Building new or purchasing a home under construction (speculation home) offers you the flexibility to customize, including your choice of color selections and updated design features. When purchasing new construction in our Wasatch Front market, I recommend you carefully address these six concerns :
1. Select a Geographic Area and Building Lot
Target a location that will offer you the lifestyle and community features you seek, and that fits your price range. Consider your travel time to work, convenience to shopping and schools, proximity to transportation, and access to parks and recreation. Proximity to family and friends may also be a key consideration. Be aware that the more affordable areas for new construction will likely increase your commute time.
Along the Wasatch Front, the new home construction industry is dominated by “production home builders.” These builder/developers subdivide large tracts of property, usually located at the perimeter of development, into improved building lots. Under regulatory control of the local municipality, the builder/developer is required to complete streets, curb, gutter, sidewalks and often include open space, such as entry and buffer area, parks, and walking trails. The builder/developer pays the cost for municipal impact and connection fees, and connects the home to culinary water and sewer service. Independent electric, natural gas, and telecommunication providers lay the underground utility lines. In a few locations secondary or “irrigation” water is available.
Building lots in older, more established areas are often available on a single lot basis from individual owners or from developers who have identified and developed “infill” locations. Usually these locations are strategically located but only offer a few lots and are surrounded by older homes. Historically, custom home builders have dominated this market segment but recently more production builders are competing for these lots. The higher land value in more centralized locations directly results in higher overall construction cost per square foot.
In the “recreation” home market exclusive custom or cabin-style lots are available, primarily on the “Wasatch Back.” With access to Park City, Heber, Ogden, Morgan, and Logan Valleys these properties vary greatly in size and recreation potential. This market is dominated by custom builders and custom developers. Your CBRB’s “Previews International” luxury home marketing program features many of the better Utah recreational properties.
After weighing the personal preferences you would like to satisfy in your selection of a home site, you will need to consider the location’s physical attributes and building code requirements. Foremost, the lot will need to accommodate your site plan and the structural footprint of the approved home plan. Urban lots will have specific setback requirements, dictating required space between the structure and property lines and/or easements. In most subdivisions, building lots will accommodate only selected builder plans. Of course the larger the lot, like most offered in recreation and rural areas, the more flexibility you will have when determining your site plan.
Key factors when selecting your lot include size, orientation, and topography. Lot size is guided by your needs and preferences. Do you wish to accommodate additional structures on the lot (as allowed by code), provide for entertaining, enjoy a garden, or create recreational space for the kids? Or would you prefer to minimize yard work and go for minimum lot size?
Topography and orientation are important considerations. Do you want afternoon shade in the back yard or a quicker snowmelt off the driveway? Are you set on a flat lot that will allow ample RV parking and a ball court or swimming pool? Or would you like the drama of a sloping lot that may generate great views off a panoramic deck, encourage multi-level living from a daylight or walkout basement, and feature terraced landscaping? Just be aware that with added slope construction cost increases, as does difficulty with yard and exterior maintenance, driveway slope steepens, and onsite parking may be restrictive.
2. Select a Home Builder and Home Plan
Home building is a competitive enterprise that forces builders to offer innovative plans, attractive styling, energy efficiency, and the latest features. Be aware that builders distinguish themselves by their architectural style, home plans, workmanship, features, and pricing. In general, new homes are better built today. Municipalities enforce higher building code requirements, adding structural strength for seismic stability, and improving energy efficiency.
Custom home builders offer the most flexibility and personalization. They will build your plan on your lot, allow full customization, and deliver the highest level of customer satisfaction. Of course you will pay a premium for this exceptional treatment.
Production home builders employ economies of scale to deliver their product at a lower price. They offer the buyer a set of predetermined home plans and styles, allowing limited customization and a variety of finish selections. Some production builders will build on your lot, secure the building permit, pay connection fees, and even cover construction financing.
You may assess a builder’s reputation from the experience of other buyers. On a weekend, feel free to walk a neighborhood and gain a sense for the community. Talk with new owners; more than likely, they will share the joy and the regret over their decisions. Ask the builder for references of prior buyers and to see other homes he has built, including some currently under construction. Consider whether the builder belongs to the local home builders' association. Member builders tend to stay in step with industry developments, legislation, and product innovation.
The builder is responsible for your largest lifetime investment, one that will impact your future comfort and happiness. Remember, when purchasing a new home, you are in the strongest position to judge the results - you have customized your selections and may inspect quality during actual construction. Again, seek the assistance of your CBRB agent to help guide you to a reputable builder, one that will deliver the product that best fits your needs and budget.
3. Select a Floor Plan
The design elements of new homes constantly evolve. The floor plan of your new home, or how the living area is arranged, is the most important aspect of the livability of the house. Modern design concept focuses on the centralized “great room” where the kitchen, semi-formal dining and family room combine to form the heart of the living area. Space that otherwise may have been allocated to a living room or formal dining is now assigned to this area. Some designs feature a “flex room” – a room near the entry that may be used as a formal area for living, dining, or an office (often set off by French Doors).
A popular plan feature is locating the master suite on the main floor and away from other bedrooms. A spacious master suite will include a decorator bath and walk-in closet, split away from the other bedrooms. Other design strengths include vaulted ceilings, loft area, a kitchen island and walk-in pantry, generous closet space with organizers, and a mud/half bath area off the garage entry. Exterior treatments that improve the home’s appearance or “curb appeal” include brick, stone, painted hardy board, and generous window sizing.
For those seeking main floor living, the “rambler” style or single level condominium/PUD will meet this objective. Those seeking more additional bedroom space will favor the “2 story” or in the condo/PUD market the “townhome” style. Touring the builder’s model homes, and even homes under construction onsite, can give you the best feel for plans that best suit your preference and need.
When evaluating a floor plan put it to the test and see how it measures up. First, does it work as a strong plan?
- Is there a smooth traffic flow pattern?
- Are the living and sleeping areas separate and clearly defined?
- Is there adequate living and working space in critical areas?
- Is wall space sufficient for larger pieces of furniture?
- Is there direct kitchen access from the garage or back door?
- Are the “sight lines” under control? (Do they protect “messy” areas and baths?)
- Is there a basement and other valuable storage space?
Second, does it meet your needs at this phase of your life? How will it fit your lifestyle?
- Is the master bedroom located on the main floor or the second level?
- Is the kitchen working space adequate and well organized?
- Are the entertaining areas adequate for your family and planned events?
- Is there an impressive focal point such a fireplace or dramatic staircase?
- Is there a guest bath on the main level?
- If the home is a 2 story, is the laundry located on the upper level?
- May the children’s activities be supervised from the great room?
- Do you have a current or pending need for a guest suite?
Finally, do you intend to deploy the latest innovations, such as:
- Advanced structural components and finish for surface areas?
- High efficiency mechanical systems and appliances?
- Smart technology for operating and securing the house?
While you have choices for customizing your new home, whether it be your first home or that “dream home” we all wish for, be prepared to make those decisions and “trade-offs” that best combine to achieve your objective. Rely on the experience of your CBRB agent to help you identify the home plan and upgrades that fit your need, and that will position you will superior resale value.
4. Contract to Purchase
Once you have decided on the location, home plan, and builder you should make an offer. When construction activity is brisk do not hesitate to place the lot you want under contract, locking in your base price and securing your position. Rather than using the standardized, state-approved purchase agreement most production builders have their own offer document. Keep in mind that new construction purchase agreements favor the builder (after all, he is putting up most of the money to build the home) and give him control over the construction process, including when the home is delivered. He will decide the subcontractors and materials utilized in the home. The builder is also responsible to pay for all building permit fees, utility connections fees, and to ensure the home fully complies with all state and local building ordinances.
Your offer is made under the purchase agreement, which upon acceptance sets the terms of the transaction and gives you a series of special protections. When working with a production builder this agreement will fix your base price. Your price only will increase if further along in the process you add upgrades, noticed by a written addendum. The agreement gives you the right to purchase the property upon completion, ahead of any other interested parties. It further gives you the right to upgrade and conform the home to your color selections, provided they fall within the builders guidelines.
Prior to making your offer, carefully review the provisions of the agreement with your CBRB agent and, if available, the builder’s agent. This will help you better understand the building process and the responsibility of both parties during construction. Always consult an attorney with respect to interpretation of contract provisions or any items of legal concern. Most importantly, be certain of the standard features that are included in the base price. Model homes are loaded with upgrades. Review each component of the home carefully with the builder’s agent to insure that expectations are accurate.
When making the offer, or within four days of acceptance as defined in the offer, you will be required to tender earnest money in the amount of approximately $1,000. Prior to construction (or prior to finishing out a speculation home) the builder will require a non-refundable construction deposit. Production home builders usually require a minimum of $5,000 or as much as 10% of the purchase price. The construction deposit is usually due 30 days after your offer has been accepted and is non-refundable. Both the earnest money and the construction deposit are applied to your down payment requirement at closing.
Production builders will finance your new home through construction, expecting you to close as soon as construction is completed. Often they have a recommended lender and will offer you a nice incentive, such as cash toward upgrades or closing costs, should you elect to use their lender. Custom builders will expect you to take out construction financing. Like any seller, the builder will want you pre-approved for financing before they consider your offer.
Make an effort to familiarize yourself with the builder’s method of doing business. He is under pressure to meet schedules and control costs. Moreover, he cannot even close on a home and see the return on his investment without full regulatory compliance. The builder’s agent will explain many of the constraints that apply during construction and request your cooperation. Be aware that your contract can be voided by the builder should you fail to timely secure financing or close on the property when completed. Also, production builders operate on a fixed-price basis. You will be expected to pay their charge for upgrades. Should you be inclined to attempt to negotiate for a concession from the builder’s set pricing schedule, it must be addressed in the initial offer.
5. Selections and Preconstruction Meeting
Once your offer has been accepted, you should move expeditiously to make color selections and finalize upgrades. The builder will set a deadline for these decisions, normally in concert with the due date for your construction deposit. When the builder receives your decisions and deposit he will file for the building permit, and begin scheduling subcontractors. Many builders will send you to a design center to make your selections where you will receive help from a design consultant. Other builders will have you make your selections at the model home and/or at a subcontractor’s showroom.
Finalizing your choices up front helps protect you from change order fees and potential construction errors. It enables the builder to redline any construction changes on the plan he submits to the municipality as required for the building permit application. After you have made your choices the builder will invite you to a preconstruction meeting where you may see his working blueprint of your home and review your planned changes and selections. Use this opportunity to address all your construction questions. Unless you are working with a custom builder, you may not have another meeting with the builder until the final walkthrough inspection. Some production builders will allow additional meetings at the four-way inspection (framing, rough mechanical, rough plumbing, rough electrical) and during finish.
The builder is motivated to complete your home as soon as possible; the return on his investment is tied to his ability to deliver the finished product. Actual construction usually requires from three to six months. Even if the builder gives you a firm completion date prior to the commencement of construction, be aware that it may not happen - unforeseen events may cause a construction delay (usually tied to the availability of subcontractors or materials and processing of the building permit).
Each day that subcontractors are on the job site you will notice the progress and feel the excitement of your new home taking shape. During construction be sure to direct your questions or concerns to your CBRB agent or the builder’s agent. Follow the authorized communication channel designated by the builder, normally the subcontractors are not allowed to interface with the buyer. However, to better accommodate your selections, the builder may allow you to work directly with some subcontractors such as the electrician and cabinetmaker.
Remember, the builder will follow the written details you generated during the selection process. Should he waiver from those instructions, he is responsible to correct the error. Should you wish another selection after you see your original choice installed, you will bear the cost of any substitution should the builder agree to the change.
During the construction process you should monitor interest rates and determine, in consultation with your lender, whether to lock the rate. For a fee the lender can lock your rate far in advance of closing, thereby freezing your payment level and protecting your ability to purchase the home upon completion.
Final Inspection and Warranty
Sometime during the final month of construction, the builder’s agent will notify your CBRB agent of the time for a walkthrough inspection of your new home. This event is your opportunity to tour each room, the basement, garage, and exterior with the builder to identify any construction flaws and to be instructed on the operation of the components of the home. It also gives the builder the chance to conduct a final inventory of his subcontractors’ work.
During your walkthrough, carefully inspect all finish work including cabinets, countertops, appliances, doors, trim and hardware, plumbing fixtures, flooring, and railings. A painter may shadow you and touch-up walls or you may blue-tape problems areas. Note any exterior finish issues. The builder will give you a copy of the inventoried items with notes on items to be addressed. The builder handles these items by scheduling the appropriate subcontractor. If a subcontractor cannot arrive until after you have taken possession of the home it will be necessary for you to grant access.
Be aware that you are required to close on the home per the deadline as agreed in the purchase contract. Even though some items identified in the walkthrough inspection remain to be completed it is not your call to hold up the closing. Your protection is the written document generated during the walkthrough..
Please keep in mind that during the walkthrough tour your focus is primarily on the cosmetic features of the home - finish work that you can see and touch. The structure of the home, hidden underneath that elegant finish, constitutes the critical mass of the home. At the walkthrough, the builder will review his home warranty, usually a one-year plan, which covers the structural and mechanical components of the home. The suppliers of these components, such as appliances and HVAC equipment, may provide extended manufactures’ warranty.
As you eventually use your plumbing, heating, air conditioning, electrical and other systems you will be testing their function. If you discover any issues notify your builder’s designated warranty representative. Additionally, during your first year in the home you will notice some light cracking and nail pops in your sheet rock. Most builders will repair the sheet rock on a one-time only basis.
At each critical step of construction your new home will be inspected by an inspector from the local municipality’s building department. It is his job to ensure your builder has followed the most recent and rigorous construction code requirements. Only if the home achieves full compliance, as certified through his final inspection, may there be a closing and an occupant in the home. You may elect to employ an independent inspector of your own, but be aware that the builder will only respond to code compliance issues. You may also elect to purchase an extended warranty plan, but since the home is new, built to code and deploys the latest materials with manufacture warranty most buyers pass on additional warranty at this time.
(Disclosure: This page explaining the process of purchasing new construction in our local market is similar to the page titled "Building or Purchasing a New Construction Home" at ColdwellBankerHomes.com because I authored both pages.)