New-Home Due Diligence and Vigilance

Agents should address the following issues when inquiring about a newly constructed home on behalf of their buyers, says Lana Butsky, CIPS, of Neapolitan Realty LLC

September 16, 2015

Ask for a sample of the builder’s contract. Most have their own, distinct from other companies’.

Ask for clarification of home warranty coverage. Warranties are often issued by a third party.

Obtain a list of costs. What is standard versus an upgrade, and how much do upgrades cost? And remember that most builders pay commission on the contract price, not the final purchase price with the upgrades included.

Inspect for defects. New homes are not flawless. Request an inspection from a separate company.

Check out the neighbors. Review county records to learn what’s being built on adjacent land.

Consider HOA fees. What happens if the builder underestimates HOA fees and costs skyrocket after development is completed? Visit a builder’s previously completed developments and gauge home owners’ satisfaction with fees.

Learn about nearby closings. Review public records to see if the developer may be prone to dumping unsold properties at auction, meaning that recently sold homes’ values may drop.

Paula Hess

Paula Hess is a former editor of California Real Estate Magazine and a Los Angeles–based freelance writer.