Five Things You Should Know About New Home Construction – Starting the process of building a new home can be very stressful. There are many factors to consider as well as overall costs and budget to keep in mind. Here are five tips to keep in mind about new home construction!
1. Know Your Numbers – Before you begin to build your new home, run some numbers to determine whether you can afford to build the home you want. Most house plans offer a cost to build tool (usually for a nominal fee) to give you an accurate estimate of construction costs based on where you’re building. The numbers include the costs of construction, tax benefits, funds for the down payment and slush account, and other related calculations. Once you have determined that you can afford to build the house you want you will need to purchase your house plan and arrange financing. Lending for construction is slightly different than regular mortgage financing. First you’ll need a home construction line of credit that will be used to pay subcontractors and suppliers who perform work and provide supplies. Once your house is constructed, you will need a residential mortgage to pay off the construction line.
2. Know Your Builder – There are many horror stories with contracts gone bad. While you may have many builders to chose from, not all are equal. Do some research and check around to find out which builders have the best reputation. Gather information and recommendations from family and friends. You will want to ask about not only the quality of work, but how punctual they are. It is also recommended that you stick to builders that are members of the National Association of Home Builders (NAHB).
3. Build With Resale in Mind – While you may not want to think about selling the house you are build, it is unlikely that it will be the last home you ever own. Be mindful of the potential resale value. Do not add too many fancy upgrades that may overprice the home and don’t choose any designs that may be very unusual or pricey for the neighborhood. While designing, as yourself if the things you are considering installing are going to appeal to others.
4. Think Green – Make sure you do your research to maximize energy-efficiency in the design of your new home. This will not only boost resale value, but save you a significant amount of money in the long run. Your architect and builder can help ensure that your windows are South-facing so you get as much sunshine as possible heating your home. You will also want to makes sure that bathrooms, laundries and garages are on the south side of your home and have small windows to minimize heat loss. Spend time choosing your insulation and HVAC systems, as well as energy-efficient appliances and WaterSense faucets and toilets.
5. Don’t Forget the Punch – The final phase of building a new home is to go over your “punch list”. A punch list is a list created at the end of construction that shows what still needs to be done or what needs to be repaired on the new construction. You and your contractor create the list before closing, when you go through your final walk through. When doing any kind of walk through or visit to your construction site be sure to be taking notes. A good idea to consider while making your punch list is to include your real estate agent. The agent will not be emotionally attached to your home and may have a better eye for identifying the flaws. Similar to someone proof reading your work, they will be have a fresh perspective on the home.
When creating the punch list remember that items typically fall into two categories: reasonable flaws and unreasonable flaws. Reasonable flaws are flaws that fall within the tolerances of building construction (or insignificant flaws that generally do not affect the quality of the new home). On the other hand, unreasonable flaws are flaws that have to be fixed. These problems do affect the quality of the home. Once any unreasonable flaws are corrected in your new home, this is called substantial completion, which means the new home is livable and can be occupied. Before closing on your new home, you’ll have one final walk through to verify that the items on your punch list were fixed. As long as the new home has reached the point of substantial completion, you should be able to proceed with closing even if everything was not completed.
Be sure you put the money for the completion of your punch list in escrow. This will allow you to move into your new home while still requiring the builder to complete the items on the punch list. The punch list marks an exciting time in the process of building your new home, because your home is almost done! Remember not to get so excited that that you breeze through your punch list, because you don’t want regret that you didn’t take the time to fix these problems.
Keep these tips in mind when beginning the new home construction process! What do you think of these tips? Are you thinking about building a new home soon? Comment to share with us!