Keys to a successful real estate purchase of new construction
[Article by Raniel Diaz published in Living Local Pacific Northwest April Home & Garden Issue]
To say some things have changed since then would appear to be the real estate understatement of the decade, but then again, have they? Even with tighter lending requirements, bank oversight, and progress in consumer protection and disclosures, today’s perfect cocktail of tight existing supply, continued historically low interest rates and migratory patterns of the American workforce, we’re continuing to see near record-setting supply of new homes. Regionally and nationally, new housing starts are hitting eight-year highs, and it seems like we’ve come full circle – at least that’s what the charts are saying.
If you’re thinking about buying a new home, there really has never been a better time than the present. So, consider some helpful tips if you’re looking to break ground with a new build to ensure the experience is everything you hope it would be.
Make a financial plan off-site. Work with a knowledgeable lender on a pre-approval.
Before soaking in the smell of a new model home and letting the professional lighting and cozy staging close the deal, remember that you should be prepared to know what you qualify for first.
A lender, especially a local one familiar with your particular market, will help you chart out a course for success. So, when you’re looking at base pricing and all the options that you can’t live without – you can have a plan to stay inside your comfort range. Just like eating and shopping local, try your regional and community banks and credit unions for good personal service and flexible products. In addition, a number of lenders have programs to lock your low interest rate in for an extended period of time. This can be a big help as interest rates will likely edge higher in the months ahead.
Plan to buy what you can afford today. Try to avoid making assumptions about your financial future.
Think you’re about to get that promotion at work? Or convinced that home prices will have double-digit annual appreciation rates for the next three to five years? Check the optimism at the door. A good rule of thumb: practice as much common sense in this area as possible.
Anyone who has been in the housing market for the past decade knows what could happen when we expect unabated linear growth. Prepare to borrow what you can afford now, not what you think you can afford later. Just because the meeting with that lender went really well, and they’re prepared to approve you “up to” a certain amount doesn’t mean you need to spend it all. Common sense isn’t as “common” as you would think in the emotionally-charged world of real estate.
Partner with a Realtor® to represent and protect you.
There are some who would expect to get a better deal if they work directly with a builder. In a majority of instances this is largely incorrect. In fact, most new construction sites have a realtor on site tasked with representing the builder as a selling agent. In most instances, it is beneficial to utilize a buying agent who represents and protects your specific interests. After all, the selling agent is primarily tasked with representing the interests of their employer and their strategic financial agendas.
When working with a team of professionals, a relational investment goes a long way.
Home shoppers should consider interpersonal tactics at all times when navigating a home purchase – knowing that one is working with a group of professional real estate agents, lenders, contractors, interior designers and builders. If building from the ground up, this relationship will last nearly six months and beyond – so one should be respectful of both each individual’s time and potential influence in your personal success. Those who forget to be courteous during conversations with people involved in the process may find themselves at the bottom of many priority lists.
In 2016, builders are operating from a position of strength, minimal anxiety – expect it to continue in the foreseeable future.
At this point in time, builders are comfortable with letting the droves of eager buyers come to them and are not concerned with finding someone else if a deal doesn’t go through. That said, there is very little “wiggle room” in price negotiations in the new home arena. In fact, outside of some small buyer incentives, don’t bank on your ability to negotiate a lower-than-asking price unless you’re getting in late to the appreciation party or riding the first wave of market correction and possible downturn. As a leading indicator of the housing economy, new construction inventory levels will often tell the story before it is written.
With spring right around the corner, those watching the real estate market closely are seeing a set-up for some early fireworks. The amount of potential inventory that could hit the market in the next few months could be staggering. In the third quarter of last year, over 1 million homeowners nationwide emerged from underwater mortgages and the trend has continued as we have seen regional appreciation across the board since. With a likely increase in existing home inventory levels, it will be interesting to see how new home builders respond to it. Either way, most would agree, real estate will always remain crazy no matter the direction.
Raniel Diaz is a Real Estate Agent at Coldwell Banker Schneidmiller Realty in Coeur d’Alene Idaho. Call him anytime at (208) 640-3794.