THINKING OF A NEW HOME?

 

So, you’re thinking about buying a home…but which is a better deal – a new home or a resale home? What location? Please refer back to my home page for information on real estate for sale in all Tarrrant County cities or more loan information.

Although most homes for sale are resale’s, about 1 out of 5 homes that are sold are new homes. But the real question is – which one is better for you?

The right answer, of course, is that it depends on your interests and needs. Both resale homes and new homes offer advantages. Existing homes are less expensive on average, and are generally much closer to town. They also are in established neighborhoods, with established trees and landscaping, and flexible financing options for you…

New homes, on the other hand, offer newer designs, more innovative use of interior space, more modern efficient heating/cooling/and appliances – and offer choices of options & upgrades that you get to pick (…and pay for!) Everything is new – including all your new neighbors.

As you might imagine – there are many advantages and disadvantages to both.

Let’s look at new home sales first. Unfortunately, most people don’t consider which home serves their needs better – they just jump in the car and go out and look at houses. However, if you’re one of the “wiser” home buyers, and leaning towards buying a new home – then here are 10 points to consider before you visit your first model home!!!

1. Find a Good Realtor Before You Start Looking

You might think I’m a bit biased here – but before you ‘rush-out’ to visit the new home builders (after looking at all the beautiful new home marketing & advertisements in the Saturday paper,) sit down or get on the phone with an (experienced) Realtor and do your homework! You’ll want to be prepared so that you can determine what price range of homes you can ‘realistically’ afford and discuss what areas of town are more appealing to you – as most new homes are built on the far outskirts of town! Then, determine a comfortable price range – as most new homes are listed at ‘plain vanilla’ prices - to get you out to their eager onsite sales reps! You can just about figure $20,000 to $40,000+ for “extra” stuff and upgrades on most new homes below $250,000. Just because the ad in the Saturday paper says new homes for $160,000, doesn’t exactly mean anyone ever actually buys one for that price! Most buyers will almost always want an upgraded carpet - instead of the ‘see-thru’ stuff that they call ‘standard,’ you’ll want landscaping, fixtures/lighting/etc, and you’ll want to have air conditioning…trust me, you will.

Sit down – put the car keys on the kitchen counter - and calculate how much you can really afford and qualify for, as there’s no sense in being brutally disappointed to learn that you can’t qualify for the $200,000 house with the $30,000 in upgrades…when you should have been looking in the $170,000-$190,000 price range. Usually that means going to another builder - which leads us to…

2. Find a good lender

Most people go about looking for houses backwards – the wrong way – because they waste valuable time driving around new home sites and calling on resale homes that they couldn’t qualify to buy anyway! A good Lender will let you know the ‘reality’ of the whole buying situation. I know ‘reality’ stinks – but my job as a mortgage and real estate professional is to help you have a pleasant buying experience. To do that - we need to make sure your income and credit scores are ‘okay’ – and make sure your back-end debt ratios are within the guidelines. You’ll also need to be sure you have enough cash for the 3% or 5%(exceptions with Ameri-Dream) down payment on the FHA or conventional loans. Then, you’ll need enough cash - to pay for your closing costs too.

You need to run through all your financing options before the builder’s onsite sales rep lets you see the model homes - and before your eyes get ‘glazed-over’… and before you can’t say ‘no’ to all the upgrades they are offering!

Believe it or not, but most new home builders can’t finance you if you have less than perfect credit (you usually need 620+ mid fico scores), or if you have too much debt in comparison to your gross monthly incomes, or if you have collections, judgments or recent bankruptcies…

New home builders usually do not offer $0 down financing. That’s exactly why you need to call good loan officer first – because if you don’t have 3-5% cash for the down payment, and if you don’t have a lot of cash saved, and/or if your credit and credit scores are less than perfect, then you will likely be ‘declined’ by the builders lender after getting all your hopes up and ‘wasting’ all that time. New home shopping should be fun – NOT frustrating!

My mortgage company offers 6 different $0 down loans designed specifically for purchasing a new home. You can even have less than perfect credit or mediocre credit. As long as you have a mid credit score as low as 580 – I can get you zero down financing! You can also have unpaid collections and judgments. You can have a recent bankruptcy (seriously – you don’t have to wait 3-4 years like traditional lenders require.) Because of these flexible financing options we offer - we can help you finance a new builder’s home.

We have financing options that most builders can’t do! As a matter of fact, I regularly ‘canvass’ the new home builders as a mortgage lending resource when they have to ‘reject’ a borrower – because of financing. You wouldn’t believe the percentage of loan clients that I get, that were ‘declined’ or refused lending from builders or other lenders (I believe that 65% of my clients were ‘declined’ by one or several lenders already before they found me.) So, you might as well buy a new home “the right way” – and that’s by getting pre-approved first – before you ever visit a new home site.

3. Are You Protected – Do You Have a Buyers Agent?

Here’s a good point to remember – the salesperson at the builder’s model homes represents the builder, NOT you. As a buyer, you can and always should work with a Realtor representing you as your Buyers Agent. The reason “why” is simple…who else is supposed to represent your financial and legal interests???

If you ever want a one-sided sales transaction – and “not necessarily” in your favor - and you’re comfortable being told by the onsite sales agent that everything they say is true and will be done…then please “be my guest...” They ‘love’ people just like you!!! After all, it’s way too late after you’ve signed all your contracts and paperwork to realize that you probably could have done better with a Realtor’s help...

When you have a Realtor to represent you, we actually get paid by the builder to represent you. These reason it’s important to have a Realtor at a new home builder is because we can help in negotiating a better deal, be available to help you answer questions about the construction, warranties, financing, differences in pricing, negotiating lot premiums, and most importantly – explaining your legal rights on the contract and how that can affect you. New home builders pay us a co-op commission just like a seller of a resale home. Realtors help all parties, as we can spend extra time to consult and advise our buyers, and so onsite sales reps can spend more time with other potential home buyers and sales since they don’t have to answer “55,000” other questions from you!

If you go to a new home builder without a Realtor on the first visit – guess what…you can’t change your mind, quick go find one – and then use the Realtor to help you in the transaction. Most all new home builders REQUIRE us to accompany you on your first visit – or for us to call the builder in advance that we are sending (you) out to see the model homes!!!

 

Here’s a perfect example. New home builders get to “keep” a lot of earnest money because they get buyers ‘qualified’ to buy – but when it gets right down to closing time – the buyers aren’t actually able to get the loan underwritten (that the builders lender told the buyer they could get) – or they infer that you were going to qualify for a lower interest rate – but the actual interest rate at closing is way higher! What are you going to do?

What are your legal rights? Can you get your earnest money and the deposit on the upgrades back? “Sorry” but the answer is “no” – the builder keeps all your earnest money and all the nonrefundable deposits for the upgrades!!! They can tell you that you will be approved for the loan – but you aren’t – or the interest rate is way higher…and guess what – you’re OUT OF LUCK!!

However, a good Realtor would have pre-advised you to write in another clause or negotiate a different financing scenario BEFORE you signed the contract! This way, you have a few options - should this or other potential disasters happen to you on your financing from the builder.

 

So – it’s your choice…but wouldn’t you want a good Realtor to represent you before you ever go out shopping for a new home?

4. Understand What You WANT and NEED In Your Next Home.

A great way to get a handle on your wants is to take a good look at your present home. What do you like about it? Do you like its open floor plan? Do you like the master bedroom and master bathroom layout? Do you like the kitchen and eating areas? Do you like the common area layout – the family room & living room?

List out everything you like about your present home, or friends’ homes you’ve seen.

Now, let’s take a look at what you don’t like about your home. Do you hate the small kitchen? Do you hate the master bedroom layout? Are the bedrooms too small? Do you want a formal dining room instead of eating in the kitchen? Is the family room going to be able to handle a big screen TV you want?

If you dislike something with your present home, you’re going to dislike it with your new home. The better you can identify these items now, the more likely you are to avoid them when you visit a new home builder – and “fall in love” with their models and fancy decorating. Don’t settle for a mini-kitchen if you really want a normal or big kitchen!

Here’s a good suggestion: Take out a piece of paper and draw a vertical line down the middle. In the left column, write down everything you like about your present home. In the right column, write down everything you dislike about your present home. It’s also important you understand WHY you dislike something.

Now, from your list of “likes,” let’s compile a list of features you want for your new home. Now, here’s an important tip that will help you really narrow your focus.

Take out another sheet of paper and put two columns on it. On the left hand side, you will be listing out the features of your home. And on the right hand side, you’ll be listing out the benefits. For each feature, you want to list the benefit of that feature.

Features tell you what something IS: 3 bedroom, 2 bath, 3 car garage, etc. Benefits tell you what something DOES. Benefits fulfill desires.

For example, a great room concept (feature) will be ideal for entertaining friends and family at special times (benefit). So on the left hand side, you would put “great room.” And on the right hand side, list out all the benefits (or reasons) for the “great room” design: Family entertaining, business entertaining, Thanksgiving holidays with the family, etc.

Understand What Each Other Is Looking For, And WHY

If you’re a husband and wife looking for a home, this exercise will eliminate many disagreements down the road. You will both understand what the other wants, and WHY they want it.

I recommend you RANK each feature in terms of its importance to you and your spouse. You’re both going to live in the home, so you better understand what the other is looking for.

For example, a well designed gourmet kitchen (remember, list ALL the features of the kitchen you’re looking for) may rank high with a woman, while having a big garage for a workshop may rank high with a man. Try to understand each other’s priorities.

Most People Have More Dreams Than Money

Ranking will also show you areas you may need to eliminate because of price constraints. And by having each person rank the importance of the features they want, you won’t be eliminating a high priority item and putting additional stress on an already stressful time.

5. How to Pick Upgrades and Options?

The most fun about buying a new house is that you usually get to pick out all the furnishings, colors, appliances and other ‘fun’ stuff. But, what you need and what you want might actually be two different things!

If you can afford all the upgrades and options – well that’s great! But unfortunately, lots of buyers end up getting over their budgets – and it ends up creating a financial burden for them – in the long run –years after you buy the house!

Be aware that you will be spending a ton of extra cash and ‘racking-up’ your Visa and Master Cards on furniture, wall & window covering, decorations, painting, pictures, landscaping, and tools and other miscellaneous items beyond your wildest dreams – especially if you move into a new home from an apartment, condo, or town home!

The number one ‘gripe’ most new home owners have after moving in 5-8 months later, is that they had “no idea” on how much money they would be spending to fix and decorate the house they way they wanted it… Think I’m kidding?

Watch your spending on options & upgrades at the new home you’ll buy…or you’ll be in debt beyond over your head – you’ll be struggling to make ends meet! Do it ‘right’ – and you’ll be having fun and enjoying your new home! Work with a good Realtor like me, who specializes in financial planning – and you’ll at least be “warned” if you are getting beyond your future financial means! Onsite sales people would love you to buy everything you can possibly afford!!! But, you’re the ones who have to pay for it all…don’t get in over your head! (Ramen noodles and generic macaroni & cheese was fine at college – but not now at this point in your life!!!)

Other good advice is this…most buyer’s regret not getting the air conditioning option – probably more than any other item you could have done without! How do I know? Well, who wants to live in an ‘inferno’ all summer? You’ll be bitching and griping about it all summer long – if you can even sleep at night when it’s 99 degrees in your upstairs bedroom! Trust me! Treat yourself to air conditioning…you bought a furnace – buy the air! Plus - in the future, I’m the Realtor showing your house for sale 3 years from now – and my buyers will not buy your house if it doesn’t have air conditioning (and it just happens to be 105 degrees in your upstairs bedroom when I’m showing your house!!!) And, because most resale buyers don’t want to have to pay $3,000-$4,000 out-of-pocket for air conditioning for your house – they’ll only look at houses that do have air conditioning! So you lose either way by not getting air conditioning!!! (…I should work for an air conditioning company!).

6. Negotiations

It surprises me that buyers don’t realize that there may be room for negotiating on price, upgrades or options – even if the onsite reps say ‘no’ to that. For example, you might be able to get a better price if a home has been put back up for sale, after another buyer couldn’t get financing, or if a completed home hasn’t sold yet, or if a premium lot hasn’t been sold yet, or if a ‘bad’ lot isn’t selling - or several other ways... As your Realtor – I’ve got several options to help you get a better deal!

Keep in mind that the land – or ‘lots’ all cost the same! The builder is just trying to add more profit into their bottom line. Funny – but most premium lots are worth the same as every other lot when you got to sell your home three years later!!! (Did they mention that to you while you were signing the $15,000 lot premium?)

You’ll want to ask for any and all discounts when you purchase a new home – as builders will often work a little financial magic to make a deal happen and close a sale. A good Realtor will explain this to you!

 

7. Signing Their Contracts

In Texas, we have one of the best home purchase contracts in the nation – better than almost every other state. It’s pre-written and used on every home purchase transaction - by every Realtor in Texas.

But guess what…new home builders don’t want to follow the guidelines set forth by the Texas Real Estate Commission – so when you buy a new builders home in Texas, you will sign THEIR contract – written by their lawyers to protect THEM…not necessarily you!!!

Am I clear here…you will be required to sign their contract – voiding all your financial rights that every other buyer gets in Texas when they buy a resale home.

Protect yourself by making sure a good Realtor has explained this to you before you ever go out looking for a new home – as this is how builders get to keep your earnest money and keep all your upgrade/option deposit money…

If you think you are smart enough to buy a new home without a Realtor’s assistance – then at least get a copy of the builder’s contract in advance – before you sign it, and pay a lawyer to explain the contract to you. Beats losing $10,000 of earnest money and upgrade deposits if a problem comes up with your financing or if your other house didn’t sell by the required date…

8. Just Because it’s New – Doesn’t Mean It’s Perfect!

Yes - the home is brand new, and typically it’s built with more modern materials, supplies and fixtures/appliances. But nothing is perfect – and the best products in the world are worthless is they have been constructed poorly, sloppily or the quality of workmanship was not good.

I would spend pages going over all the possible things that usually go ‘wrong’ after you’ve moved into your new home – but the biggest thing to understand is that your new home, as with a new car, will probably have a few minor (let’s hope!) problems that happen.

In Texas, you’ll have a structural warranty of 10 years. The other concrete work like: sidewalks/garages/basement/porches/patios have a 1 year warranty. There’s usually a 1 year warranty on broken or defective workmanship on everything else – see your contract to be sure!!!

Also, you are depending on the builder to come back and fix your broken stuff – so make sure you are prepared to wait a long time for the actual repairs to be made. Hire me as your Realtor – and you’ll know in advance what items to be sure and have double checked and written up in your contract to protect you in the future – should you have any of these common problems after you’ve moved in.

 

9.You Don’t Make Money When You Sell Real Estate, You Make Money When You BUY It…

Do you see the statement above? Someone once told me it was written backwards - that you only “make” money when you SELL real estate. “How on earth could you make money when you buy it?” they said.

But that statement IS accurate. You see, you might receive your sales proceeds when you sell your home in the future, but it’s how well you BOUGHT your home now that will determine HOW MUCH your proceeds will be in the future!

But the story doesn’t end there. Finding the right home and making a prudent financial investment is more involved than just “buying right.” You also need to think about how your ‘excited’ decisions to buy a new house now – will genuinely affect your ability to make a profit or save your life in the future!!!

Even Experienced Homeowners Make Costly Mistakes

When Buying And Financing Their Home…

I enjoy buying and selling houses. I specialize in helping people like you find & buy the right home …AND with the right financing because I’m in this business for the long-haul. I really enjoy my job.

It’s no surprise that borrowing $150,000 to $450,000 or more - to buy a new house - is a lot of money and really scary. What if you lose your job? What if you get in a car wreck or what if you get sick or in an accident?

What if you can’t make the house payments?

How much to PAY for the home…how much to BORROW…and on what FINANCIAL TERMS can literally mean tens of thousands of dollars MORE or LESS in your pocket!

If you’re like most people, the decision to buy a home involves a lot of stress and anxiety. For over 95% of Texas buyers, it’s the single largest financial transaction of their lives. Mistakes in any part of the buying process will cost you thousands…more than likely – tens of thousands of dollars or more!

But at the same time, when you work with a professional – a real estate and mortgage expert, it’s usually fun and far less stressful – because you can get answers to all your ‘doubts’ and all your other questions. Buying a new house or a resale house is fun – once you’re comfortable – and you understand all the variables and become knowledgeable about everything!

If you’re “afraid” of being worked-over – or worried about making a bad decision, then you’re going to lose a lot of sleep when you buy your next house. That’s why you need to call me – because I can help you through the whole process and give you great real estate and financial/mortgage advice! I especially enjoy helping people find good deals on new homes – and can offer you helpful, straightforward tips that I’ve learned, taught and practiced over the years for finding a nice new or resale home.

I’m here to help you and make your buying decision a great one! I have a ‘ton’ of information and useful tips to make you feel comfortable…just give me a call before you visit the new home builders!!!

I look forward to working with you...

Tom