A brand new home, custom designed to suit your needs and personal style… What’s not to love?
Being the first person to move into a shiny new place clearly has some serious perks. There are also some pretty big differences to consider while buying new construction compared to an existing home. As your trusted Chicago real estate partners, we are here to help you see the full picture so that you know how to buy new construction the smart way.
You’ll Be Buying Sight Unseen
You may be signing a purchase contract on a property that doesn’t exist yet, so rendered images and floor plan diagrams will replace listing pictures and showings. Take the time to visualize the floor plan and get your bearings on the actual size of each room. Bust out the tape measure to see how wide your hallways, dining room, or kitchen island will actually be. Also, be sure to ask the builder’s agent to point out all upgrades while walking you through a model home. Models are often loaded with features that are not included in the standard price. Find out exactly what the base price includes and how much extra you’ll have to fork over to make it look like the model.
Early Bird Gets the Worm
When it comes to new construction, there is a first mover advantage. To incentivize a buyer to purchase before they see the finished product, builders are more likely to offer a discounted price early in the project’s development. As a new home development gets closer to completion, the builder will demonstrate that the project is in demand by advertising that the units are almost sold out, and will charge a premium for the units that are still left. If you’re buying a condo in a new high rise building in River North or South Loop, you’ll also have your pick of floor plan and level within the building.
Don’t Expect to Move In Any Time Soon
With an existing home, you can go from looking at pictures online to moving in within a few months. If you have a hard moving deadline, new construction may not be for you. If you choose to buy new, make sure the completion date works with your timeline, and be ready to be flexible with delays. You should also know construction might continue within the complex even after you move in.
Research the Builder
Simply put, some builders are more reputable than others. A good builder will ensure that you have a good experience working with them and will smooth over any issues discovered without hesitation. You’ll want to make sure your builder doesn’t have a track record of complaints or lawsuits before you put your future home in their hands. Check review sites or local court records, or ask your real estate agent to tell you more about their reputation around town. It’s also a good idea to talk to previous customers, so if you can’t find references on the builder’s website, don’t be afraid to ask the builder for them.
Recruit Your Own Team
Many builders will have their own real estate agents and preferred lenders that you can work with. Know that you can (and should) shop around for a real estate agent and lender to represent you and your best interests, not the builder’s. The builder may require you to get pre-approved with their lender and may incentivize you to select them for your loan, but you are not obligated to.
Inspections Are Still Important
Just because a place is brand new doesn’t mean it’s perfect. Inspections are just as crucial with new construction because you’ll be the first-ever occupant in the home. You’ll have an inspection conducted about a week before your closing so that the builder can fix any issues discovered at that time. If construction was still in progress at that point, not to worry! You’ll still have a final walk-through once construction is complete, and the builder will have a specified period of time to fix any issues found. Also, be sure you understand all structural and builder’s warranties that come with your home. Most builders will provide a 1-year workmanship warranty, and you’ll want to know exactly what to do if issues do arise after you move in.
New Comes at a Price
The luxuries and benefits that new construction offers don’t come for free. You can expect to pay a premium of ~5% for new construction compared to an existing home with similar features, simply because buyers are willing to pay up to select their own floor plan and finishes. Builders will also want 5-10% down in earnest money shortly after you sign the contract, which may be many months or even years before you actually close. That’s a chunk of change to have tied up. If you’re buying into a new multi-unit building, don’t expect to negotiate price. Builders avoid this because it undercuts your future neighbors who have already bought the same floor plan in the building. Rather, try to negotiate upgrades into the price, since those cannot be tracked on public record for future buyers to see.
Next week, we’ll talk specifics about buying a new construction condo in Chicago. Stay tuned!