How to Shop Wisely for a New Home -- Part One
Don't believe Mick Jagger — if you’re embarking on a journey to buy and build a new home, you can get what you want in your dream home.
The key is to do your homework first — and then to plan and organize your shopping process to ensure that your journey is rewarding, concise -- and most of all, enjoyable.
Builders and consumers who’ve bought and built a new home agree it’s fun, exciting and rewarding. Our goal is to demystify the new home shopping process so you know what to expect.
The key is simple: Ask plenty of questions. As you do so, you’ll learn which type of home, neighborhood and mortgage are right for you and better understand the exciting choices you’ll make -- including which new home community, builder, and lot is right for you -- and choices you’ll make to personalize your home.
When you’re looking at new homes, you’re in good company. According to the 2012 Profile of Home Buyers and Sellers from The National Association of Realtors, the majority of consumers considering another home consider new homes. That’s not surprising, since new homes offer:
• Open floor plans that reflect the way we live today, especially family rooms that open to the kitchen
• Bedrooms with larger closets and larger, more luxurious master baths
• Ceilings, countertops are often higher
• The latest advances in energy efficiency and significant cost savings compared to homes built just a few years ago.
• Your new home and the products it contains are brand-new and under warranty, meaning more time to enjoy your home, not work on a fixer-upper used home.
Many buyers also value the ability to personalize their new home to reflect your tastes in many ways, such as selecting your favorite colors and styles in cabinets, countertops, appliances, flooring and carpet, tile, kitchen and bath faucets and fixtures and more.
Given the many advantages of new homes, it’s not surprising they’re on the list for most home shoppers. And shoppers not looking at new homes may have a misperception.
“We find some people don’t even consider new construction because they mistakenly think it’s automatically more expensive or more complicated [than buying a resale home],” says Kevin Oakley, director of marketing for Heartland Custom Homes in Pittsburgh. “People tend to shop by excluding things, but they may miss out on a chance to own a home that’s perfect for them.”
For new home shoppers, here’s a roadmap of what to expect:
STEP 1: Calculate how much home you can afford.
We’ve anointed this as the first step, but there’s room for disagreement on whether the mandatory opening move is to determine firmly how much a lender says you can afford.
“I think it depends on the price point. If it’s a first-time buyer situation, (financing is) a great starting point,” explains Angie Colston, vice president of sales and marketing for Ryland Homes in Orlando and Jacksonville, Fla.
That said, some first-time buyers find that visiting model homes before nailing down financing is a reasonable alternative starting point because Colston’s company, like many builders, will help consumers calculate a realistic price point.
In Colston’s experience, people who have already owned a home — known in real-estate parlance as “move-up buyers” — possess a certain savvy about their price range and can go ahead and begin the shopping process, then arrange financing as they go along.
But Oakley of Heartland Custom Homes is more convinced that getting a grip on affordability is Step 1.
“People tend to pre-approve themselves for a mortgage without talking to a financial expert, and often they limit themselves unnecessarily,” he says. “Don’t limit your considerations by ruling out something because of financing matters that you might not understand.”
Generally speaking, builders seek a 20 percent down payment and may require clients to pay for the house in installments as construction progresses. Some builders offer mortgage financing, but as with any loan offer, it could pay to comparison-shop.
Adam Koos is a financial planner in Dublin, Ohio. He tells his clients that as a rule of thumb, a mortgage payment shouldn't exceed 25 to 30 percent of monthly income, and they should have a general idea of the cost of insurance, taxes, utilities, etc.
STEP 2: Define your needs before embarking on your hunt.
Creating a wish list that outlines your preferences -- and indulging in a little honest soul-searching before you start your house hunt – will both pay big dividends with a more focused and shorter search.
As you think about your wish list, it’s very helpful to separate your must-have features from the nice-to-have features that you’d like in your new home.
Think about your lifestyle. Are you into large lots, wide-open spaces and hiking trails? Or are you the high-rise condo with balcony type? While that’s a pretty extreme difference, it helps to think about ideal commute times, schools (better schools add value at resale, even if you don’t have children) and what types of infrastructure (shops, museums, restaurants, libraries and hospitals) you’d ideally like close at hand.
These factors should help you narrow down to a specific part of town. Next is to define the basic attributes of the home you desire. These include more than just the number of bedrooms and baths you want. Do you love to entertain or cook? Perhaps a large family room open to the kitchen is best.
Do you want a home office? A media room? Space for hobbies? All are vital questions to ask before you start your search.
Don’t forget to think about the future. The average buyer lives in a home at least 5-7 years. Many people stay far longer. Think through how your needs will change over the time you’ll be in your new home: Children may come, grow, or leave the nest. Post-college kids may boomerang back home for a time. Will a parent live with you at some point? Will you tire of climbing a staircase? If so, a master bedroom on the first floor may best meet your needs.
Dennis Webb, vice president of operations for Fulton Homes in Phoenix, says his average homebuyer spends at least four hours online. That’s smart. Today, you’ll find photos, floorplans, home and community amenities, videos, virtual tours and a whole lot more online. Your initial online search will save you loads of time -- and help you select the new homes that most closely match your criteria to visit in person.
STEP 3: Start your search on the web.
A so-called aggregator website, such as NewHomeSource.com, is a great place to start. With more than 80,000 new homes, builders and new home communities across the nation, NewHomeSource.com is the largest new home resource in the world. That breadth of new homes for sale allows shoppers to quickly get a feel for many new home communities and active builders in a given area.
While searching, keep your wish list handy. Eighty-thousand–plus listings may seem like a goldmine, but it can get daunting when a simple search in a market (Houston, in this case) nets you 9,221 new homes in 638 new home communities across several hundred square miles.
Fortunately, major real estate sites like NewHomeSource.com offer built-in filtering tools so you can refine your search based on your wish list. Filtering for your criteria (number of bedrooms/baths, minimum/maximum price, and features of your new home will allow you to quickly focus on homes that meet your needs. You can also filter for a specific school district or search for amenities of the new home community (such as a community center or pool and hiking trails) to further refine your search results,
So, you’ve narrowed down your search. What’s next? A great next step is to request information from a builder. Look for key facts on a specific builder’s homes in a given new home community. Other helpful info includes driving directions, contact information for the builder or community, a link to the builder’s own website and more.
Having defined your wish list, narrowed your search results, and focused on the new homes and communities that most closely match your criteria, it’s time to hop in the car and go visit model homes in person.
While shopping online is an ideal way to narrow down your search, there’s simply no substitute for an in-person visit to the homes that match your needs. A home is the largest investment most people make. You need to go see it.
When visiting model homes, don’t overlook the time-honored advice of asking around about builder reputations. When visiting new home communities where buyers have already have moved in, don’t be shy about speaking to residents you happen to meet. Recent buyers are often happy to share their experiences.
Visiting model homes and builders’ offices not only can reveal a builder's offerings, but a builder’s on-site staff can help you better define and refine your needs.
“We do a lot of investigative work upfront,” said Colston of Ryland Homes. “We sit down (with home buyers) and talk and figure out what their needs are and their time frame. We laser-focus on their information, and point out things in the models that are important to them.”
STEP 4: Working with a real estate agent.
If you’re shopping for both new and resale homes, odds are good you’re using a real estate agent. After all, only an agent has the code to open the lockbox that allows you and your agent to tour a resale home. A top real estate agent can add lots of valuable insight into the community and the process.
Terri Hunt, an agent with RE/Max Suburban in Schaumburg, Ill., states that an independent real estate agent experienced in new construction can be a valuable ally.
“We bring a lot of knowledge of local builders’ reputations,” says Hunt. “We may have worked with a builder in the past and understand the type of construction he or she provides. We know the towns he or she is building in, the school districts, etc.”
Whether or not you work with a third-party agent, make sure to fully tap the considerable expertise a builder’s on-site sales team offers.
The builder’s sales consultant has deep knowledge and expertise in the stages of construction, the builder’s library of floorplans, the availability and price of specific lots, the availability of options and upgrades, the builder’s approach to construction and energy efficiency, warranties, and a whole lot more.
STEP 5: Custom or production, which is right for you?
Homebuilding can be sliced into two very broad categories: production and custom. Higher volume or production builders offer a line of specific models (often referred to as plans) at base prices that include numerous specified materials.
In addition to the many standard features included with each home, most production builders offer a menu of product choices and upgrades. Buyers typically can expect to make product and design choices from a menu of options in categories such as appliances, cabinets, countertops, faucets and fixtures, flooring, lighting and more.
Many production builders also offer some variation in the floorplan. It’s often possible to add a bay window or upgrade to a three car garage. Other builders give you the choice of a linen closet or using that space for a larger walk-in shower in your master bathroom. Some builders even offer a bonus room. Based on your needs and desires, you can have this built out as an extra bedroom, a study, or perhaps as a media room.
With the many choices production builders offer, buyers can easily personalize their new home in many ways. If you wish to design a home from scratch, a custom home is your best bet. Custom homes are one-of-a-kind. They’re entirely built to order, created by an architect, and constructed according to the customer’s dreams, wishes and desires. The limits to a custom home are very few: your imagination, your budget, and what a given lot and local zoning rules accommodate.
Speaking of land, custom homes are often built on the customer’s own lot, but some new-home communities are comprised entirely of custom homes. Some large new home communities include neighborhoods comprised of custom homes and neighborhoods with production homes. Both custom and production builders can deliver a high quality home, with the range of personalization and customization above. For more choosing a custom or production builder, see the related articles below.
Mary Umberger is a freelance writer specializing in real estate and home-related topics. Her work appears frequently in The Chicago Tribune, Inman News and other leading print and online publications.