New Construction Tip: Things To Look For When Reviewing A Purchase Contract
Builders, whether a condo high-rise, townhome community, new home, or an entire subdivision in Virginia, Washington DC or Maryland, all have their own broker representation, preferred attorneys, preferred mortgage brokers, and of course, their own real estate sales contracts. So how does all of this change the buying process for you? Here are some things to keep in mind if you decide to pursue new construction properties:
-The builder has hired a real estate agent to represent them…why shouldn’t you? The real estate agent sitting in the model unit, used as their office, is there solely to represent the builders best interest, not yours. Remember that.
-They have formed partnerships with a list of mortgage lenders and a title company who will handle the title search and conduct your settlement (aka closing). You are FREE to use one of their lenders or select one of your own. The Real Estate Settlement Procedures Act (known as RESPA) prohibits anyone (agent or builder) from requiring you to use any one company or person. However, that being said, they will often offer incentives to use one of their people…there may be nothing wrong with them! In fact, in the contract, they may offer you some credit or incentive for using them, ex. a percentage of the sales price towards your closings costs, etc.
-Transfer and Recordation Taxes – make sure it details buyers are responsible for only their own portion of this, and that the seller is not requiring you to pay both taxes. I’ve seen this done before, so pick your jaw up off the floor. Review this paragraph very carefully.
–Warranty on wall to wall coverage: is there a 1 year warranty on appliances? What about electrical/mechanical, etc? Usually there’s a 1 year warranty on appliances, and a 2 year warranty on wall-to-wall stuff as outlined by individual contracts. You’ll have the opportunity to do both a cosmetic (wall dings, paint, fixtures) and an inspection (appliances, outlets, mechanical, electrical), so make sure you take note of anything that doesn’t work properly.
–Renting and selling restrictions, if any. Sometimes builders will prohibit you from selling your unit for at least 1 year after you close, so you’re not competing with them. Others will put a minimum on the length of a lease (ex. at least 6 months). If this is a concern for you, make sure you explore this issue deeper.
Every contract is different. Make sure you read through all of the documents they give you before you sign anything…or better yet, call me and let me help you make sense of it! 🙂