Today, millions of consumers are investing in homes that are not yet built. Some consumers don't realize, however, that buying a home before it's been built is a lot different from buying an existing home. Weather may delay construction and closing. Mortgage rates could shoot up. The builder could take shortcuts or make mistakes that could later cost you money.
To avoid problems such as these, the Better Business Bureau suggests the following steps:
- Zero in on land plans. How can you find out what you're getting into when you buy the ninth house built in a 200-home development? Ask the town's land planner about current zoning requirements and any proposals that have been submitted to develop nearby land.
- Visit the developer's earlier projects to check out the quality of the community centers, landscaping, and other amenities. Ask residents if the developer delivered what was promised. Contact your BBB to locate trustworthy developers.
- Check out the homeowners' association. In large metro areas, at least half of new home sales include membership in a homeowners' association, according to the Community Associations Institute. Ask for a copy of the association's rules as soon as you're seriously interested in buying. Find out how much the association fee is.
- Carefully scrutinize the contract, and consider legal review before signing. Make sure any upgrades are included in the contract. Also, add a statement to the contract allowing you to visit the site at several designated times. Keep your deposit check as small as possible. That money is at risk until you and your family move in.
- Inspect the finished product. Before you take delivery of the property, give the new house a top-to-bottom examination yourself and consider bringing along an experienced new-home inspector with you.
- Protect your mortgage rate. As the closing date approaches, you'll want to lock in your interest rate. If delays occur, talk to your lending institution. It may agree to extend your rate lock-in. If that doesn't work, ask the lender to close the loan and hold some of the money in escrow until the appraiser verifies the home is complete.