To build or to buy. This question faces many homebuyers in the Gilbert and Queen Creek AZ markets. With inventory of available homes still very low buyers look to both new construction projects and existing homes to try to find the best option for their particular situation. There are key differences to both types of purchases that should come into consideration and are part of our standard counsel to buyers. These points are not universal but pretty common. I’ll break this into 3 categories: New build (dirt lot start from scratch), Builder spec home (under construction and preliminary selections have been made), Existing home (built and bought by someone else, now up for sale by the private owner.
New Build: Contracting to build a home from the ground up can be very exciting. Most production builders will subdivid a neighborhood, install ammenities like parks, playgrounds and such, then contract to sell the lot combined with a home built to one of several floorplan configurations. Buyer will in many cases select the home site (lot), floorplan and configuration, and optional finishes or features. The process may take anywhere from 6-18 months depending on the builder, availalbity of materials and labor. The pandemic and subsequent supply chain issues saw large delays in new construction time tables, most of which have resolved themselves as of the time of this writing. It should be noted that disruptions in timetables can always be possible and builders will not commit to a specific close date until you approach the completion of construction. Sales associates at model home centers, or internet sales associates represent the builder and protect the builders interest. Buyers may utilize a buyer’s agent and in many cases the builder will pay the coorperating buyer broker a commission, but the broker must be present on your first visit to the community and register you as their client. Builders use their own purchase agreements. These agreements are prepared by builders, and their attorneys, and language is generally there to protect the inerests of the builder. Builders hold the deposits. This is true of most builders and different from buying an exisitng home where deposits are held by a neutral third party title company. Final price is unknown at contract signing. The final sales price will not be known for sure until all optional design selections have been made, generally this happens within the first 60 days of contract signing but total final price is unknown until everything under consideration has been decided. Home completion and buyer possession date is unknown. Until the home is nearly complete you are on a construction schedule that may see delayed or accelerated time tables. Some items may not be included. It is pretty standard to take possession of a new construction home without back yard landscaping or improvements (just dirt). Window treatments and finish items may not be offered by the builder or pricing may make purchasing on your own after closing a better option. Some builders do not include front yard landscaping or improvements either. It’s important to pay attention to what appliances, finish items and landscaping or or is not included with the price of the home.
Builder Spec Home: Also called an inventory or “quick move in” home. This is a homesite that the builder opted to initiate the build process on without contracting with a specifi buyer. Builder will select the floorplan and optional construction features, obtain permites based on those selections and start building the home. At some point they will make the optional selections for finishes, sometimes this is in the very beginning and sometimes it is later in the process. Just like new build projects, the sales associate represents the builder, the contracts are written by the builder. If all selections have been made the price will be final. If selections can still be made by the buyer then the price may change accordingly. Timetable may be more predictable. Depending on how far along the construction is, the builder may have more confidence in an accurate closing schedule. Buyer may not be able to customize the home. If all selections have been made then that is what comes with the home and buyer can not make changes to optional finishes.
Existing Homes: Existing home purchases are quite a bit different from buying a new construction home or builder spec home. Primarily in regards to timelines and cost. Here is what to consider: Price is negotiable but finalized at time of contract. While inspections and appraisals may create opportunities for the terms to be negotiated and possibly change, the price at contract agreement is as high as the price will ever be. Negotiations after contract due to appraisal or inspections issues would likely only reduce the price. Home is complete and sold as is. No design selections or back yard improvements to do. Standard purchase agreement. Almost all of our existing home transactions are perfomed via the Arizona Association of Realtors Purchase Contract. This document tends be more neutral and is flexible to be applied to a variety of home purchases and subsequent terms. Deposits are held by neutral third party. Seller does not hold the deposit funds. Typical closing (possession) schedule is about 30 days from contract to closing. This timefram would allow for financing or cash purchases and include a 10 day inspection period, typically an appraisal contingency.
In summary, the most important difference in these types of transactions revolve around money, time and the contract being used. There are advantages and disadvantages to any of the three above and a buyers specific situation may make one or another more attracitve. Most importantly is to have trusted representation on your side of the table. At Newman Realty, we are well versed in all types of purchase processes and are ready to help you with your buy or build project!
Until next time friends,