Buying new construction in Seattle is home option that many in the city prefer to take. There is nothing like buying something brand spanking new and that goes for homes too. Specifically, if you really love that modern new construction home look. That new house smell that comes with new construction is magical. Fresh paint, brand new appliances, and fancy finishes that just make your heart happy. It is easy to get caught up in the excitement of something shiny and new. Before you decide to go the new construction route here are a few things you should understand about the process.
First, Get Your Own Agent – Do Not Use the Listing Broker or Their Team
Just like regular homeowners, builders on new construction often team up with a specific broker to list and market their properties. While it’s a good partnership for the builder and broker, it may not be the best deal for buyers. Specifically, buyers that use the listing broker to also represent them in the sale. This is called Dual Agency. These agents may work in an onsite sales office or could be hosting an open house. The issue is a dual agent may not advocate as aggressively for the buyer. They may not want to jeopardize their bread and butter development deal to save a one time buyer a few thousand dollars through proper negotiation. Always hire your own representation that will advocate for you through the entire process.
Diva Fact- In Washington State when a broker works as a dual agent, some of the fiduciary duties they normally have with a buyer are not in effect. In this case, the broker has a duty to work in the best interests of the seller, not the buyer.
Buying New Construction in Seattle Process
New Construction in Seattle – Below we will walk you through the big items you need to keep in mind when buying a new construction home in Seattle. Every builder is different and every buyer has their own unique questions. Take the time to figure out what you need to feel comfortable with your new home.
Not All New Construction Builders Are The Same
Builders do not all build equally. Some builders take pride in every project and make sure they deliver a product they can stand behind. Then there are those churn and burn builders that want to build as many things as quickly as possible. Often these type of builders cut corners that may have repercussions a few years into your ownership. It is important to talk to your agent and do some research on the builder. It’s a good idea to ask for information about other projects they have completed. A simple drive-by of a completed project can give you a good idea of how their past work is wearing over time.
What is a Pre-Sale?
Sometimes builders sell their properties before they break ground. This is called a pre-sale. This can be great for a buyer because you may be able to lock in a lower price now, instead of buying ten months later in a higher market. On the flip side, the market could go the other way and you may be locked into a higher price then that future market supports.
One of the biggest benefits to buying presale is often you get to choose from the builder’s selection of finishes and styles. They offer a base package that comes with the home and there are different styles and colors you can choose. They also allow you the option to make upgrades from the standard package. These upgrades range from higher-end appliances to flooring, custom lighting and just about everything else you can think of. They will usually have you come to their design center to select your choices. Upgrades come with a price and add up fast. Keep in mind once you order the finishes builders will not refund your money on them if you back out of the transaction.
Builders Require Additional Paperwork That supersedes the Standard Purchase and Sale Agreement
Most builders don’t use the standard Northwest Multiple Listing Service (NWMLS) Purchase and Sale Agreement to sell their homes. When they do they almost always include their own addenda which supersede the NWMLS forms. It’s critical that you read the entire contract yourself. Both you and your agent must fully understand the agreement you are signing. That being said, builder contracts are in fact very similar to the standard MLS forms. The meaningful differences usually lie in the inspection process and the appraisal terms. The terms are usually written more favorably for the seller than they would be on MLS forms. Hence the reason they use their own forms.
What Forms Might Be Different?
- Seller Disclosure Form – Most builders are not required to provide a seller disclosure form since the property has not been occupied.
- Inspection – The builder typically wants you to do a walkthrough so they can fix items that were not finalized. Regardless you need to do an inspection.
- Title Report – The title is going to be brand new. Transferring title from the builder to the new homeowner might include different types of deeds than a standard real estate transaction.
Did you know that most builders require you to waive your appraisal contingency?
Yes! A lot of builders set the price and expect the buyer to meet that price regardless of where the home appraisers. Just an FYI a home appraisal is value the lender determines your home to be worth. It is a critical component of the financing portion of the home buying process. In the small chance that your lender cannot appraise the home the buyer has to come up with additional money to close on the home.
Some Lenders Require to Get Pre-Qualified With Their Lender
Many lenders require you to go and get pre-approved with their lender to confirm that you have the ability to purchase the home. Some of these lenders might have deals to help you with a lower rate or waive your closing costs. And once again check out the fine print. There are typically kickbacks between lenders and builders. Or the lender is the entity financing the project for the builder. Below is a great guide on how to select the right lender for you.
You Need To Do an Inspection on a New Construction Home
It’s brand new construction so why do you need an inspection? Remember, not all builders do quality work. The inspection period is your chance to learn all about the home. YOU NEED TO DO AN INSPECTION.
The inspection process in new construction is different than buying an older home. Usually, in new construction, the builder contract states your inspection is informational only. They could also set limitations on what they are willing to address from your inspection report. However, I have found that even if the contract language is more “builder friendly” most builders will address legitimate defects found during the inspection period.
After the builder has completed the construction home you will conduct a Blue Tape Walk. This is done with the builder and it’s your opportunity to have all of the scratches, scuff marks and other deficiencies addressed. As you walk the house together you and the builder will agree on the work they are willing to do. Keep in mind that most of the time, if they don’t want to address something at this point you cannot use that as a reason to cancel the contract.
Field Story– Once I had a sewer inspection done on a new construction townhome. The builder told me I was wasting my client’s money since the sewer line was brand new. In the end, it turned out the plumber installed a section of the sewer line in backward. Had the buyers moved in and started using the plumbing, sewage would have backed up into their Brand New Home.
Title Review – Joint Maintenance Agreement and Sewer Capacity Charges
New construction builders are notorious for delivering the title report right before the home closes. It is often the most overlooked portion of the home buying process. Buried in the report is the Joint Maintenance Agreement (Townhouses) and Sewer Capacity Charges.
What is a Joint Maintenance Agreement? Typically this applies to townhouses or homes that share common spaces with another property. The Joint Maintenance is the agreement by all of the owners to maintain the commen areas. In new development this might include restrictions on the use of the home.
What is a Sewer Capacity Charge? Every new construction homeowner in King County is required to pay a charge for hooking up the sewer line to existing infrastructure. The charge is passed on to the owner and paid monthly through one’s utilities.
Builders Home Warranty
All builders must provide a Year warranty for the home.
When buying new construction you receive a one year warranty. This is a huge perk that you don’t get when buying an older home. Most builders have their own warranty contract that they come with the home. Regardless of what it says, it cannot be less coverage than what the state allows. RCW 64.35.305. Once again, it is important to read and fully understand what the warranty covers. About ten months after your close date I recommend you have the inspector come back and re-inspect the home to check or any deficiencies. You must have any items addressed before the one year period is up or the builder or warranty company will not make any repairs. Of course, if you have any major issues come up before then reach out to the builder and ask them for repairs immediately.
Pro-Tip: About ten months after your close date I recommend you have the inspector come back and re-inspect the home to check or any deficiencies.
New construction is an exciting way to buy real estate. There are some different challenges but it is worth it in the end. You get the benefit of experiencing everything in the home fresh and new. With that comes the responsibility of keeping it in the best shape possible. Always be thinking about resale so when it’s time for you to sell you can get top dollar.