Answers to Frequently Asked Questions about Building a New Home

Why is it so hard to find out about all the possible builders?

The new build market is a constantly shifting target- builders and communities come and go as neighborhoods get built up and new ones start. A builder today may not exist a few years from now- companies merge, dissolve, and go out of business.

What’s the biggest motivating factors when people build a new home?

  • Location
  • Price range (both the monthly payment and the total price)
  • Features- floor plans and amenities.

What’s the difference between a “production” and a “semi-production/semi-custom” home?

A production home is a set floor plan that either cannot be modified, or has very limited modification choices. At the most extreme end is a home that has predetermined the floor plan on the lot, the color and flooring choices, and even the landscaping. The advantage to production restrictions is that the builder can control their building costs to a greater degree, and often offer more competitive pricing.

A semi-production/semi-custom home takes an existing floor plan and offers modifications. Some builders will make elaborate changes; others offer limited choices. There are usually a wider variety of upgrade options available as well.

Why is everything an “upgrade”? It seems like I’m being nickel-dimed to death.

The mindset for building a home is completely opposite from buying an existing home. With an existing home, “what you see is what you get”. You may note if the color of the room matches your decor, but you’re probably not noticing if the floorboards are 2″ or 4″, or if the lightswitch plate is brass or plastic.

When building a home, these are all choices (among many others) that can be made, and with each comes a different cost. At times this selection process can become mind-numbing, as well as unexpectedly expensive.

TIP: When looking at initial pricing of a home, it’s a good idea to add about $10-20,000.00 to the initial price. It’s a very good rule of thumb that the final price will meet or exceed this amount as you develop what you really want.

Why are there always price increases as the community develops? Is it a better idea to get in at the very beginning?

Actually, it’s simple- the builders want to make a profit (that’s why they’re in the business, folks). So do the people who sell the lumber, drywall, windows, etc. As time goes on, it’s a given that one or more of these groups is going to have a price increase….. which is going to be passed on to you, the buyer.

Regarding building at the very beginning…… there’s a calculated risk that needs to be carefully decided. Some communities have started out with grandiose plans (and price tags!) that the market turned their noses up at. As time went on (with insufficient sales), these builders significantly downsized the floor plans, choices, etc to lower prices. In these examples, resale for the original homeowners is going to be hurt. On the other hand, those in popular communities have enjoyed quick equity in their homes as pricing and demand went up.

What is meant by “Buyer Representation”?

When a realtor is working with you on your behalf, that person is professionally and legally bound to represent your best interests. Remember, if you choose to work directly with a builder representation without a realtor, that builder representative is legally bound to represent the builder’s interests- they are an employee of the builder.

How can a good realtor “make it all better”?

An additional benefit of working with a good realtor is that he/she is always looking at your purchase with future resale in mind, and can give you important advice regarding choices that will improve your resale. Realtors work in both markets- new build and existing homes. We intimately know what buyers want and will pay extra for.

What is the realtor’s commission, and who pays for it?

The realtor usually receives a 3% commission based on the original contract price of the home, and the builder pays for it. It’s a very common misconception that somehow the buyer has to pay a commission- not true in the state of Ohio.

Here’s the BIG question…. can I get a “better deal” if I don’t use a realtor? After all, I’m looking at my bottom line here……

Here’s another common misconception- and the answer is NO. In the vast majority of cases, the builders out there have a general fund that either goes to marketing/advertising, or to paying the realtor’s commission- it’s a set fund. The builder is NOT going to give a discount for not using a realtor…. it’s the same price to you.

(of course, my realtor voice wants to chime in- if it doesn’t cost you to use a realtor, you’re not going to get the home any cheaper NOT using a realtor, and the realtor is legally representing your interests……. what are you, nuts? Use a realtor!)

However……. there are a few unethical people out there who love to break the rules. So, yes… I have heard of occasional builders/builder reps who have a “nod-nod, wink-wink” policy where the realtor was cut out of the deal, and the buyer got something extra (sometimes under the table).

To those whose eyes are gleaming after reading the last two sentences, I offer the following: Your home is (usually) your biggest investment. If you choose to work with a person that does not legally represent your interests, and has demonstrated their lack of ethics in one area….. what do you think the odds are that ethics issues may arise in other areas? Beware..

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I visited a builder’s model home on my own, and now they say I can’t use a realtor. What’s that all about?

Some builders have funny rules about realtor participation. They insist that the initial contact with the builder comes from the realtor- it’s called “registering” the buyer. In these cases, if you visit a model home and you fill out a form, or the sales rep fills out a form for you- Surprise! You have been “registered”. That sales rep has added you to their Quota belt, and will probably get an incentive if you buy a home.

If you want to use a realtor, there’s an easy way to get around this. Simply give the sales rep one of your realtor’s business cards, or tell them your realtor’s name/number. In the vast majority of cases (most people are honest, hardworking folks just like you), you’re set, and there no futher problems.

In that rare case where they are insisting you can’t have your realtor participate, there’s a simple way to ensure you can be represented- tell the builder you’re not going to build without your realtor participating. When it comes down to the wire, the builder will want to make a sale- and you will have the personal representation you desire.

Is “cost per square foot” a good way to compare different builders?

The “cost per square foot” form of measurement is a good way to get a very generalized big picture of value, but it’s not a good way to to determine accurate value. This ballpark form of measurement doesn’t take into account any of the amenities of the home, which hugely impacts value. A home with granite counters, wood shelving built-ins, elaborate trim and crown molding, etc. will have a much higher cost per square foot than a home with laminate counters and plain plastic coated trim. Likewise, when comparing two different builders in the same community there will be different finishes and detail quality issues to consider.

Use this to get an initial “big picture”, then tune in on the fine differences. It’s important to keep in mind the many, many differences that are not accounted for in the “square foot” comparison.