Considering Buying New Construction?

Four Critical Things You Need to Know Before Buying.

Buying anything new is exciting and when it comes to buying real estate that feeling is no different…. You pay a premium and expect perfection. With nearly fifteen years’ experience of representing buyers, sellers and builders in the Chicago real estate market, I have some deep insights for those considering buying a new construction property. This knowledge should help prepare any buyer considering new construction housing, whether it be a condo or single family home. As a buyer, you want to be confident and excited and not anxious and filled with regret.

Reputation is Everything. All You Have in Business is Your Reputation.

The first question I ask any listing broker is, who is the builder and what is their experience? You do not want to buy a home or condo from someone with limited experience. There are a lot of variables to take into consideration (zoning, architecture, layout, subcontractors and finishes to name a few) when building a home and if one or two of these variables are off, it can lead to issues and deficiencies with the finished product. I request the name of the builder, a list of past projects, a list of potential references (past buyers) willing to share their experience and a possible meet and greet between the builder and buyer. If the builder is not willing to take time and share his knowledge and passion for building, it may not be a home you want to purchase. 

Custom Options. Making the Home Your Own With Taste & Style.

Depending on where the home is in the construction process, an attractive component of purchasing new construction is the ability to customize. The option to customizes, is something that will be marketed and advertised to potential buyers. Customization should include more than a coat of paint or a floor stain color. Finishes such as tile (floor or backsplash), counter tops (kitchen and baths), light fixtures, wiring (television placement) and landscaping are just a few options that buyers should have the option to personalize. I have witnessed builders take extreme positions on customizations, some allowing none, while others being too accommodating and the process nearly becomes a custom build. Know your options and preferences well in advance of finalizing a contract. Options can be overwhelming and change orders (not approved by the builder) can become costly. Also, understand the difference between custom selections, upgrades, credits and allowances.

Punch-List. The Builder's to-do List Prior to the Closing.

A punch list is defined as a document prepared near the end of a construction project listing work not conforming to contract specifications that the general contractor/builder must complete prior to final payment (the closing). Punch lists have always been part of the process but have changed in Chicago in recent years. Punch lists were often addressed post-closing, often within 30-days and an agreed amount of money was put in escrow to add accountability. The money was also described as a “hold-back.” The negotiation and process has now shifted, where hold-backs are not common and much (if not all) the punch-list items are addressed prior to close. This is a sizable leap of faith for all parties. Punch-list items are most often small cosmetic items, such as touch-up paint for scuffs, scratches, etc.… although some times can include large items such as garage roof decks.     

Warranty. What is Covered & for How Long?

All new construction homes should include a one-year warranty. A builder I once represented was quick to clarify, it is a “limited” warranty. The warranty should cover the work completed by most (if not all) sub-contractors. A third-party warranty, offered by a company like American Home Shield, should not be confused with a developer’s warranty. Your standard third party vendor warranty covers mechanical systems (furnace and air conditioning) and appliances. These systems are all new and already have manufacture’s warranties. In the ideal scenario, the buyer and builder have a personal and collaborative relationship. Some builders go above and beyond and do touch-up most move-in, while others will await the 12-month mark and return to address all first-year growing pains of the home. There are other builders, unfortunately, that take an adversarial role and are defensive about quality control issues, either identified by the inspector or homeowner. Seasoned brokers offer a layer of protection and accountability in these scenarios. Home buyers should be sure to document any issues post-closing (up to 12 months) and share these with the builder, buyer’s attorney and listing broker for an efficient and smooth resolution. Consult and defer to your real estate attorney to thoroughly understand the warranty component of a developer’s warranty and developer’s contract.

Knowledge and expectations are key elements to the home buying process. Expectations often increase with new construction, so being better informed and more educated as a consumer, only makes good sense. If you are considering buying in the Chicago market, I am happy provide free counsel on the home buying process, market trends, respected builders and sought after downtown building. Working with a seasoned and experience real estate professional is vital, and completing your team with an experienced lender (Reilly O'Toole of Guaranteed Rate) and attorney (Tom Scannell of Scannell & Associates). Questions or additional inquiries can be directed to (773) 490-6813 or [email protected]. www.mundyadvisors.com