Tips to Protect Yourself with Builders Contracts and New Construction

New construction in DC can be a great option in Denver’s real estate market, with its low inventory. But just because it’s new doesn’t mean there aren’t things to look out for. In fact, that’s why you should be extra careful. Here are a few tips on working through the process.

Work with an agent An agent with new construction experience will be able to give you advice throughout the process. An agent also provides a buffer of communication between you and the builder’s rep, which can be very helpful when negotiating. The Builder’s agent has an interest to sell houses, and they won’t give you a price break if you choose not to use an agent. That would upset their sales comparables and other Buyers who come in with representation. A knowledgeable buyer’s agent offers value with experience, insight and help negotiating. Since the fee is baked into the price already, there’s no reason not to work with someone. 

Protect your agent by allowing him or her to communicate with the builder first. Don’t just go visiting the site on a whim on a Sunday without asking your agent to at least call first and introduce themselves as your agent. Many new construction sales offices are sticklers on this protocol, and some won’t honor the agency relation if you come onsite without your agent present. Believe me, your agent won’t mind the call and it’ll save any trouble and/or confusion when it comes to your representation. If you really must go in and your agent is not around, put your agent’s name and information in the sign-in sheet so the Builder will contact them for follow-up.

Review Contract Terms — New construction contracts are written by attorneys hired by the builder, so read the language carefully. Pay attention to time frames and make sure they work for you, or else work  your agent negotiate the changes that you need. Check appraisal language and time frames, financing and earnest money deposit details. If timing allows, work in a pre-drywall inspection as well as the regular inspection so you have a chance to really do your due diligence on the property. 

Research Preferred Service Providers – A builder contract often offers strong incentives, like closing cost help or other discounts, to keep you working with their preferred title companies and lenders. Having worked with builders on a few different new construction projects, working with the same companies on each deal really does make for a smoother process, as title company and lenders already have the builder information on hand and the parties are familiar with each other. But, since these providers are getting bulk business from the builder, they’ll tend to communicate with the builder more freely and may favor them in small ways. 

You may have to give up the attractive purchase incentives in order to work with a “non-preferred” service provider when working with a new builder. Do your research to compare, and if you want to use your own then see what you and your agent can negotiate as far as concessions are concerned.

Research Developer Reputation — Find out what other projects they’ve worked on, and see if you can find out if there were there any legal issues in the early years after new owners moved in. Keep in mind, in boom or bust years can cause fluctuations in developer performance, but do your research and find out what you can. Here’s a list of Denver’s top homebuilders, but this is a dynamic industry so it’s not a comprehensive list.  

Home inspection – The foreman can help you with the final walk-through and punch list, but he works for the builder. You’ll want the eye of an inspector on your new place at least once, if not twice (before and after drywall). An inspector is hired by you at your cost, and they’ll provide you with a writeup and a report to show the builder exactly what issues need worked out. Believe me, it’s worth it to have the documentation on hand and an expert opinion backing up your punch list items.

Published by Jessica Wilkie, Broker Associate

Hard worker data geek with experience and humor to share. Enjoy serving people throughout their real estate journeys and helping them make good and informed real estate moves.

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