Take a Look at What's Inside

What Are Builders Incentives?
What Is A Decorating Allowance?
Is A Builder's' Preferred Lender The Best Choice?
What Is The Punch List?
What Is A Construction Perm Loan?
What Is A Rate Lock?
Production vs. Custom Builders - What's The Difference?
Should I Have an Agent Or New-Home Co-broker For A New-Home Purchase?
Should I Have an Attorney Review A New-Home Purchase Contract?
How Can I Compare Builders?

What Are Builders Incentives?

Builders sell homes which are a complex, long-term purchase. For specific homes or lots in a project, at certain times they may improve terms in some way to incent someone to buy the home promptly - in other words Incentives. This video categorizes and summarizes some types you might encounter. Broadly speaking, there are: 1) Incentives that offer value to the buyer: like a televisions, vacations or even car leases. 2) Incentives that add value to the home like 탐decorating allowances to upgrade carpets, floors or appliances. 3) Incentives that reduce buyer￐s short-term costs or the overall price of a given home such as cash contribution to closing costs or waiving lot premiums. 4) incentives that save buyers time. A builder might have an arrangement with a preferred lender who is already familiar with their project - which could save you time in the mortgage process. Evaluate incentives objectively; would you BUY that TV, vacation, carpet or car? What does the up-front cash cost you when financed over the life of the mortgage? And how do preferred lender terms compare to terms from other lenders? Arm yourself with market knowledge. Don't let emotional decisions compromise your long-term finances. And get advice from a trusted, knowledgeable source like your real estate agent or certified new-home co-broker.

What Is A Decorating Allowance?

As this video explains, new home builders and resale sellers sometimes offer a decorating allowance. Typically, this enables buyers to upgrade things like carpets, flooring and appliances and take advantage of the builders economies of scale. If you’re buying, ask the seller these questions about a decorating-allowance offer: What terms must your offer satisfy to qualify for the decorating allowance? Is the allowance credited at closing and can it be applied to your closing costs? Make sure your lender permits whatever they propose and discuss the impact on commission with your real estate agent or new-home co-broker - they may agree to forego commission on the returned allowance. If they do, make sure it’s documented in the listing agreement. At closing, be sure the allowance addendum is included on the HUD-1 settlement form.

Is A Builder's' Preferred Lender The Best Choice?

This video gives you some ways to frame that question. Its more efficient and less paperwork for home builders to have financing on new-home sales handled by a single lender. So builders, particularly on larger projects, frequently make arrangements with a ᅴpreferred lender. That lender can be fully informed about their building project which may help them handle your mortgage application more quickly. As with any large transaction, you should compare options for your financial situation to make the decision about what￐s best for you. Be aware of market conditions and compare the preferred lenders offer to others; in other words, you still need to shop. Compare terms carefully, and get clarification in writing about what aspects of a builder s offer apply to which lenders. If you have concerns or feel pressured toward one lender ask for written confirmation that no parties are receiving monetary benefits from any other parties which is illegal under RESPA laws. Its natural to want to close quickly but make sure you get the best terms for your long-term investment in a home.

What Is The Punch List?

Once a builder or contractor has declared a project substantially complete it’s given a pre-final inspection. As this video outlines, the punch list - called a snag list in some other English-speaking countries - is the remaining set of tasks. Tasks might include repairs like damaged windows or wall cracks, or final installation fixes like activating security systems or getting elevator permits. Punch lists are frequently organized by the type of sub-contractor that does each job carpentry items, electrical items, plumbing tasks, and so on. Most contracts allow buyers to withhold final payment until these tasks are done, or conditions resolved to their satisfaction. Don’t close escrow until the punch list items are addressed to your satisfaction; once you do close, you legally own it as-is.

What Is A Construction Perm Loan?

Like the man says, a blueprint is not a house - so conventional home mortgages don￐t apply to construction projects. However, most blueprints become houses - so loans that cover construction, then convert to permanent mortgages or construction perm탐 loans are fairly common. The construction loan phase is frequently a variable-rate loan, with scheduled loan draws￐ to match construction stages. Upon completion - usually a certificate of occupancy - commonly called a CO탐 - the construction loan is converted to a permanent mortgage. The advantage of construction perm loans is that you only need ONE application and ONE closing. Compare interest-rate trends to your construction schedule (and assume construction delays) to evaluate if a rate-lock agreement on the permanent mortgage stage makes sense. And weigh your construction-loan terms and their short-term cost against your mortgage rate, and its probable long-term costs. Compare lenders to get the best construction perm탐 package for your situation.

What Is A Rate Lock?

Mortgage rates change constantly through an unpredictable combination of government policies and economic conditions. This video explains the common term 'rate lock.' A Rate Lock is a guarantee that a lender will honor a specific combination of interest rates and points for a given period of time. A lock protects a buyer from rate increases but commits them to a higher rate if mortgage rates fall below the locked rate. As of 2014, rate locks arent usually an option until a purchase offer for a specific property - new-home or resale - has been accepted by the seller. The borrower￐s credit score, the loan-to-value ratio property type, location and other factors plus, of course, market rates and market conditions will also affect rate-lock decisions. Decide whether to lock or float? based on your capacity for risk and your best rational knowledge about construction and closing schedules. If your rate lock expires an extension might be available but both you and the lender will be looking at current mortgage rates to decide the best option.

Production vs. Custom Builders - What's The Difference?

This short video explains these broad categories. Production: build many homes from a limited set of home plans with finite options for customization. Custom: build one-of-a-kind homes or highly customized plans usually with direct client involvement. Selecting one or the other depends on how much design input you want to have when you want to build and move in and, critically, where you want to build. Production builders typically offer land and homes as a package; if you already own the land, a custom builder or a spot lot탐 builder may be your only options. Price matters as well but its not a simple comparison. Both production and custom homes can range from simple to complex, and inexpensive to high-end. And the construction quality - which is a big factor in long-term price ownership costs, and enjoyment - can vary from ᅰpasses inspection to superb, for either production OR custom homes. Production building has become more customizable and production builders have economies of scale on their side; if you buy a pre-construction home in their development your design choices or square footage may be as good or even better than a custom builder could provide for the same price. Evaluate both options in person before making a long-term decision.

Should I Have an Agent Or New-Home Co-broker For A New-Home Purchase?

A 2013 national survey showed that 88% of new-home buyers involve a real estate agent to help them through the home-buying process. So most buyers- and most builders have decided it￐s the best way to go, as this video shows. New-home project salespeople are a great resource to understand their project. But your agents job is to help YOU find the right home whether resale or new construction. The fact is, new-home builders expect buyer탐s agents and the buyers agent commission is usually already built in to the price. The buyer￐s agent benefits the builder as well because they're more likely to qualify buyers, lead them to realistic choices and help them close a transaction successfully. Make sure your agent is contractually committed to represent YOU in the process and let them help you buy the right home for you.

Should I Have an Attorney Review A New-Home Purchase Contract?

As you'll see, most buyers don't understand real estate contracts. Hire a qualified real estate attorney to review the contract for YOUR benefit in understanding the contract, potential issues and concerns. Most new-home sales contracts are fill-in-the-blanks; there탐s very little room for negotiation. An attorney will help you be SURE about what you are committing to. If a special or deal makes you feel compelled to sign quickly, tell the builder you want to add a clause making the contract contingent on review and approval by your attorney. Most builders are amenable to this, provided the review is done promptly. Think of the attorney this way: Theyre explaining the contract TO you, not renegotiating it FOR you.

How Can I Compare Builders?

Your new favorite video! Before you fall in love with a model home and neighborhood visuals compare builders with these questions. How many homes have you built, over how many years? Can you give me references from prior buyers? Are you licensed and insured? What home plans are offered in this project? Who will oversee construction of my home? How and when can I make changes and upgrades during construction? How long will my home take to complete? What is your process for inspection during construction? What type of warranty do you offer? and finally How and when would my final price be determined? Compare the answers from different builders to help balance the emotional decision with practical, rational facts. If something is particularly important ask to get it in writing. And use the advice from your agent or new-home co-broker.

 

These videos are for informational purposes only when thinking about buying or selling a house. These are not intended to supersede any information or transaction that you may be involved in with a Broker, Lender or other Real Estate Professional.