What’s It Like To Buy a New Construction Home?
I mean, really, what do you do? How do you even begin? Do you just walk up to a realtor and say, “hey, I need a new construction home,” — or is there more to it?
Too often you hear about the standard home buying experience – the one where you get a real estate agent to show you some houses. The thing is, these houses are already standing and ready to go. They aren’t empty plots of land or half-built structures. What happens when you want to build a dream home from scratch and become the first owner of a new construction home?
Welcome to the exciting journey of buying a home from a builder! Though the process can involve more planning and an extra step or two, the overarching story is the same. You meet a real estate agent, who introduces you to the seller, who, in this case, is the builder. Ultimately, events lead to keys in your hand.
What happens between your initial meeting with the builder to signing your closing documents? Marketplace Homes is here to guide you through with a handmade FAQ for first-time new construction home builders.
There are no bad questions here.
This guide wouldn’t be possible without the expertise of Nathan Speidel, one of our senior solutions consultants. Through his years of experience, he has seen countless situations involving new construction deals. He’s the kind of person who would look you in the eye and say there are no wrong questions – because all lead to answers that can help you make the right choice… so fire away!
What questions do you have? If you don’t see it below, feel free to contact Marketplace Homes and we’ll get back to you ASAP.
Q: I’m starting from zero. How do I even start?
Before you make a contract with a builder, you need to set yourself up for success. Even if you plan to work with the builder’s preferred lender, it helps greatly to talk with your local bank and get a preapproval letter. This helps the builder know your top dollar and get a good picture of your financial profile. It also helps you save time when looking for homes.
Then, find a realtor and start the shopping process. As you look for homes, your realtor will find a solution for your first home to make the timeline as seamless as possible. It’s a lot going on at once, but thankfully, you should be kept in the loop throughout the buying process.
Q. When I buy a new construction home, whom will I be working with the most?
Most people start their home search with a real estate agent with a specialty in new construction. The only thing that changes with a new build deal is that your agent would take you to the builder, then the builder salesperson will talk you through all your options. You will then be working with your real estate agent to put your home on the market and hope your move is timed right.
If you choose Marketplace Homes as your agent, we can work with your builder and lender to find solutions to help you move forward. This includes buyouts, rentbacks, and more. This is beyond what an ordinary agent can do.
Q: Is it ok to just go straight to the builder without an agent?
Honestly, we would heavily advise against meeting a builder unrepresented. This is because a real estate agent helps you understand a lot about real estate law and functions as the bridge between you and the builder. Agents also serve these functions:
- Advocates for your needs.
- Helps you get the best deal.
- Explains the builder’s contract in detail and its benefits and drawbacks related to your side of the deal.
- Ensures that the contract’s terms are as beneficial as possible for you.
With all these perks, working with an agent, especially as a first-time new construction home buyer, is a wise move.
Q: Will I save money if I don’t use a real estate agent?
Not when it comes to buying a new construction home. Agent commissions typically come from the sale of a home, so it will not affect your purchase of the new home.
If you plan to sell a home that you own, then you may save up to 3% of the home’s price by listing without an agent. However, some realtors (like your Marketplace Homes agent) will discount this commission; and what you gain in their expertise can mean thousands more to your bottom line.
If you go without an agent for both buying and selling a home, you could also miss out on incentives and advantages that come with expert representation. Real estate agents ensure that the builder contract isn’t written to just benefit one party. They can also help you understand the terms, line by line, so you know what you’re signing.
This can put you in the position to ask for free upgrades, incentives, discounts, and more on your new home. If you work with a Marketplace Homes agent, you can get 1% savings on commission and take advantage of special incentive programs that remove common barriers to qualifying for a new build.
Q: What’s the most important thing I need to buy a new construction home?
The main thing you need is a financial guarantee or backup. Nathan and our experts nationwide have seen a lot of change in the past few years. Since 2022 and beyond, it’s extremely difficult to buy a new construction home without some financial guarantee in place. Namely, most buyers use the equity from their first home as collateral.
However, having a deal dependent on whether the first home sells is a big risk. Most builders want the home already sold so that a “contingency”, or “dependent factor” , isn’t on the contract at all. So, for you to get the money in place, you need to already sell your home or have a financial guarantee so that the builder can proceed confidently. Our new construction programs that provide guaranteed sales funds from your first home ensure you can pay for a new construction home.
Q: What’s the hardest thing about buying a new construction home?
According to Nathan, “finding the house is not the hardest part, but it’s the 12 things you need to have before you can even make a contract.” Meeting the builder’s qualifications is the largest challenge. Having financial backups and eliminating a home sale contingency, or making sure that the sale does not depend on selling your home, can help you greatly.
Tasks like fixing your credit score, streamlining your moving situation so you’re not moving twice, and decreasing your debt-to-income ratio are the logistics that typically put our new construction buyers in a tailspin. The good news? When you work with an agent, you will get tailored advice on how to work on these logistics so you’ll be ready to buy on every front.
Q: What if I have no equity or not enough equity? What other financial backups can I use?
If you don’t have enough equity to help you buy a new construction home, you can still qualify if your financial profile checks the lender’s boxes. If you have a home with insufficient equity, you can turn it into an asset as a rental.
Now, not all rental situations offer the same benefit. For instance, most lenders need records of 12 months worth of your home’s rental income to consider rental income as a backup. However, there is a shortcut if you work with Marketplace Homes and use one of our most unique programs: Guaranteed Lease Agreement (GLA).
In this program, Marketplace promises to pay monthly rent for your home for two years, even if it’s unoccupied. This allows most lenders to accept it as a viable financial backup that doesn’t need mortgage history. All this means you can move sooner and not be in a hotel or your parent’s basement for a year as you work things out!
Q: How do I make sure that my first home sells when I need it to?
When you work with a real estate agent from a standard brokerage, you will usually go through the typical listing process. Your first home sells when a buyer makes an acceptable offer and all parties sign closing documents. Though you get the benefits of selling on the open market for a potential top dollar, you may also sell too early or too late. This singular solution ultimately means you have to move twice or pay two mortgages for months on end. Either outcome is no fun.
So, instead of doing that, you can work with a brokerage with more creative solutions. At Marketplace Homes, you can mix and match different programs to time your move just right with a buyout and rent back. This means you can free equity from your first home and stay in your first home as a rental so you don’t waste money on hotels and storage units. That’s mighty convenient and ends up evening out the costs of relocating twice or paying two mortgages.
Q: How can I get the most deals when buying a new construction home?
Homebuyers can get the best deals by having experienced real estate representation. Talk to your agent and use their expertise to work out deals with the builder and their preferred lender. Overall, the most perks are going to come from builder incentives. For example, a builder can pay for some closing costs and give free upgrades and discounts. Their lender may also offer special interest rates for the loan to reduce monthly payments.
Q: How much time do I have to buy a new construction home?
Your new construction home may be move-in-ready, in the final stages of touch ups, or it may not even have its foundation. Once you decide on a new construction house, your real estate agent can tailor a solution that will enable you to have the funds you need around the new construction home’s completion.
Your builder should give you a timeline estimate based on the home’s stage of completion. You may just have the minimum 30 days to close, or you may have 60-90 days, or there may be months ahead before you move in. The more time you have, the more options you can explore. Selling on the open market with a buyout as a backup is an excellent option for buyers with more time. Meanwhile, a quick buyout or GLA can work for individuals that need to move out quickly.
Q: Will selling my home off-market be a rip-off?
This is a valid question, and the short answer is no. It is true that the typical buyout will give you less than the open market would. Specifically, MH buyouts are around 80-90% of the home’s fair market value. However, there are conveniences involved with a buyout that can end up evening out figures, especially if your move involves complicated logistics and expensive relocation costs.
For example, if you sell your home for top dollar but then end up spending around $10k on double moving costs, hotels, storage units, eating out, double mortgages, short-term rental homes, and other costs involved with being in-between homes, the profit you gained will inevitably even out to be the original buyout number.
Also, consider the peace of mind and guarantee a buyout gives to the entire deal. In many cases, the builder won’t sign the contract unless there is an accepted offer for your home in place. Though it was easy to sell a home in 2022, higher interest rates and a slower market means that there is no guarantee that your home will sell for top dollar and on time.
Q: How quickly can Marketplace Homes buy my house?
Marketplace Homes can get you a buyout as a backup plan within 48 hours. It’s a fast and easy solution that has helped many buyers get under contract with a builder. We’ve even helped people who were left high and dry 3 weeks before closing by offering a quick buyout!
Q: Can I use an iBuyer instead of Marketplace’s services?
Of course you can. As a consumer, you have the right to explore every option until you find one that works for you. Whether you want to obtain a buyout through a big box iBuyer or proceed with a buyout from Marketplace Homes, we will be here if you ever want to take our offer. All our buyouts come with transparent terms that leave as little as possible to the unknown. You’ll know about any fees or concessions to the best of our knowledge and ability.
While standard iBuyers give the higher number upfront, they don’t figure in the concessions for repairs and maintenance with that quote. Marketplace’s quotes appear lower at first, but we already include the upfront offer with the concessions. Transparency is the biggest difference between our solutions and other iBuyers. We promise that you’ll get the most accurate number upfront so you’re not left scrambling for a financial guarantee.
Alicia Persson is a real estate content/SEO writer at Marketplace Homes. She has several years of experience working in real estate teams that specialized in investments and property management. Before she joined Marketplace, she was a freelance writer for 7 years, leading to a specialization in real estate and home living content for boutique digital marketing agencies. During her writing years, she learned the basics of SEO and gained experience writing for many different clients, making her highly versatile at creating diverse content.
She is a proud University of Virginia master’s graduate and enjoyed her undergraduate years at the University of Mary Washington. When Alicia is not writing, she plays keytar and sings in a local 90’s rock cover band, or she spends time with her amazing family.