Pitfalls of Buying New Construction

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As an agent representing a buyer on new construction there will be a different set of worries that will cross a buyer’s mind and therefore your plate.  Today I am outlining what I have experienced over the years.  

#1 Price.  The fear of overpaying is a big concern with new construction. If your client is one of the first to purchase in a new community or a complex and there is not a flurry of sales activity once you enter contract it will jar the client and make them feel that they overpaid.  How to approach this is simple, request a price adjustment.  If the builder refuses, your client can choose to walk or choose to move forward with the purchase.  Do not justify the price they paid or articulate why they should not ask for an adjustment. Remember, they are your client and you work for them and a property’s value is what the market is willing to pay for it.  This guideline applies to asking for upgrades and any other perks the buyer wants to ask for.  Certainly, if it is not within reason, you can let them know it’s a long shot but you are willing to give it a go.

#2 Inspections.  Many builders or agents will say there is no need for inspections because it is new construction. In my experience my inspectors have found more major problems with new construction then with a resale property.  For the simple fact that it has not been lived in (tried out).  Definitely advise your clients to get a home inspection.  A termite and pest control inspection will be less necessary for condos and townhomes however it will be valuable for single family homes because these inspectors test showers for water tightness.  I have had many reports come back with leaks in the pan (nails go through the hot mopped floor) and the whole shower is in need of replacement.  Not an inexpensive fix in a newly constructed high end home.  Additionally, an inspector will see things your eyes may have missed and it creates a great fix-it list for you to request of the builder.

#3  Perfection in every detail.  This is the toughest part of selling new construction in my opinion.  A home being resold can have missing outlet plates, scuffs on the floors and chips in the walls and a buyer will overlook them and chalk it up to normal wear and tear.  In new construction, a scratch on the floor, a crooked light plate, or a cabinet that appears dinged will be a show stopper for the buyer in contract.  The expectation is 100% perfection.  And who can blame them? It should be perfect if it was built with care.  Which we know with massive construction it often is not.  As an agent, go to bat for your client.  Have them walk their new home and note every detail that is not perfect in their eyes.  Turn this list into a repair request to the seller.  And navigate carefully with the listing agent and builder.  Hot tempers and emotions come with criticism of work. Skillful negotiation will be pertinent to hold the deal together and get your client what they want.  And keep in mind they may not get everything they want, so it will be critically important to set expectations.

#4 Senate Bill 800 New Construction Warranty and Defect Litigation

In 2002, Senate Bill 800 (“SB 800”), was created to protect the purchaser and the builder of new residential construction sold on or after January 1, 2003.  Codified in California Civil Code Sections 895 through 945.5, you may also see it referenced as Civil Code 895.  The short of it is, the builder is required to provide the homeowner with a minimum one-year ‘fit and finish’ warranty to cover cabinets, mirrors, flooring, walls, countertops, paint and trim.  Some builders will provide a more extensive warranty so ask what you are getting before you close escrow to be sure you and your clients know when to call the builder for repairs or help.  There is also a new construction home protection plan that can be purchased through a provider that will cover years 2 through 4.  I always request this in the offer because it provides a nice extra plan for the buyers and is not a large expense for the seller.


Link to article on Tracy's Blog...http://losgatosliving.tumblr.com/post/156861188680/pitfalls-of-new-construction-purchases