Prices are high, inventory is low and offers in the market are walking a fine line between homebuying and becoming a Vegas-level professional gambler funded only by your life savings. To say that the market is crazy feels a bit like an understatement these days and Covid has compounded the issue. I’ve seen Realtors take keys out of lockboxes to keep homes their clients are interest in from being shown (that’s a great way to lose your license), and I’ve had a Realtor enter without having scheduled a showing (another way to lose your license) which is technically trespassing and a great way to make the seller really, really angry. So as the buyer, how do you stay above the fray?
Two words: New Construction.
While it can be fraught with it’s own set of difficulties, new construction is a great way to keep out of the trenches of full-out real estate warfare known as the multiple offers situation.
Working with a builder means working with a company so they’ve got a plan to handle roll outs of lots and floorplans. They are held to a higher standard than a residential seller and must abide by equal housing opportunity laws. This means that a kindly worded love letter to the seller are off the table for tactics to win a home. The builder usually has an interest list and any newly available properties are offered to those on the list using a first-come-first-served basis. There’s no way to buy your way to the front of the line and sales staff are salaried meaning that their ability to take a shady financial incentive from a homebuyer is essentially zero.
Furthermore, because the sales staff is a step removed from ownership, they have no incentives to select buyers planning to build more expensive homes. As long as the lot is sold and a house is built, then the sales staff is happy whether the ultimate price of the home is 400,000 or 550,000. Meanwhile, if it was a seller selecting offers there’s a clear winner in that race.
Buying new construction also means that there’s more than one home for sale, so if your first choice of building lot happens to be scooped up, there are still other options for you. If you miss out on a re-sale home there is no true backup plan and your house hunt begins back at square one after losing the bid.
With new construction homes and especially those built by larger companies the pricing is more streamlined. It doesn’t always feel like that when you make what you think is a small tweak in the design showroom and it hits your bottom line hard, but it’s true. Shifts in pricing take a while to take effect in larger companies, so their pricing for an equivalent home on the resale market can actually be substantially less. Also, with multi-state builders pricing is often calculated for an entire region, so whether you’re in a big city or a more rural location you won’t see a tremendous jump in the price to construct a home. The majority of the pricing difference is due to the cost of the land itself and not much else.
Getting on a builder’s VIP list can feel daunting because there might be a ton of names on the list ahead of you, but try not to worry. With so many people looking for homes it’s easy to see a really large interest list but then because of the time required to complete the construction process the majority of those who were originally interested either found a home by other means or decided to exit the homebuying market all together. A lot can happen during the time a community opens and a certain home is ultimately built, so try not to feel discouraged.
If you’re sick of getting beat out in multiple offers, you don’t have a ton a money to put down on a house, or you have a difficult form of financing, then it’s time to look at new construction to see what options might work better for you!