What To Know When Buying New Construction in New Jersey

Walking into a decked-out model home on a builder’s development is very different than going to an open house for a previously-owned home, even if it’s been staged.

And it’s understandable why new builds can be appealing since homebuyers have the opportunity to pick out customized features or upgrades, sometimes even select the lot or exact location within the neighborhood, and then move into a pristine never-before-lived-in home. 

Being a part of the process from start to finish means you have more control over the outcome of your constructed home and even more say at times when working with the builder. But it can be stressful, time consuming, and not always smooth sailing if you don’t know what you are doing.

Whether you’re working with a local builder with their own development or a major national construction company, buying a new build home will be a different experience than buying a pre-owned home from another homeowner.

That’s why if you’re thinking of purchasing a new build, make sure you know what to expect and understand some key strategies that can make it a successful journey to your home sweet new build!

Here are the top strategies to keep in mind:

1. Should you use your own Realtor or Go It Alone

At first glance, it may seem like you don’t need a Realtor to represent you and instead deal directly with the builder. Of course I am biased as I am a realtor after all..but here’s the case for using a Realtor:

• Many Buyers buy directly from the Builder, but the sales guy at that gorgeous model suite works for the Builder, not for you. His job is to get the highest price and the best conditions for the Builder. He doesn’t care if you don’t get the best price, or if you sign a contract that restricts your ability to resell or rent the unit–he works for the Builder, not for you. How can that be a good idea?
• Yes, when you use a Realtor to buy a pre-construction home, we get paid (imagine–we get paid for our work!). But don’t be fooled into thinking that if you don’t use a Realtor, that you’ll pocket the money we would have been paid. That money will go to the Builder’s sales team (or maybe the Builder himself). Have you ever heard of a Buyer getting a discount because they didn’t use a Realtor? Me neither.
• Buying a pre-construction home is complicated and there are a lot of legal intricacies and details involved–Your Realtor can help review timelines on the contract and your rights regarding cancellations and deposits. Always have an attorney review before you waive protections.
• By the time a new development project goes on sale to the public, most of the good units are already sold–in fact, we routinely see units that are already 50% sold  by the time of the public opening. The ONLY WAY to get the best units (high floors, best layouts, good views) is by partnering with someone who has VIP access BEFORE they go on sale to the public. And if you’re working with the right VIP Realtor, you should get special VIP pricing and upgrades too.
• Yes, Builders are notorious non-negotiators. But there ARE things that a knowledgeable Realtor can negotiate for you–from upgrades to your closing costs. In recent years, rising costs of materials and shipping have had an impact on the price of new builds. A traditional new build could take up to a year or more to finish. A lot can happen in that timeframe so if there is a builder’s escalation clause with pricing, understand it fully and negotiate as needed in your best interest.
• Your Realtor can help you Stick to your budget and don’t get swayed by costly upgrades.Even if you’re building your dream home, don’t go over budget. It’s very easy for this to happen when you have the opportunity to customize.Understand the pricing for certain customizations and any upgrades on the base model. Pick and choose carefully so you’re not surprised by the final number — and know which upgrades to remove first if you need to cut costs. Advise which upgrades add resale value and which don’t.

2. You Don’t Have To Use the Builder’s Preferred Lender

Builders often offer incentives for using their preferred lender. That said, you should still shop around for the best mortgage for you and your financial situation. It can be tempting to use the builder’s onsite lender since it can feel so easy and simple — like a one-stop-shopping experience, but they might not always have the best financial deal for you.

You still want to compare and understand how all the fine print comes together whether you go with their preferred lender or your own lender.  Oftentimes the contract terms change and you want to be sure you understand what you can and can’t do based on the decision about which lender you are using. 

3. Always Get a Home Inspection

• Even though it’s a brand-new home, you should protect yourself and your investment with a home inspection (or inspections!) done by a reputable professional. Builders can make mistakes, and new homes can have defects. You don’t want any surprises once you move in. Make sure you get multiple inspections based on certain steps in the construction process, such as the pre-drywall inspection. Even if your home comes with a structural warranty and a workmanship warranty, having a professional inspection or inspections can hopefully eliminate certain potential issues before you move in.
• You also want to  carefully review any warranties to determine what they may cover and their procedures for service requests. These warranties can provide another layer of protection on top of any home inspections.

4. Expect the unexpected at times!

Know your timeline but expect delays. From start to finish, new build homes require lots of details on so many fronts, which means delays can happen. Materials may take longer to get delivered, certain customizations could take longer or are no longer in-stock, or unexpected weather conditions can put a hold on things.

Have a plan in place if there are delays and if you want to time selling your current home with the completion of your new home.

Also be prepared for unexpected things even after you move into your home because a new build has not yet been tested by someone living there like a resale home. 

There can be issues that don’t come up until your fourth or fifth shower, for example. You want to be sure you know how to handle things like that, even if you did have an inspection. 

I typically negotiate that the builder agrees to fix certain things after move-in for a period of time.

5. The Deposit

While purchasers of resale homes generally provide a deposit of 5% or less after the attorney review process, builders generally require significantly higher deposits in order to fund the construction – often as high as 10 or 20%. Usually a set amount $3,000, $5,000, etc. is required when the agreement is first signed, and the balance to 5% is due within 10 or 15 days. From there, there are various ways the remainder of the deposit is paid – for example, an additional 5% at 30 days, 5% at 90 days, 5% 180 days, or sometimes the deposit is timed with the phases of construction (5% when they break ground, 5% on occupancy, etc.). Point is: be prepared to pay the builder a much larger deposit for a pre-construction home.

💡 If you decide to use a Realtor to buy a pre-construction home in New Jersey, make sure you partner with someone who knows pre-construction and knows the particular project you’re interested in. They’ll know the good buildings, the good builders and can walk you through what can be an intimidating process.