be sure to ask the builder who does their property inspections. New properties can have problems that the trained inspector can often find.
  9. Do a “walk-through” with the builder’s rep and your Realtor® at least several days before you intend to close on the purchase. The purpose of this event is to discover items that need attention or correction (repainting, caulking, broken tiles, incorrect appliances, etc.). This list of items, often called a punch list, should be agreed to and signed by you and the builder’s rep. If possible, do not complete the purchase until all items on the punch list have been completed. Ask for a final walk-through before closing.
  10. Check on property taxes. In Texas, new homes are taxed in the first year at the value on January 1st of that year. If the home is built on a vacant lot, the tax owed at the end of the year will be very low. Next year’s taxes will be based on the completed value on January 1st of that year. Unless your lender sets your loan payments with tax and insurance escrows that will cover the tax bill in the second year, you could be in for quite a surprise!
  11. File for a homestead exemption with your county appraisal district. Unless you live in the property on January 1st in the year of purchase, you cannot file until after the end of that year. I will be glad to provide the required form to you.
  12. Ask the builder how many units in the development are being sold to investors. Property values can be affected negatively in developments where there is too high a ratio of leased homes to homes used as the owners’ personal residences. 
  13. Get a copy of deed restrictions for the neighborhood. These documents will define what you can and cannot do with your home and property. If there is a home owner’s association (HOA), learn who manages the association and what is included in the fees that you will pay. HOA fees are mandatory in most cases. You can lose your home if you do not pay them.
  14. Review the survey for the property, noting the building lines on the property, and the utility and other easements that were established with the subdivision.
  15. Ask for a copy of the “as-built” floor plan and blueprints. These will be handy if you want to make any changes, and will be to your advantage when you get ready to sell.
  16. Understand the base cost for the home, and what builder-offered upgrades will cost. Builders make money from upgrades. You may want to do some yourself after you purchase the home, and not have the cost of upgrades or appliances included in your home loan.
  17. Do not let emotion rule your purchase. The good builder’s rep may tell you that you need to make an immediate decision to lock up the home you want. Do that only if you are satisfied with all the details of the transaction and understand that the contract once signed becomes a legal document.
  18. If possible, buy when the market for new home sales is slow. Builders will be more willing to negotiate price and will likely offer more incentives to unload their completed units. You may also get a better deal when a developer is closing out a new-home community.

"We love because He first loved us." (1 John 4:19, NKJV)

Jim Gilbert, e-Pro®, REALTOR®
Austin, Texas Real Estate Agent
Licensed by the Texas Real Estate Commission (#0536692) to sell Homes & Real Estate in Texas

   


4501 Spicewood Springs Rd., #1029, Austin, TX 78759 ♦ (512) 342-8744

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