What to know before you buy from a builder
Condos and townhouses are springing up all over the Bay Area. Many people assume it’s a simpler process to buy from a builder. But while totally different than your typical real estate sale, it’s actually quite complex. I’ve helped clients navigate this often tricky process across five major builders. Here are 8 things you should know before you even start looking.
1
Go with a realtor
Step foot inside the sales office, register yourself without an agent and the builder becomes your agent by default. This can be irreversible. You want to be represented by someone independent of the builder, who will provide guidance with your best interests in mind.
2
Prepare for an early deposit
This is a unique situation where you secure your unit with a deposit and then get the paperwork. Typically, you’ll have three days to review the documents and receive a full refund if you choose to back out of the sale.
3
Read the fine print
The paperwork is going to be very different, and there is a lot of it. I’ve seen documents nearly 1,000 pages long. An agent will know what to watch out for. For example, new developments are often built on contaminated land (e.g. an old gas station), and the paperwork will outline the testing done to determine its safety.
4
Prepare for quick decisions
Every buyer has a unique buying process. When units are released for sale they may turn to a waitlist or it may be a first come, first served. My client lost the unit of her first choice the day of its release because someone showed up at 9 am with a deposit and he was the first one on the wait list. Another client fell in love with a condo on a Thursday, waited to show his girlfriend that weekend and the price went up.
5
Know your closing costs
In this situation, the buyer covers all closing costs. Typically, there will be a lender on site and they may offer an incentive to go through them. It can work to your benefit but know that if the builder is your agent and their lender is your bank then you are handing over a lot of control to their process.
6
Beware of site unseen
Most times you’re buying an unfinished product and your move in day is subject to delays. I had a unit delayed for months because rain had stalled construction. My clients had already moved out of their apartment and fortunately, I was able to negotiate compensation. They were happy with the finished product but it helped to have an agent navigate those obstacles.
7
Upgrade wisely
If finishings are not pre-selected, you’ll likely have the option to upgrade. That can add up, and there’s often pressure to do it now. For instance, if you want to upgrade to hardwood after construction, it could be contingent on HOA approval so read that paperwork very closely.
8
Factor in HOAs
HOAs start at least $300 per month (but are often much higher). These don’t necessarily include any amenities and utilities are rarely covered with new construction. It’s not uncommon for HOAs to go solely to things like insurance, reserves and common area maintenance.
There’s a lot to be cautious of but there are also a ton of advantages. New construction is pristine, clean and up-to-date. There is a 10-year structural warranty on the building, and a lesser warranty on appliances. Buildings are often in commute-friendly locations, or near bustling downtowns. Units will be smaller and your “yard” will consist of a patio at best but that means less maintenance, and that can be a plus to many.