The Lake Minnetonka home buying market offers a number of options. With sales of new construction last year surging to the highest level since 2007, single-family home production is projected to reach 840,000 units this year. That represents an increase of 18% over 2015, according to the National Association of Home Builders (NAHB). The challenge for home buyers, however, is new residential construction comes with a higher price tag than ever. The NAHB reports that in 2015 the average price of a newly-constructed home rose to $351,000 – an increase of over $100,000 from 2009. If you're thinking of buying a new home, there are several things to know and questions to ask. Let's examine them.
Lake Minnetonka Home Buying: Know "New"
While prices are indeed high for new construction, there are still ways you can save if you're looking to buy a new home. Real estate experts say it's similar to shopping for a new auto – the correct strategy will likely produce the best results.
When you're new home shopping, ask the home builders these six questions to find the best home for you – at the best price possible.
1 – "If I use your preferred lender and title company, what financial incentives can I expect?"
While production or "cookie cutter" builders are sometimes slow to set a precedent by negotiating sales prices, custom builders are often more open and flexible.
Home building experts offer this example as an explanation. Say a new home is listed for sale at $375,000 and sells for $365,000. The next prospective buyer in the development will expect to pay no more than $365,000 – the most recent comparable sale. As a way to keep the playing field level while maintaining the best margins, many builders may offer attractive incentives to home buyers who agree to use their preferred mortgage lender and title company. In addition, some home builders may even pay as much as $10,000 in closing costs. Still others may propose upgrades in the home such as more upscale granite countertops or hardwood flooring.
While you're shopping for a new home in the Lake Minnetonka home buying marketplace, experts suggest you should get additional quotes from a minimum of two other lenders before making a decision. However, look past just the interest rate being offered. Compare the terms of each lender to ensure the loan estimates are comparable.
2 – "What are the standard finishes?"
Most model homes available for personal tours by prospective home buyers represent an upscale or higher-end version of the standard floor plan. It's important to find out from the builder or his representative which of the options are standard, what the upgrades are, and how much cost difference is. The bells and whistles shown in the model home are there for a reason – to pique your interest – but they usually cost more.
Some savvy buyers have found success using this strategy: They purchase the home and move into it without the upgrades. Then, at a later date, they hire a subcontractor to perform the desirable upgrades. Most home builders charge a substantial markup on some finishes and product types. For example, the new housing development's builder may charge $4,000 to $6,000 for a quality, high-performance HVAC unit. With some research and negotiation, you may be able to hire another company to install the same unit for roughly 50% of that cost.
The downside, of course, is that by using a third party after you move in you'll be responsible for paying for the upgrades out of pocket. For many borrowers, one of the biggest advantages of having the builder do the upgrades is that they can be financed into the loan amount and amortized along with the monthly payment.
3 – "What are the long-term plans for this community?"
Once you enter the Lake Minnetonka home buying arena, you'll readily see that in cases where there is sufficient land, a successful home builder may be planning to build additional phases of an existing subdivision development. Often, this may affect your decision to buy. Here's why:
Let's assume that in a particular development only a handful of new homes have been built and sold. If the builder plans to develop an additional 50-75 homes and you and your family decide to buy and move in, guess what? You will inevitably have to endure construction noise, added traffic and potential debris for months to follow. In addition, there's always the chance that the original builder is unable to continue building in the development and a new company takes his place. If the quality of the workmanship suffers as a result of the builder change, that may adversely affect your home's value.
4 – “What are the HOA rules and regulations?”
Every HOA is different. While they all have Declaration of Covenants, Conditions and Restrictions (CC&Rs) as well as bylaws, what those items contain will vary from place to place. If you're looking for a new home in the Lake Minnetonka home buying market, be sure to get a copy of that information from the builder or development's representative and review them closely. If you want to have a private fence, a backyard storage shed or a doghouse you may want to check the HOA restrictions. Some HOA'S don't allow for those – and other – items. Ignorance of the bylaws will not excuse you from being assessed a penalty for non-compliance. In addition, be sure to find out when your HOA dues will commence. Many builders cover the HOA costs until a certain percentage of the development's homes (usually 50%) are sold.
5 – “What construction warranties do you provide?”
While most builders usually provide a one-year workmanship warranty and a 10-year structural warranty, warranties can vary. Be sure you know what your warranties cover and don't cover. Also, have a clear understanding for what the damage limitations are. Additionally, be sure to get manufacturer's warranties on your washer and dryer, hot water heater, HVAC unit, all kitchen appliances, and your home's roof.
6 – "Can you provide me with a list of your previous clients?"
As is the case with auto mechanics, dentists or even hairstylists, we all feel more comfortable dealing with people who come highly recommended. It's the same with builders in the Lake Minnetonka home buying arena. Have the builder provide you with references and contact each of them. Ask them questions like, "Did he solve any issues that arose in a timely and satisfactory manner?" and "Would you do business with the builder again?" Remember this, however, it's human nature to only provide the names of references that will give us positive reviews, so be smart – see if you can find past customers of the builder on your own. Checking online for reviews on Angie's List, calling your local Better Business Bureau or area Homebuilder's Association, or going door to door and canvassing the homes previously built in your neighborhood may also provide additional information.
See more articles pertaining to home buying tips in the section of articles on Lake Minnetonka Home Buying Tips just below Lake Minnetonka Real Estate Categories in the column to your right. And remember, we also post tips daily on Facebook and Twitter . Check us out there too.