21 Answers to Common New Home Building Questions
A lot of people are looking to buy in Painted Prairie rather than purchasing a “resale” home that is already built. Since building a new home is so different than just purchasing an already existing one, we’ve created this Frequently Asked Questions (“FAQ”) page to help people get a sense of the process before they decide if building a new home is right for them. This list will grow and change over time. Check out the questions and answers below and if you still have questions or you’d like to chat about my services as a local real estate broker you can reach me at (720) 799-6376 or firstname.lastname@example.org
- Can you give me an overview of the new home construction process from A-Z?
- Can I negotiate with the new home builders in Painted Prairie or are their prices set in stone?
- Should I buy a new home or should I buy an existing home?
- Should I have a Realtor when I buy a new home?
- Should I have the home inspected like I would on a resale home? It’s brand new so what could go wrong?
- What builders are in Painted Prairie and what do they have to offer?
- I can afford the builder’s base price but what other costs do I need to consider?
- Are there a lot of new homes to buy right now in Painted Prairie and is it easy to get the model and lot that I want?
- Is it overwhelming to try to build your own new home in Painted Prairie?
- Can I customize my new home or do I have to stick to the plan exactly?
- How does earnest money work when you’re buying a new home?
- If I’m interested in a new home, what is the process to reserve one with a builder in Painted Prairie?
- Can I negotiate with the builder regarding things I don’t like in their purchase contract?
- We’re on a budget – which upgrades should we do now with the builder and which ones should we do later once we own the home?
- I am building a new home in Painted Prairie but it’s not done yet and I need to enroll my child in school. Will Aurora Public Schools allow me to enroll now even though we haven’t closed on the purchase yet?
- What is a Soils Report?
- What is a Party Wall Agreement?
- What are the best items to spend money on at the design center and how do I stay within budget?
- What happens if I back out of the contract while the new home is being built?
- Will the builder actually be building my home or will they be using subcontractors?
- What is a Plot Plan?
1. Can you give me an overview of the new home construction process from A-Z?
Sure, I figured a lot of people would want an overview of the whole process, so Joe Phillips, Focus Managing broker, shot a video series outlining each step along the way. We have helped hundreds of clients build their new home in both this neighborhood and others in Denver. To help demonstrate the process of building a new home, this video series shows every step along the way from the first time you go to the model homes all the way to how things work after you close on the new home and move in. Hopefully by seeing the whole process in advance some of the fear of the unknown will go away for you. To see the whole video series click here.
2. Can I negotiate with the new home builders in Painted Prairie or are their prices set in stone?
I hear this question a lot and I think the answer is “it depends.” (The typical attorney answer – I know). It depends on the real estate market and what options both parties have rather than the deal at hand. Meaning, does the buyer have a lot of other attractive housing options other than this new home? If so, they have negotiating power and can ask for some concessions (whether that means a lower price, some closing costs paid by the seller, etc.). If the builder has other options besides your offer, meaning if they have a lot of other buyers wanting their homes, then they have negotiating power and their answer is going to be no when you ask for concessions.
Currently the builders have the leverage because buyer demand is high and if you don’t want to pay their price someone else will. That doesn’t mean we can’t try, it never hurts to ask for something you want in real estate. That said, don’t get your hopes up for discounts from the builders at this time.
3. Should I buy a new home or should I buy an existing home?
This one depends on your situation and what’s available in the market at the time. If anyone asks me that, I’d ask them some of the following questions:
First, have you looked at all the options for both new and resale homes? I think it’s always a good idea to go see both so you can look at all the pros and cons in person before you decide. Second, when do you want to move in? If you need to move in soon, a new home will likely not be a good fit.
From time to time you’ll find a builder who has a home that is nearing completion without a buyer but that is rare. Typically, it will take you 4 months to a year to complete a new home from the time it’s a dirt lot to the time you move in. Typically, the higher the price point the longer it will take because in the higher end homes, the design and build process takes longer. So if you’re okay waiting, new homes may work, but if you want to move quickly a resale is the way to go. I’d also ask if the buyer wants to pick out all the details of the home or if they are ok with what someone else has selected? If you are one who enjoys putting your touch on a home and picking everything out the new home process is fun but if you don’t know what you want or you get overwhelmed by a lot of decision making a new home may not be for you. From the flooring to the carpet to the fixtures…it can get overwhelming at times. Lastly, I’d let buyers know that new homes sometimes come with some hidden costs compared to resale homes. On a new home you’ll need to purchase window coverings which can easily cost $4k- $15k depending on the home.
I think it’s easy to also spend a lot of money on new furniture when you purchase a new home compared to an existing one (the new house can make your existing furniture seem old, even though it really may not need to be replaced).
4. Should I have a Realtor when I buy a new home?
Obviously, I’m biased on this question, I think you should have a Realtor. Of course, I’d love for it to be me, but if it’s not, there are other brokers living and working in the neighborhood that would serve you well. Why not have a Realtor on your side? The builder is going to charge you the same amount either way, if you don’t have a broker then they don’t have to pay your broker and they just pocket the money. A Realtor can help you along the way, explain things for you, and add value to the process through their previous experiences. And it’s paid for by the seller, so why not have one?
If you’re averse to Realtors, maybe you had a bad experience in the past. In that case I’d say chat with a few and see who you’re comfortable with and who you think you’ll mesh well throughout the process. It is an involved and long process so find someone you will work well with.
Click HERE for a short video on what we at Focus will do when representing you in a new build home.
5. Should I have the home inspected like I would on a resale home? It’s brand new so what could go wrong?
Yes, I think you should always have a third-party inspector inspect the home even though it’s new. In fact, we recommend the home inspector come do 3 separate inspections of the home while it is being built. They will come out during the foundation phase, during the framing/mechanical phase and again right before closing for the final inspection. When you are building a new home, you can inspect the craftsmanship of the builder throughout the process, don’t wait till the end and just have one when all the walls are sealed up! On our new home our inspector found multiple items that needed to be corrected and I’m not sure if they would have been caught by the builder. All the builders in Painted Prairie are good intentioned but they are moving fast and they are using multiple sub-contractors…there is plenty of room for mistakes to be made and you need someone on your side.
Click here for my general inspector’s scope of work for the 3 inspections he does as well as the cost of each inspection. I can tell you this is money well spent.
6. What builders are in Painted Prairie and what do they have to offer?
There are currently 5 builders in the neighborhood. Painted Prairie is a master planned community so the developer has to approve all the builders and sell them lots. So you won’t see people picking their own builders, they’ll need to chose from one of the nine. What the builders have to offer is always changing so I do updates on a regular basis to keep people posted.
There is attached product (townhomes, condos) ranging in price from the $300k’s to the $500k’s as well as detached single-family homes ranging from the upper $400k’s to the $600k’s. The heart of the market seems to be homes in the $400k to $500k range.
For our latest update on what all the builders have to offer check out our New Home Builders in Painted Prairie section. If you want to chat about your criteria and price range, I can point you in the right direction to a builder that fits your needs pretty quickly. I can be reached at (720) 799-6376 or email@example.com.
7. I can afford the builder’s base price but what other costs do I need to consider?
Good question. The builder’s base price can be misleading because the end price is probably quite a bit higher. Some say this is deceiving on the part of the builder, but the builders would argue that by offering buyers a base price and then optional items above that amount they are giving buyers the maximum ability to customize their home as they want rather than building one way for everyone. There is probably some truth to both arguments.
Anyway, in addition to the base price you’ll need to consider the additional cost of any lot premiums, structural options, design center options, change orders, closing costs and post-closing items. That’s a lot to swallow, let’s go over them one at a time.
Lot premium is the amount you pay above the base price for a better lot. For example, a lot next to a park may sell for $5,000 more than one off the park. Structural options are all the options you choose that involve structural changes to the house. For example, choosing to have a 3-car garage rather than the standard 2-car garage is a structural option that will affect your cost. These are typically selected early in the process because the builder needs to know the structural layout to get a building permit.
The design center costs are all the options you choose to customize the home cosmetically. For example, you could choose more expensive tile, carpet, hardware, lighting, baseboards, etc., etc. Even air conditioning is an option (usually) so don’t take for granted that the basics are included…ask questions. Change orders are when you change your mind mid-way through the process and make a change. The builder will charge you extra for this because it slows them down and costs them money.
Closing costs are all the costs associated with buying the home and paying the lender for everything related to the loan (assuming you’re getting a loan). These can add up, especially because the lender will be funding an escrow for your taxes and insurance. Talk to your lender early to understand these costs. Lastly, there are post-closing costs to consider such as window treatments, furniture, additional landscaping, etc.
So the real cost is not the base cost. It’s the base cost + lot premium + structural options + design center options + change orders + closing costs + post-closing costs! I don’t mean to scare people or turn them away, the point is just to inform people before they start the process. Poor expectations of the total cost involved can result in buyer frustration and the process should be fun.
8. Are there a lot of new homes to buy right now in Painted Prairie and is it easy to get the model and lot that I want?
The inventory of homes in Denver and Aurora right now is very tight and that includes new homes. Builders have been selling homes at a fast rate and this makes it harder for buyers to get the model and the lot that they desire. Oftentimes, builders will have particular models that appeal to a wide variety of people and these inevitably are the most popular models. The builders can’t sell the same model to everyone though because it would result in a very monotonous street scene. So to protect the character of the neighborhood and ultimately the property values, the master developer of the neighborhood, has to approve the street scene proposed by the builders.
So given the tight market it’s not impossible to get the model and lot you want but you need to start early in the process, well in advance of when you want to close on the home. You may have to wait 6 months for the home you want and then another 6-8 months for it to be built! This is too long for all buyers and some will opt to go with the resale market where you can find a home and be moved in within 30-45 days. One thing is for sure, if you want a new home, you need to figure out which builders have the plans you like, get on their interest list and ideally get a local real estate agent that has relationships with the builders to get you the home you want when it becomes available (hint..hint…sorry for a little self-promotion but we do believe having a local agent helps).
9. Is it overwhelming to try to build your own new home in Painted Prairie?
The process can be a little daunting but I think most of the stress involved comes from not knowing what to expect. If you know what to expect going in, you will be more equipped with the patience you need to have when building a new home.
Another big issue buyers have to be ok with some uncertainty. There is likely going to be a period of time when you’re not sure which model and which lot you are going to be able to purchase. This can be frustrating but it’s just how it is. It’s unlikely you will walk in one day and find the home and lot you want without waiting. Will this not knowing drive you crazy? If so, maybe a resale is more suitable for you because it’s a much quicker process.
Although if you like control I’m guessing you may enjoy picking out your new home finishes rather than accepting what someone else picked for the home on a resale. What about the selection process for all the finishes, is that overwhelming? It can be. I like to offer my clients the assistance of an interior decorator to help them through the selection process. Between the interior decorator and the design professionals that will staff the builder’s design center, the buyers will have the help they need to make all their selections. I think the key is to be patient and know that it will take several design center trips and some time looking at sites such Houzz or Pinterest to find the look and feel that matches your style.
Construction is rarely right on time and mistakes do happen so be patient going in and expect some setbacks and changes along the way. In my experience it’s all worth it in the end when you get the home you love in the area you want.
10. Can I customize my new home or do I have to stick to the plan exactly?
All of the builders allow you to select which finishes you put in the home such as tiles, hardwood floors, etc., but when it comes to being able to really customize your home, some builders are more open to it than others. The builders’ whole business model is about getting efficiencies out of building the same house in repetition. They can use the same plans, the construction crews know how to build it, they’ve worked out the kinks, etc. When they have to customize things for each buyer, it slows their process down and it opens them up to the opportunity of making more errors.
That said, there is some flexibility. For example, many of the builders will have some predetermined structural options for you to choose from…such as making a room a study or converting it to an additional bedroom. It’s not uncommon for there to be an optional loft on the second level which could also be a bedroom. So you’ll have some control but if you want to do something way outside the box, it’s not likely because that’s a headache for the builder. And given the buyer demand there are plenty of buyers who will purchase their homes and not want changes made.
11. How does earnest money work when you’re buying a new home?
First, I’ll start by explaining earnest money for those who have not purchased a new home and then I’ll talk about how it works with new home builders.
Whether you are buying a new home or a resale you’ll need to provide earnest money with your offer which shows the seller you are serious about buying the property. The earnest money will then be held by a third party (typically a title company) or the seller (in the case of new home builders). If the buyer defaults on the contract and does not close on the home, the seller is entitled to keep the earnest money to in essence reimburse them for the time that was wasted on the sale that didn’t close. It protects the seller from buyers who may change their mind after the seller has gone through all the trouble of listing the home and not offering it to other buyers.
When buying a new home, you’ll be required to put down a fair amount of money as earnest money. With many builders in Painted Prairie this will be $5k – $10k (even more for the higher-end builders) you have to put down up front and then as you make selections for your finishes that amount will increase. For example, if you decide to upgrade your cabinets to a really high end level the builder will ask you to put down a % of that as additional earnest money because they have to order those high-end cabinets and if you backed out, the next buyer may not want them. If you choose a really large or unusual option such as a carriage house over the garage you may be asked to put down 100% of the cost of the upgrade at that time because the seller doesn’t want to build something unique to then have the buyer back out.
You won’t have to close on the home and pay the full purchase price until it’s completely finished, but you should plan to have cash up front and along the way for earnest money.
12. If I’m interested in a new home, what is the process to reserve one with a builder in Painted Prairie?
Luckily, we are still in the infancy stage of Painted Prairie. However, with the growth of the community, I can see future filings in Painted Prairie becoming a little more competitive (think Central Park (neighborhood formally known as Stapleton). Currently, there are plenty of lots available in some really key areas – near parks and other green space. I keep in touch with all the builders frequently so we are the first to know any information that we can share with our clients. My advice would be to find out the process of the builders you like and get in their system earlier than you think you need to. Speaking from experience, demand will become high, and you may be waiting quite a while to get the home you want in a few years.
13. Can I negotiate with the builder regarding things I don’t like in their purchase contract?
Builders all have their own in-house contracts rather than trying to use the standard Colorado-approved forms that are used on resale transactions. New builds are very unique, so it makes sense that they have a custom contract.
These contracts are written by the builder’s attorney and they are, of course, slanted to protect the builder from risk, not you as the buyer. So I can tell you now you won’t love some of the things in the contract because at every turn they are trying to cover themselves from risk. Click HERE for more details about builder contracts.
So, can you negotiate things in the contract you don’t like? I think the answer is it depends on the state of the market. The builders in Painted Prairie are largely “production” builders, which means they produce their homes in a very standardized way so their subcontractors and employees get efficient at building the homes. If they make changes for clients, whether on the contract or the physical building of the home, they lose the assembly line type efficiency that they rely on. So they avoid making changes and try to keep every contract and every home the same….it’s a vital part of their business model.
In a “seller’s market”, such as what we are experiencing in 2020, there are tons of buyers and not enough homes so in many ways the sellers (in this case builders) are calling the shots. If you don’t like their terms, they have another buyer right after you, so you don’t have much leverage to negotiate with them. In a “buyer’s market”, (such as what we experienced in Denver from late 2007 to early 2012) builders needed buyers and were willing to tolerate more negotiating because if you didn’t buy their home, they may have had to wait quite a while for the next buyer to come along.
So in this current market my advice is to review the contract well, have an attorney do so if you want and try to get the builder to make some changes that work for both parties but know going in you may not have a lot of luck. Focus also has an in-house attorney we use to review the new build contracts as well.
14. We’re on a budget – which upgrades should we do now with the builder and which ones should we do later once we own the home?
This is a common question that comes up with almost every new home buyer because almost all of us are trying to stick to a budget but we’re also all tempted by the array of upgrade options that are available. So here is what I think you should consider as you make that decision.
First, I suggest clients go through the options and upgrades and select all the things they want, regardless of budget considerations. Once they do that I suggest they use the following set of questions to narrow down the list until it fits within their original budget. Can the item be done after the purchase easily or will it be costly to change later? For example, when considering a 2-car garage vs a 2.5 car garage how easy would it be to add that extra .5 car space later? Not easy at all, it would require changing the foundation, changing the roof line, siding, etc. This is an example of an item to have the builder do cause there is no way it’s going to be feasible after the purchase. In general, anything that is structural or behind the drywall should be done with the builder because it will be costly to change down the road. Conversely, changing out light fixtures, installing window treatments, painting, and hardware are all examples of items that you can change later without a big expense.
Once you’ve gone through the list with that question the next thing to ask is do we have the cash to do this item after we make the purchase? This is critical. For some people they won’t have cash after the purchase (or time to dedicate to the project) so having the builder do things, even if it costs more, is better for them because they can finance the upgrade in their mortgage. For others who have more cash doing it on their own after the purchase may make more sense. It all depends on what’s important to you as the buyer.
Once you’ve reviewed the list with that question the last one is do we really need this item? There is a temptation to overdo it and spend too much so try to step back and ask yourself if this upgrade is something you really have to have. If you are on the fence about items, it’s also good to ask your Realtor if the item has good resale value. Once you’ve looked at the upgrades using that set of questions as filters, you should have it narrowed down to pretty close to your original budget. Then you just have to cut a few things to make it fit even though you want them, regardless of price point it’s human nature to always want a little more than you can afford!
15. I am building a new home in Painted Prairie but it’s not done yet and I need to enroll my child in school. Will Aurora Public Schools allow me to enroll now even though we haven’t closed on the purchase yet?
Yes, Aurora Public Schools will allow you to enroll your child even before you’ve closed on your new home. You’ll need to provide your future address and also give them a copy of the Real Estate Purchase Contract. For extra information on the Aurora Public Schools process, please check out friend Keely Buchanan’s website, Preparing for Denver Kindergarten.
16. What is a Soils Report?
Read more about this in Focus managing broker, Joe Phillip’s post, “What is a ‘Soils Report’ and why do I care as a New Home Buyer?”
17. What is a Party Wall Agreement?
Read more about this in our post, “What’s a Party Wall Agreement…?”
18. What are the best items to spend money on at the design center and how do I stay within budget?
The design center can be an overwhelming experience because there are so many options to choose from. Someone who goes in with no budget can come out with a price tag on their new home that is way too much. It’s easy to go overboard. In general, I suggest buyers go in with a firm budget in mind. I then suggest they pick out everything they want in their home with no budget in mind. After they have their ideal house picked out then I think they should trim down on items until they are back within their budget. This way they’ve explored all the options and they can systematically decide what is really most important to them. I suggest buyers spend their money in general on upgrades to the main level flooring, the kitchen and the master bathroom. To me these are some of the most critical areas and the areas that will get a lot of attention when the homeowner goes to resell the home down the road.
19. What happens if I back out of the contract while the new home is being built?
This is not a scenario anyone wants to think about when they contract on a new home, but it happens from time to time. Buyers can lose their jobs or be relocated during the construction period and need to get out for some reason. Almost all builder contracts will require that the buyer’s earnest money be at risk (meaning be non-refundable) after the first 30-45 days of the contract. During that first period the buyer can typically get out if their loan isn’t approved but beyond that earnest money is typically non-refundable.
So if you are considering building a new home be sure you are serious enough to put that earnest money at risk. Builder contracts don’t have as many buyer “outs” as resale contracts. For example, on a resale the buyer can typically get out of the contract if the property doesn’t appraise for the contract price or the inspections don’t go well. That’s not normally the case with new builds so only contract if you can afford to risk the earnest money involved.
20. Will the builder actually be building my home or will they be using subcontractors?
Almost all builders are not actually building your home, they are subcontracting out the home to separate companies that all do different parts of the home. The builders’ job is just to act as the general contractor and make sure that all the sub-contractors are doing their work appropriately. This is one reason why new homes can be delayed. If the subcontractors get too busy they not only fall behind on their part of the process but all the other parts behind them are also delayed. In busy markets subcontractors are extremely busy and delays are common.
21. What is a Plot Plan?
A plot plan is a rendering of your home from a top-down orientation. It shows the building footprint, the property lines, the set-backs (how far the home is from the property line), the location of the utilities (gas, water, electric, etc), the AC compressor location, sewer clean out locations, the grading of the ground on the lot which affects drainage and more. Typically the builder does not have the plot plan available for the buyer when the home is purchased. It usually comes a little later once the home is under contract. The builder needs to have a plot plan completed by a third-party engineer as part of the process for receiving the building permits for the home. The Plot Plan is informative for the homeowner and it’s also something to hang on to in case the homeowner chooses to do landscaping or exterior projects down the road. This document will help the future contractors on those projects to make sure they don’t mess up the grading/drainage or build something in a spot where they shouldn’t.