Buying new construction in Chicago isn’t much different from buying a “resale” home. What variances there are, however, can make all the difference between buying a diamond or a lemon. Here are a few tips to keep in mind when buying new construction:
Tip #1: Don’t use the builder’s sales agent – hire your own.
If they’re the builder’s agent, they’re being paid to represent the builder, no matter what they tell you. Committing to your own Chicago real estate buyers’ agent assures that you will have an advocate to assist you in understanding the contract, determining if the home is fairly priced, selecting upgrades, and recommending an inspector that is well versed in the nuances of new construction. Plus your buyers’ agents’ compensation is paid by the developer. You should also be willing to sign an exclusive buyer agency agreement to solidify your relationship with your agent
Tip #2: Find your own lender.
Going thru the builders’ preferred lender may provide you with some benefits, such as being able to close your loan even if you are the 1st buyer to close. But you may be giving up some things as well, such as 1st time buyer programs not offered thru all lenders, or better rates since an outside lender might be more aggressive in looking for better rates & programs. Having your Chicago real estate agent refer you to lenders that they have a working relationship with usually helps in having a smooth transaction! Otherwise, you should talk with any lender or banker that you already have a relationship with.
Tip #3: Talk to a Chicago real estate agent or lawyer.
Keep in mind that the developer’s attorney wrote the contract, so it is typically slanted to their best interests. Asking about cancellation rights, when the balance of your earnest money is due, when is the targeted decision dates for upgrades and any additional monies is due for them are services your agent provides to assure you understand both your liability and your commitments.
Tip #4: Decide what options or upgrades you want.
Every builder has a different business model, but for most, upgrades are a profit center, so spend wisely! Early on, you should find out if your lender allows the upgrades you’ve chosen to be added to the loan. They will need an accounting of your selected upgrades that you are intending to wrap into your loan. If your lender doesn’t allow this, the cost of the upgrades will come out of your pocket in cash.
Tip #5: Research the builder.
It’s amazing how many people think a builder is good, simply because they can build a house or condominium. Unless you’re a licensed home inspector, the chance of you catching a cut corner or shoddy building practices is slim to none. It’s prudent to check out other projects the builder has done, find out if there are any pending lawsuits or building code violations against them, if they are jumping from one project to another because of an increase in contracts on one building and a decrease in contracts in another?
Owning newly constructed Chicago real estate and knowing that you’re the first person to live in the home can be a wonderful, exciting experience. Make sure that you protect yourself so you can enjoy it!
If you are thinking of buying new construction, it’s critical to decide upfront if you want the benefits of having your own buyer’s agent as your advocate. If you visit a builder’s model without your agent, the odds are great that they won’t be able to represent you with that builder. While I personally disagree with that practice, many builders will hold to that policy and in effect place you in a dual agency situation where you don’t have your own exclusive representation.
I’m available via email or my mobile – 312.953.8685 – should you want to find out more about how I can help you work thru all of the nuances when buying your new construction home.