This is a continuation from the first blog post about new construction. Please read that first blog.
The Initial Visit
This blog will go over the high-level steps of new construction starting with your first appointment at the site. You will be present (with your buyer agent) and will meet the site representative. This representative may be an employee of the developer or may be an agent of the brokerage the develop has hired to sell the properties. In either case, they will be the one who is most knowledgeable about the site, the plans, the models, the timeframes, the upgrades, and many other specifics of that development. At this point, your buyer agent should allow for the site agent to do his or her job and explain to you everything they want to convey about their offering. You should ask questions but you may just make notes about your questions until the site agent’s presentation has been delivered.
You will be encouraged to take a look at the models they have available and understand that what you see in the model is almost all upgraded from the standard model (and base price). It’s like the showroom at a car dealership. The designs, décor, furniture, paint colors, trim, etc. are all beautiful. And they are meticulously thought out to draw you into their development. Ask what is standard and what is an upgrade. Ask about structural upgrades that the model may have (i.e. bumped-out rooms, bathrooms in the basement area, loft areas, etc.) that may not be standard features of the base model. Keep reminding yourself, “It’s all about the base, all about the base”.
You will be taking in a lot of information. You will have questions that will come up after you have seen the property. DO NOT make a reservation on a lot until you are sure about the location and potential financial commitment – no matter how “urgent” things may be presented to you. Your agent should be able to help you push back on any sales pressure you may feel from the site agent. There is a lot to consider so take your time. This blog cannot cover all of the items to address but here are a few: lot location, timeframe to completion, what deposit amounts are required, what phase is being released at what time, can you mix & match options or are their standard packages, and many more. Take your time. It’s a big decision.
The Agreement
Great! You have decided that this is the place for you and you are ready to sign an agreement. This may take place in several steps. The site agent will explain those steps to you and your agent will help you through this process. Remember, the documents are not standard contracts written by your state’s Realtor board; they are contracts writer by the developer’s attorneys and will most likely be most favorable to the developer. Having an attorney available to review these documents (since your agent cannot advise you on legal advice) may be advisable. You should ask for and receive the documents you are being asked to sign to review and for some time to have them reviewed before you sign them. It may be necessary to place a small, REFUNDABLE, deposit down to hold a lot for a short period of time. Discuss this with the site agent. Unlike an agreement of sale for resale properties, these agreements may have requirements for larger down payments and greater risk of loss if you change your mind. Remember, the builder is building this home to you specifications. If you back out, they may not be able to sell this home very easily. Therefore, they want your commitment and money is the best way to achieve that.
There may be phases of the agreement that are indicated. They could be lot reservation, initial down payment, larger deposit after selections for options have been made, and then the remaining amount due at settlement. Pay attention to these amounts and timelines. If you do not understand something, ask for clarification. Get outside counsel if necessary. Do not sign something you do not understand.
Other items in the agreement that you need to pay attention to would also include who you can choose as a lender and who you can choose to do your title work. Sometimes you have flexibility, sometimes you don’t. Sometimes the packages and ‘deals’ being offered require the use of the developer’s affiliated services. Read the contract! Pay attention to additional fees; especially ones that are added for each day you may be late in fulfilling your obligation. For example, a contract may state that there is a $250/day fee charged to the buyer if the settlement date is not met- regardless of the buyer’s circumstances. You can be certain that there will be no late fee charged to the developer if they don’t meet their timeline.
There can be more or less to an agreement that what has been stated here. This will give you notice that they need to be read and understood. Can you change it? Probably not. But if you do not like the terms, you do not have to proceed with the purchase.
In our next segment, we’ll discuss upgrades, options, lot premiums, and other aspects of trying to get you to spend more money.
Buy and Sell With The Cyr Team
The Cyr Team delivers superior client care to those looking to buy or sell real estate. We educate, advise, and guide our clients through one of the biggest transactions of their lives by bringing a structured, process-driven methodology to build consistency and clarity in a real estate transaction. Located in SE Pennsylvania, we are licensed in PA, DE, and NJ to better serve the tri-state area.