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"...read This BEFORE You Visit Your First Model Home!"
When shopping for your home, you'll discover that most homes on the market are resales. Yet, one out of four homebuyers purchases a new home. Both new homes and resales offer advantages. Before you make a decision, let's . . .

Compare These Points!

New Homes

  • offer innovative use of space and style
  • greater energy efficiency
  • a choice of options and upgrades
  • everything is new, and modern.

Existing Homes

  • on the average they are less expensive
  • often they are in established neighborhoods with mature landscaping
  • homes have already settled, eliminating possible problems that arise from this happening after the purchase of home
As you can see, there are advantages to both. Most people consider both new and existing homes before they decide to purchase. Should you be thinking about buying a new house, here are 10 points to consider before you visit your first model home.

1. Determine a Comfortable Price Range

Before you visit your first model home, sit down with your agent and do your homework. You'll want to be prepared so that you can determine a comfortable price range for your new home.  If you own a home, you'll first need to know the net proceeds from its sale in order to determine how much cash you'll have to work with. Don't simply estimate this but carefully calculate every possible selling cost. If you're a first time buyer, you'll need to first qualify your income. Determine the size of your down payment, then work out a monthly debt load so you can determine a comfortable price range.

2. Sellers' Agents Versus Buyers' Agents

Here's a good point to remember. The sales agent in the model home represents the builder, not you. They are known as sellers' agents. As a buyer you can work with a buyers' agent at no additional cost. It's his/her business to best represent your needs by being knowledgeable about home construction, warranties, financing, differences in pricing, quality, even lot selection so that you get the best value for your money.

3. A Builder For All Reasons

Like all tradesmen, builders vary in their fields of expertise. For example there are builders who specialize in craftsmanship, others who are known for their innovative use of space, and those who offer below-market financing or customer attention during construction and after move-in. Determine your own specific needs or preferences then shop around for a builder that will best address your requirements.

4. Get the Facts About Your Builder

Before making a final decision, it is wise to check out the reputation and financial strength of the builder. Get "spec sheets" on home features covering everything from floor plans to energy efficiency, including lot availability and delivery of your home.

5. Check Out the Neighborhood

  • Learn as much as you can about the community.
  • Discover what amenities it has to offer.
  • Investigate if financial reserves have been set aside to build or replace major amenities like schools or community roads
  • Find out from local land-use officials what else is planned or could be constructed in the area, especially where vacant land is applicable.
  • Review the rules for the homeowner's association, or find out if one will be set up.
  • Think of how you will be affected by commuting routes and times.

6. Choosing Options and Upgrades

The less expensive the base price of the house is, the more options and upgrades you can add without fear of overpricing it for the neighborhood. Options are items the builder installs during construction, such as adding usable space like a sunroom or a powder room. These features can add the most to the resale value of your home. Upgrading means selecting quality above "builder standard" such as carpeting, ceramics, detailing, kitchen fixtures and appliances. Be sure to take advantage of builder incentives that offer free upgrades or credit off the sale price. Remember, you can add a deck, finished basement or landscaping later and sometimes for less money.

7. Negotiations

Often buyers don't realize that there may be room for negotiating price, upgrades or options. For example, you have some scope for negotiating with the builder if s/he has a completed a home but hasn't sold it. Also some "premium lots" are priced higher and are sometimes saved to be sold last. Keep in mind that typically, all lots cost the builder the same, so be sure to enquire about lot pricing. Builders may offer discounts or special financing to help close a sale.

8. Be Sure the Contract Works in Your Favor!

When spelling out the particulars of an agreement with your builder, ensure you protect yourself by having safeguards written into the agreement, such as:
  • placing your deposit in escrow
  • detailing your upgrades;
  • allowing you access to the construction site to check on progress;
  • a 30-day advance notice of the closing date.
  • an explanation of what the fine print means in the warranties of the builder and manufacturer.

9. Financing - What's Best for You?

Some builders, especially in high-volume communities that place large numbers of loans, can offer special financing packages. However, because "home loan" lending is highly competitive, you have many financing choices other than those being offered by the builder. Shop around for everything, from rates to lender fees. Appraisals, inspections, surveys, attorneys and closing fees can vary as well.

10. Just Because it's New.... - Doesn't Mean it's Perfect

Yes it's new and typically it's built with modern materials that are durable, low maintenance, stronger, quieter, and safer. But because nothing is perfect, even if it's new, consider hiring a reputable, licensed home inspector. Then create a builder "punch list", from what you've learned to address any problems before closing. Consider budgeting for items to be modified or added later on. Many new home buyers use a real estate agent to help them negotiate the best price and terms with the builder.

Buyer Advantages Your Builder May Not Reveal!

Here's a fact that you may not be aware of, some builders have newly-constructed homes available for immediate delivery. Usually these homes are ready to move into within 30 days. Even if some builders are eager to sell, they'll probably keep that knowledge to themselves. Immediate delivery homes are often available for various reasons:
  • the community, where new homes are being constructed is nearly complete, so the builder proceeds to have the on-site-contractors build "spec" homes (homes built on speculation for sale) on the last lots;
  • the model home is for sale;
  • the contract on a home has fallen through;
  • builders include constructing homes for immediate delivery for buyers who are relocating or who have sold their previous home and need one to move into quickly.
Immediate delivery homes may be more desirable because, sometimes builders offer financing incentives or free options. This may be done in place of chopping prices to appeal to buyers purchasing later in the building phase. An immediate delivery home is an advantageous way to purchase a home if you need to move in quickly, or need a physical space to walk through and see before you sign a contract. Be sure to enquire.

Azim Jina Personal Real Estate Corporation at Sutton Centre Realty

Every member of our team works in real estate out of a genuine desire to help people. As you navigate the home buying or selling process, we're there every step of the way to answer your questions and help you achieve the most profitable outcome possible.

  •   Board-Certified Agents
  •   Familiar with Local Neighborhoods
  •   Knowledgeable on All Aspects of the Real Estate Process
  •   Caring and Compassionate

Call us today and get the help you need to find your dream home!

FIXER UPPER MYTHS & FACTS
What You Should Know BEFORE You Buy

"A home will only sell for what the market can bear. What this means is that no matter how many upgrades were made, or how much money has been invested in the upgrades, a home will only sell for what the majority of homebuyers are willing to pay."
Before deciding that your next home must be a fixer-upper, you should do some homework into what to expect when purchasing these types of homes. Many prospective homebuyers tend to have a romanticized version of the entire process, and are quite shocked when confronted with the hard reality. Fixer Upper homes can often represent a good deal, but there are some points that a homebuyer should be aware of before making that offer.

MYTH #1 . . .

I can make a "killing" in the real estate market by buying a run-down home, for tens of thousands of dollars less than the average home, fixing it up, and then immediately selling it for full price, or more.

FACT #1 . . .

Most homeowners looking to sell their "fixer upper" home understand that they will have to list their home at a price that reflects the cost involved in restoring the home to its original condition. The asking price of a fixer upper is usually calculated so that the savings represented by the lower than average market price is roughly equal to the amount of money that a buyer could expect to spend on necessary renovations. Updating the "look" of a home, or upgrading to higher-end finishes, is not included in these calculations, and you should be careful not to spend so much money on renovations that you are unable to recoup your investment.

MYTH #2 . . .

If I’m buying a fixer-upper home, I don’t need to bother with the added cost and aggravation of a home inspection because I already know what I’m getting.

FACT #2 . . .

A home inspection should always be included in an Offer To Purchase and Sell agreement, and it is arguably even more important to include one when you are looking to buy a fixer upper. Structural defects are normally not visible to the untrained eye, yet will cost much more to repair than the obvious cosmetic fix-ups. Most licensed home inspectors will not only detail the defects that they uncover, but can also give you a good idea of the costs involved in fixing them.

MYTH #3 . . .

It’s better to pay a lot less and buy a "fixer upper" in an undesirable area, than to pay more for a comparable "fixer upper" in a better neighborhood.

FACT #3 . . .

Most of us have heard the quote, "the three most important things to look for when buying a home are: location….location…and location!" While this is obviously meant to be funny, and is a somewhat oversimplified rule of home buying, it does drive home the point of how important it is to consider where you will buy your home. Purchasing a fixer upper in a desirable neighborhood will cost you more initially, but the payoffs -- personal peace-of-mind and higher return on your home investment when you sell -- should not be overlooked.

MYTH #4 . . .

Once I fix this house up, I can turn around and sell it for double the price I paid.

FACT #4 . . .

A home will only sell for what the market can bear. What this means is that no matter how many upgrades were made, or how much money has been invested in the upgrades, a home will only sell for what the majority of homebuyers are willing to pay. Factors to consider when calculating your possible return on investment:

1. Location: What kind of a neighborhood is the home in?

The type of neighborhood will determine which type of buyers you will attract when you decide to sell. For example: An area consisting of mostly “first time buyers” will attract buyers who have a strict and limited budget. They are looking for affordability above all else – including high-end finishes and perfectly landscaped gardens.

2. Neighbors: What are the neighboring homes like?

A beautiful home surrounded by unkempt, run-down homes will sell for much less, than a beautiful home surrounded by well kept, nicely maintained homes.

3. Surroundings: What are the surrounding features?

Buyers are willing to pay more for a home that is in a convenient, yet quiet locale. While you may find it convenient to side onto a school, many potential buyers would eliminate such a location due to the noise level associated with the presence of hundreds of excitable children, and the congestion caused by school buses and parents dropping off and picking up students.

MYTH #5 . . .

I can make a lot more money by turning this single family home into a multi-family dwelling.

FACT #5 . . .

While this statement is for the most part true, it may not be possible. Most towns and cities have strict zoning laws that not only dictate the maximum allowable occupancy within any given area, but also dictate the size and design of a home when building new, or creating additions to an existing structure.
Once you have thoroughly investigated the pro’s and con’s associated with purchasing a fixer upper home, and you have decided that it’s right for you, be sure to "run your numbers".
1. List Price of Fixer Upper
2. Average Recent Sale Prices of Similar "Non Fixer Upper" Area Homes
3. Estimated Cost of Repairs from Reputable Source (e.g. referred Renovation Company)
4. Buffer Amount for "Unexpected" Repair Costs (usually 1/2 of estimated total)
5. Selling Expenses (real estate fees, lawyer fees, closing costs)
6. Amount of Profit You Desire versus Amount of Actual Profit
For example:
1. $200,000.00 = List Price of Fixer Upper
2. $255,000.00 = Average Sales Price
3. $ 25,000.00 = Estimated Repairs
4. $ 12,500.00 = Buffer for Repairs
5. $ 17,000.00 = Selling Expenses
6. $ 20,000.00 = Desired Profit Versus Actual
Profit of $500.00
If your intent was to purchase the house shown in the example above, make the repairs, and immediately list the house for sale, your Actual Profit shown is only $500.00. If, however, your intent was to purchase the same house, but actually live in it for a few years before selling, you would normally expect to turn a much better profit for two reasons:
• First, historically speaking, the real estate market normally goes up over time and your anticipated sale price would be higher - affording you more profit.
• Second, the money that you would have been paying in rent to live elsewhere - with no return - is actively paying down your mortgage and increasing your equity.
As with all investments, though, nothing is guaranteed. So when looking to finance a home, keep in mind that the real estate market has taken some big hits in the past. Never overextend yourself financially.
Please note that the figures in the calculations shown were used for example purposes only. Local housing prices, repair costs, and selling costs will vary greatly from one location to another. It is recommended that all Buyers thoroughly research their local costs and legal restrictions before purchasing.

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Copyright 2023 by the Real Estate Board of Greater Vancouver, Fraser Valley Real Estate Board, Chilliwack and District Real Estate Board, BC Northern Real Estate Board, and Kootenay Real Estate Board. All Rights Reserved.

Information Deemed Reliable But Not Guaranteed.

The information provided herein must only be used by consumers that have a bona fide interest in the purchase, sale, or lease of real estate and may not be used for any commercial purpose or any other purpose.

Last updated: 5/19/2023 4:58 PM