FAQs About New Construction Answered By Regina Harp, a Specialist
When Choosing a Builder choose a 5 STAR
Builder!
When you choose Regina Harp & Team
as your New Construction Specialists, you are also choosing some of the
BEST Builders in our community that builds your NEW Custom Homes.
Here are some Frequently Asked
Questions. Just click on the questions you want answered and you will be
taken to my answer.
Should I build my
new home or purchase an existing one?
If you decide to build your new home, you
will have to wait about five months for it to be completed. You will see the
progress of the home as it goes up and see the imperfections as they happen (no
home is perfect). It can be a stressful time for you and the entire family.
However, the upside is that you will get the exact home, lot, floor plan and
finishes that you want. You'll also get to choose your color selections and add
any extras that you want to the home. Another good thing about buying a NEW
home is that the home comes with warranties that Louisiana law requires. The
upkeep/repairs on NEW homes are far less then an older home. Something I tell
my clients to consider is can they maintain the older home. Some of my clients
don't have the means to take care of the older home as things happen on the
home such as a new air conditioner, new roof, or hot water heater.
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Can I save
money by not using a New Construction Realtor?
My friends said I can save money by going
directly to the Builder and not use a New Construction Realtor, is that
true???
No. Remember, the compensation for that
Realtor's fees are already "built-into" the new home price! If no Realtor is
involved in the transaction, the money is allocated for a marketing fee and
staff overhead. Without the Realtor involved, the Builder and his staff is then
left to take care of all questions, paperwork, closing, selection of colors,
etc.
The biggest downfall to NOT having a New
Construction Realtor is that you don't have anyone watching out for YOUR best
interests in the building of your home.
A New Construction Realtor can advise you
on things that protect YOUR interests, such as the Builder's reputation, why
Builder A says this home will cost $130,000 and Builder B says it would cost
$140,000, does the wood flooring in my home really cost an extra $4000, or is
it really $2500...If you "The Buyer" can't answer these questions, it's in your
best interest to have a New Construction Agent that can!
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Why
does the same size home differ by thousands of dollars?
I've noticed in one subdivision a home can
be the same size, but the price will differ by thousands of dollars, why is
that?
Things cost what they cost... Like anything
else, a builder has his own ideas and styles for a home, be it curb appeal,
energy efficiency or providing you with a safe home.
Builder A may have put a lot of extras in
his home compared to Builder B...such as REAL plastered stucco, appropriate
tonnage on the A/C unit, HardiPlank verses Masonite Board, more brick on the
exterior, FULL security system verses a pre-wired security system, crown
moldings...plus lots more. What he puts into his home will determine what you
pay.
OR another scenario... one builder may have
sat on the home for a while and needs to "dump" it because the home is getting
stale on the market. If that is true, you may want to consider if it will
resale easily if you will only be in the home a few years. If not and you love
the home, make an offer and go for it!
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Does it matter how
much experience a Builder
has?
An experienced builder can usually detect
problems BEFORE they occur. And that is assuming that both "Builders" are out
in the field overseeing the construction of your home. If the Builder has
someone supervising the job, how experienced is the supervisor? The experienced
builder is usually more stable in his business and knows the costs of building
a home, so he's less likely to be coming to you for the extras he
forgot.
If the home is already built, then all you
have to really worry about is what did each Builder put into the home. The more
experienced Builder is typically more schooled in the products he puts on the
homes to prevent warranty problems later on.
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How do I know if a
Realtor specializes in New Construction? And
does it really matter if she specializes in new homes?
Most Realtors who "really" specialize in New
Construction will be able to answer your questions without running to a Builder
for every question you have. They usually know what subdivisions you can build
in for your size home, and they also know what new subdivisions are going to be
coming on the market and when. They can answer your basic questions on
construction of a new home and point out the differences between Builder A and
Builder B.
Does it matter?
You bet it does! I have had many buyers
change their minds on a home once I went in and told them what the differences
on two homes were. The buyers didn't realize that they were getting prefab
cabinets (particleboard), low insulation, etc. Some of the buyers wanted a
quality built home. Others weren't bothered by these things and went for the
lower priced home. Bottom line is without me as their New Construction Realtor,
they didn't KNOW what they were purchasing or getting in their new home.
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What is a
material lien on a home?
A material lien is filed on a home when
someone (say the plumber) does work on the home and doesn't get paid by the
Builder. The plumber then files a material lien so the new owner can't sell the
home until the plumber is paid. He has 70 days to file a material lien to hold
1st mortgage. However, he has a total of one year and 70 days to file a lien,
which would hold 2nd mortgage when filed after the 70-day material lien period!
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What is interim financing?
Interim financing is the construction loan
that a builder gets to build your home. He usually gets 4-5 drawings on the
loan amount and has to have the home built up to a certain point before he gets
each draw and parish inspection. Once he is done with the home, then the
buyer's permanent loan pays off the builder's interim construction loan. The
builder's interim loan is usually at a higher interest rate and he will be
paying about $40-50 a day once he has all of his draws. That is the reason he
doesn't want to delay building a home and pushes it through. (Example: Home
sits five days with no workers on it. The builder just lost $250 of his
profit).
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What does
pre-wired for security
mean?
This means that your builder has paid to
have the wire for a security system run throughout the walls and ceilings. This
usually also includes the contacts for each window and door, but make
sure!
A FULL security system means that the
builder has paid for the pre-wiring in the home AND the keypad, contacts, and
"brain" are all installed. The system is functioning already and you can choose
to get it monitored by an alarm company. If you don't get it monitored, then
the alarm will still go off, letting the neighborhood and you know there is an
intruder.
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How do I
start building if I already own a
home?
Your first step is contacting a reputable
mortgage company to see what you will qualify for on the new home. It's
possible that you could afford both homes and start right away OR you may have
to wait to sell your existing home first.
Once you have that number, you need to have
me come in and do a CMA (Market Analysis) on your existing home and see if you
have the equity in your home to go into another home. If you need $10,000 to
get into the new home, can you get that from the existing home if you don't
have $10,000 in savings, etc.
Once we figure out that this is a situation
that will work for you, we put your home on the market to be sold. And
depending on the Builder you choose, he may go ahead and start your NEW home as
soon as the existing home is on the market, if you're in a hurry!
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Can you
provide me with a list of Builders I can talk to?
Yes! I can provide you with a list of
Builders that you can interview. The Builders I recommend are reputable
Builders that do this everyday (not just build two a year)! They are Builders I
have worked with for awhile.
If you have other Builder names given to
you by friends and family and you want to interview them, I would be happy to
represent you by sitting down with you and the Builder to ask the questions we
need to ask to protect your interests.
Some "Builders" will tell you that you
don't really "need" a New Construction Realtor. The truth is you don't have to
use a Builder OR Agent, BUT you are paying the Builder for his services,
knowledge, and supervision on protecting your interests with all the
subcontractors that work on your home.
A New Construction Agent does the same
thing in protecting your interests with many people, such as the bank, the
Builder, the Closing Agent, etc. The Agent will talk to you about the place you
will put the home (Builders push their own subdivisions, regardless of if it is
a great place or not). Going to a Builder without your New Construction Realtor
is like going through a lawsuit case without an attorney there to represent
your interest.
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What is
the difference between all crown moldings?
A crown molding is the wood trim found
around the outer perimeter of the ceiling. Single crown is one piece of
molding, double is two pieces and triple is three or four pieces. The more
pieces there are, the more it costs.
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Is it
true that Builders won't accept an offer on New Homes?
No. If you like a New Home you saw, then
call your New Construction Realtor and have her put in an offer for the home.
You never know what a builder will or won't accept. And bottom line is, all the
Builder can do is say no or tell you what he will do.
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If I'm looking at model homes, may I bring my Realtor back to view
the home and help me assess the "pros" and "cons" of selecting a certain
home?
In our marketplace, both custom and
production builders welcome Realtors to accompany their client. It is often
better to have the Realtor accompany you on the first visit, or at least bring
the Realtor's card if your Realtor isn't present on your first viewing. Always
let the builder's agent know that you plan to work with your
Realtor!
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Shouldn't I
tell the Builder's Agent I don't have an
Agent?
Isn't it true that when the builder's agent
asks me if I'm working with a Realtor, it is to my benefit to answer, "No,"
because I might be able to buy the home for less without a Realtor involved in
the transaction?
No. The reason the Builder's agent is
asking if you have a Realtor, is so she knows all of the players involved in
the transaction. Remember the Builder is paying his Agent 3% commission and
will pay your Agent 3% commission. If you don't let the Builder's Agent know
you have a Realtor to represent your interests, then she will receive the full
6% commission. FACT: The Builder's agent represents the specific Builder's
home. Another FACT: Most Builders acknowledge that at least 80% of their sales
are made with the buyer being represented by a Realtor.
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Why use a
Realtor if I plan to buy new?
Remember, the compensation for that
Realtor's fees are already "built-into" the new home. If no Realtor is involved
in the transaction, the money is allocated for a marketing fee. The benefit to
you is this: in looking at the model home, it is very easy to want to include
every option the builder offers. If you do not have a budget in mind, it is
very easy to overdo it and select everything! However, most of us do need to
look to the future of resale, and your buyer's agent can help advise you on
what extras would meet the "like kind and quality" for the neighborhood you are
considering.
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How can I save
money letting a Builder build my home?
An agent told me that I could save money and
headaches letting her Builder build my home; how is that?
If Builder A goes into a subdivision and
buys a bunch of lots, he will get a better lot discount from the developer then
the other builders can get. So if Builder A gets a $5000 discount per lot, then
he can quote you $5000 less on a home then Builder B can.
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My friend
told me that I can save a lot by building myself. Is that
true?
My friend told me that I can save a lot by
building myself, but others are telling me it's not worth it, why?
Most believe that a builder is making tens
of thousands of dollars on a new construction home. That is false. On average a
builder is making approximately $9,000 on a 1600 living area and about $15,000
on a 2100 living area. The Builder will get better prices than you from every
subcontractor because he is doing 3-5 a month, verses your one home in five
years. He will also be getting very good subcontractors because he doesn't want
to deal with the headaches of a subcontractor messing up his home. YOU won't
know who is good and who isn't. You also won't know if the job was done
properly or not. In fact, on some things done on the home, you may not know if
it was done properly until years down the road.
Another thing you may not realize is that
if you build your own home and pull the Builder Permit in YOUR name, YOU ARE
THEN RESPONSIBLE FOR THE LOUISIANA STATE WARRANTY UNTIL IT EXPIRES! So if you
decide to sell the home and eight years from now the foundation cracks or the
roof starts sagging, you and your family will have to honor the warranty and
make repairs on the home you built regardless of how many times the home was
sold. The State won't care that you had no clue of how to pour a slab and hired
a bunch of bad subcontractors. By pulling the permit, you acted as a
professional Builder.
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Regina, you often mention
RED FLAGS, what are they?
This puts a smile on my face, because I do
often say watch for red flags when dealing with Builders. There are some
wonderful Builders out there, but there are even more out there trying to be
Builders.
RED FLAGS:
Mr. Builder can't
supply you with references of homes that he has built as custom homes.
Mr.
Builder hasn't built any homes in awhile.
Mr. Builder tells you don't deal
with your New Construction Agent anymore.
Mr. Builder tells you he's not
sure of what your allowances are right now and doesn't give you a written copy
of standard items in your home.
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Typically, what
percentage does a builder make on a house? - I came across your FAQ
section on new construction while doing a search on the internet and wanted to
say I was very impressed. Your FAQ's were very informative. If I were looking
into real estate and/or building in the Baton Rouge area, I'm sold as to who my
agent would be.
If you don't mind, I was wondering if you
could answer one question for me that you mentioned in your FAQ but I was
hoping for a little bit further explanation. Typically, what percentage does a
builder make on a house? For example are they making 5% over the actually
costs?
Regina's Answer was: Thanks so much
for the compliment! If I had to guess on an average with specs, I would say
more like 10%, but every builder is different on what they charge especially if
it is a custom home. Also understand that one 1700 living area with a lower
roof line, could be cheaper then one that is a "lumber eater", so the profit
can be influenced by these types of things as well as if the home has wood
floors or not, etc. Hope this helps.
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