Charlotte NC New Home Buying Today: What to Watch for In Any Market, Doubly True in Today’s Market
Purchasing a new home wisely is a challenge… and these 10 rules will
help you buy that home with confidence, in any market, and see that you
get what you pay for. I am a former new Home sales rep, former builder
and veteran real estate broker… I know these guys and how they work,
plus I’ve helped dozens of new home purchasers buy their new home here
in Charlotte…
1. The
#1 Rule of real estate, Location ? Ok- so this isn’t ONLY a new home
tip- but vitally importqant to your happiness none the less because ist still is the #1 Rule for being happy with your decision 6 months or
a year later. .. talk to folks about areas and neighborhoods, drive out
and visit for yourself. Are you from out of town? Try and get a hotel
in the area you are considering moving to. Decide on your area or areas
first- and do not stray too far. In almost every case,
straying is a mistake, even if it looks like “too good a deal to pass
up.”Take the time to decide on the general areas, then look at homes.
Resist
falling in love with the new home pictured on page 27 of the New Home
guide, then going to find it, and loving it, buying it…RESIST!
Where the Home IS, is Crucial.. AND is frequently a Fatal Flaw.
Some adjustment in search area may be fine, stretching that area a bit,
OK, but not across town, unless you know that too is a great area for
you. Location, commute time, particular schools perhaps, and the
conveniences of life, are vitally important, and many experienced home
buyers believe that, if they had to choose, those community features
are slightly more important than the exact house. So no matter what the “Deal” is, don’t compromise on location more than a little, OK?
2. Decide whether you are an “Inventory” customer or a “to Be Built.” Inventory
homes are ready now, or in some cases up to 60 days- “to be builts” are
probably 4-8 months out- so this easy right? Just pick your preferred
time schedule and you are done… or, perhaps, if you don’t like the
Inventory, then build? What’s wrong with that? Nothing, necessarily,
but there is a BIG difference, you probably haven’t noticed. What is
that?
Well most builders WILL negotiate on Inventory homes, and will NOT negotiate on “To Be Built” homes.
So how bad do you want a deal on a New Home? …you want it bad? Then
you are an Inventory only buyer. In today’s market in Charlotte, the
healthiest in the nation, I insist my new home buyers buy Inventory at
a discount, to protec, hedge, their investment. “No deal, no buy!” For
the most part, the discussion below is about tract builders, the local
and national builders who dominate most major markets.
3. Builder Agents do NOT represent you, and they DO represent the builder,
who writes their paycheck…Do NOT reveal anything about your buying
motives or fears. NOTHING (SORRY for shouting) This includes when your
lease is up. This includes “What else have you looked at?” and
innocuous questions like, “Why are you moving?” They will ask too,
trust me on this. If you like the project, then you say you are
flexible, if you are an inventory buyer, and need something right away,
I don’t care if your apartment building is being torn down next week,
you are looking for something “relatively soon.” And do not rely on
them for the truth or whole story… listen to this true dialog between
a builders rep, myself and my buyer:
Buyer (to seller rep): “What is that land (pointing) going to be?”
New Home Rep-Sellers Agent (watch the carefully chosen
words): “That property is owned by another party, and you should assume
future development.”
Terry: (buyer looks to me) : “I’ll check.”
And check I did. In about 15 minutes of online research I found that
the zoning had recently changed, there was a proposed shopping center
there and a Target shopping center sits there today. Now do you believe
that this rep honestly didn’t know there was a Target going to be
there? Who knows, she may have “heard” there was one coming, but not
wanting to know, never took the 15 minutes to verify it for herself…
she didn’t want to know, therefore she didn’t want to report just
“rumors.” A classic “don’t ask, don’t tell” policy, and if you look at
their words above, she very carefully stated so as Not to misrepresent,
…”owned by another party, and you should assume future development.”
No lies there, just not the whole story either! Some of you are
detemined to think the best of people, and I appreciate that, but
unfortunately, they do use that belief in you to their advantage to
make better deals, every day.
4. Buyer incentives- these are inevitably tied to using builder’s lender
and closing attorney. I am not a fan of this, but all builders do it
and these are powerful motivators to use the builder’s lender and
closing agent. On a recent townhouse purchase there were $12,000 of
buyer incentives tied directly to the use of their lender and closing
attorney. Now my buyer was pre-approved and when the first lender came
in high, we asked for their second lender. My borrower, with excellent
credit and 20% down, got the rate to 5.35. Their first offer was 6%.
So, negotiate. Now he has a great rate and the $12,000 in incentives,
but it pays to know what you are qualified for BEFORE walking in, so
get Pre-Approved, so you know what a good deal looks like. There is no
real downside here if they are using a quality lender you’ve heard of
before-as most major builders do, and of course you will want to
compare “Good Faith Estimates,” but once again, all is not as it
appears entirely. In North Carolina, under the standard re-sale
contract, buyers get to choose and pay for the closing attorney.. so if
the builder picks and pays for the attorney, who does that attorney
represent? You guessed right, the builder! It is recommended you bring
your own attorney for legal representation, here in NC the cost is
about $250.
5.Is XYZ a good builder? This is an
incredibly subjective question, and you will need a local expert to
answer that with confidence… it may be your Agent, it probably
isn’t., but I beleive what most are asking is this: Can I Trust This
Builder? The answer came from polixrixw: “Trust, but verify.” First
rely on your own eyes and ears. What size and type builder are you
considering? Small custom, or tract? If this is a small custom builder,
then his references and his workmanship should be visible and speak for
themselves. Who supervises? Ask questions, take his or her measure,
interview him for the job. If it is a tract, or semi-custom, say the
builder builds 50 or more homes per year, then the quality of the home
you get is based more on the local superintendent and subcontractors,
rather than a builder’s name or reputation. After choosing your builder
wisely, a good home inspector is the best defense against shoddy
workmanship or worse. In tract situarions, a building inspector should
always be used by athe typical buyer. In custom, typically not.
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6.
If you are an Inventory buyer skip to 9 below, the next 3 will be about
To Be Built Homes, assuming you have to have one built… in most
markets there is not a lot of inventory.
The first question to ask is always, “In the model we are looking at,
what’s included, what’s not included, and how much do the common
options cost? The “includeds”- “not includeds” etc can get very
complex- ask the question if your Realtor doesn’t, “What is the average option package?”
The sign you saw out front, “From the high 200’s” often means from the
mid 300’s once they are outfitted… and that may be all together too
much. Also ask about Lot premiums, a clever way to raise home prices
without changing all your brochures. There standard brochure package
should have all this information, as well as any on Inventory homes
available.
7. Buying New Home Options- there are two
concerns here, watch out for over-improvement, and watch out for
additional deposit requirements. These bells and whistles are easy to
over do. But “I want the house the way I want it” you say… that’s OK,
just know that it commits you to the house for the long term- 5 years
or more in all likelihood. What’s a good rule of thumb for options? 10%
If options exceed 10% of the home purchase price, more than likely you
are over budget. Be sure and get the things everyone looks for: extra
hardwood floors, granite kitchen counters to name only two. What about
brick on 4 sides, when brick front with siding on three sides is
standard? Skip the $20,000 they will ask for the brick, unless you can
get your arms around the fact that it is probably worth $5000 max on
resale.
One honest builder here in Charlotte, with honest appraisals, has a
notice you must sign at time of contract. That notice states that
options are there for the client enjoyment and not all options will
raise the appraised value. Amen to that, he is the only one so
straightforward. Some builders use a Design Center to sell you options.
Again, the main thing here is, don’t get carried away, and look for
lasting value, things everyone seems to like. Watch out especially for
options that require 50% deposits. These deposits are almost always
non-refundable, even if you are denied a loan and the contract is
“contingent” on you obtaining financing. You will find that the
language surrounding these deposits is different, and in almost every case non-refundable.
8. When is the best time to buy? What you should know about lots…
When is the best time to buy in a community? What kind of lot should
you get? Should you buy before there is a model? In the middle? At the
end? That depends of course on the exact situation… but if price is
what you are looking for, prices are always best before there is a
model… but you ask, how do I know what the community will look like?
That is the trade off for the early purchaser… what will it look
like? You have some pretty drawings and promises, then what? If you
haven’t seen their other communities, I think you should. If they are
large and established, that sounds good. If they are small and local,
and never attempted a project this size, show me the money-
I mean amenities! If the pool and clubhouse are already built, then the
neighborhood is well under way…if not? If you move forward, do it
with with caution. Never take the last lot of this section aka the
bottom of the barrel (this section is almost sold out)- wait or move to
next community. Why do they “release” only these lots? Sometimes, they
haven’t received final city approval… most of the time, they are
artificial, to create urgency on the Buyers part… “It is the last one
left, we aren’t sure when the new ones will be released” This is also
done to move the bad lots. Remember who do they work for? That is their
job.
There are a few specific lots to ALWAYS (99.9%) avoid. The first lot in
on either side- every person leaving the neighborhood will have to pass
this house twice daily. Often there is an entry road, then it comes
into a stop sign and you have to turn left or right. If there is a
house/lot directly in front of you while you are stopped, that is one
to avoid. In the evening every car’s headlights will shine brightly in
that house…Watch out for grade. Too steep front yards or backyards
should be avoided or bought knowing they will be more difficult to
resell.
9. The Builder Contract- This is the quintessential one sided contract. I
think some law schools demonstrate one-sided contracts with builder
contacts. Seriously, the actual agreement can be written in 3 or 4
pages- why then does the average builder contract have 30 or more
pages? Well they have the 4 pages to describe the agreement, and 26
pages of things the builder is not responsible for… I am not kidding.
Worse, the contract can’t be changed or altered, or the contract is
nullified. So, if they all do it, why is it important?
Because once contracted, they have a substantial amount of your money, and a one
sided deal you are not likely to back out…because you risk losing
your deposit. As a buyer, you need to know that they hold all the
cards–i.e. you need to have confidence they will deliver. Your
recourse is limited if they do not.
This is another reason I have a strong preference for the Inventory
purchase. It is WYSIWYG-What you see is what you get, and for the most
part, the 26 pages of excuses and things not responsible for, simply
don’t apply since the house is done or almost done. If you need
something else in the contract, have the Agent writeup an Addendum to
add To the contract- therefore not “changing” just adding to.
10. Do you need a Real Estate Agent? Can you do this yourself? My answer is Yes and Yes,
you do need a good Agent to advocate for you and to get the best deal,
and you can do it by yourself, but why would you? Customs with Agents
and New Home Builders differ from area to area, but in most major
markets this will be true: You lose nothing having an Agent-you don’t
gain a better deal without an Agent, because any builder dependent on
Realtor sales (Realtors bring 75-80% of the buyers in Charlotte) will
not cut them out his way, no sensible builder would because word would
get out, and Realtors, and their buyers would stop coming out.
When it comes to negotiating, a good Realtor will know something of the
builders reputation for deal making, and what to offer on an inventory
home, saving you money and time. Additionally, they will be there to
fight for you if you get into a contract dispute.We save home buyers money every day in new home sales.
Here, the
Agent’s power is multiplied, because if the builder is perceived to be
screwing you, the buyer, they may be more concerned about their
reputation with us Agents, than with doing the right thing by you, and
the issue will be more likely corrected to you the buyer’s
satisfaction, out of fear of offending the Agent- or the damage the
Agent can do to their reputation.
If nothing else so having an Agent leverages your position.
Negotiating with a builder is a zero sum game, and they can be quite
tenacious. Once or twice a year, a builder helps keep my negotiating
skills sharp. Most builders are honest and most transactions go
smoothly- however if they don’t, they will fight, no doubt about it,
and you need a fighter with you, that is why you need a good Agent.
Note I said Good Agent, take your time, talk to several, quiz them on
these points and test their knowledge on local issues, how things are
done in your area. Then decide, do I want an Agent? I’d say Yes you
want a Good agent.
One last thing, the best time to get what you want is before the
contract is signed. Do your research, know what you want, then find a
good Agent, or Go in and do battle yourself, prior to contract signing
or as part of the original deal–and do buy Inventory at a discount.
©Copyright 2008
All Rights Reserved
Terry McDonald
I am a Buyer Agent in Charlotte NC: I represent only you. Search Charlotte NC Homes here. Also you may want to review the latest Charlotte Homes For Sale and Appreciation Report
Here are couple of recent articles about the strong Charlotte real estate market by Forbes.com and
ABC News
To learn more call me direct at 704-351-1519. tm
If you’re interested in your own personal tour or additional photos and information on this incredible deal, call us direct at 704-248-1166 or send an email request. The comps are available to prove the price and we promise you won’t be disappointed! 
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