Buying New Construction in Forsyth County

We’ve discussed the resurgence of new construction in Forsyth County before, and we are now seeing some trends that buyers need to be aware of when considering buying new homes in Forsyth County.  Many of the large builders have their own contracts which are obviously geared toward protecting their interests in the transactions.  Here are 3 critical pieces of the contract to make sure you are aware of and understand the consequences of.

1) Many builder contracts now specifically state that they only guarantee the appraisal will meet the base price of the home.  What does this mean?  Let’s say a buyer purchases a home for $300,000 and then adds $35,000 in upgrades for a total purchase price of $335,000.  The appraisal comes in at $305,000.  The buyer has to either come up with the additional $30,000 or be in default of the contract.  By defaulting, the buyer loses their earnest money and any additional deposits made for the upgrades (which the builder usually requires).  The lesson here is to be very cautious about adding any upgrades to new homes you are purchasing.  You can always add them later.

2) The second factor to be aware of is regarding finance contingencies.  Most of the national builders have relationships with mortgage companies and offer incentives to buyers for using their lender.  For example, the buyer may receive $2,500 toward closing costs if they use the builder’s lender.  Some builders now offer a finance contingency only if you use their preferred lender.  The preferred lenders are usually good companies that will get the loan closed.  The disadvantage to the buyer is they assume additional risk if they choose a different lender for any reason (better rate, existing relationship, etc.). With no finance contingency, if they don’t qualify for the loan they will lose their earnest money and any other construction deposits they’ve made.

3) The third change is perhaps the most unusual and I’ve only seen it with one builder.  This particular builder has a paragraph in their contract stating they can raise the purchase price during the construction of the home.  One of my colleagues here at Keller Williams Realty had a client purchase a home from this builder and the purchase price increased twice during construction!  The buyer really wanted the home, so they agreed and closed on the home.

The bottom line for home buyers is to make sure you have representation from a Realtor when purchasing a new home in Forsyth County.  The contracts are critical and most people don’t even bother to read them.

Call me before you begin your search for a new home!

Tim Hopkins

www.tkosales.com

678-341-7403