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Basics You Need To Know (FAQs) When Buying New Construction From Big Builders

Basics You Need To Know (FAQs) When Buying New Construction From Big Builders

Here are the basics we think every buyer should know when buying a new construction home from a “Big Builder”.  It might be worth remembering that since we’re in Houston, some of the things we talk about might be more specific to the Houston market.

When we say “Big Builder”, it’s a term we use colloquially to refer to a large, corporate builder that builds homes in multiple communities.  Often you will find they’re not confined to the local Houston market and will have operations in multiple cities in Texas or nationally. They’re the builders you’d find in new suburbs and master-planned communities. Examples of Big Builders you might have heard of include Perry Homes, Meritage Homes, Partners in Building, KB Home, and Lennar, just to name a few.

What is an “inventory” home versus a “custom” or “spec” home?

As a homebuyer you can either pick a home that the builder has already built, or you can pick out an empty lot and build from scratch.  A home that was not built for a specific customer is called an “inventory” home. “Inventory” homes are also called “Quick Move-in” homes on builders’ websites.  The term “inventory home” is a term most builder sales reps use, regardless of which builder they work for.

On the other hand, when a customer picks out a lot and builds from scratch, that is often referred to as a “custom home” by many sales reps, but there are different terms that might be used also.  The term I personally like to use is a “spec” home (since the home is built to the customer’s specifications). I’ve heard a few sales reps call custom / spec homes “new construction” (but I find that confusing since inventory homes are technically new construction too).

The important thing we’re trying to highlight is that there’s a difference between inventory homes and non-inventory (i.e. custom / spec) homes.

If I’m buying an inventory home, can I make any customizations or changes to the finishes (i.e. design choices)?

Yes, it’s possible.  But it’s dependent on how far along they are in the construction process.  Let’s say, for example, you pick out an inventory home and they haven’t put in the floors or countertops. If builder hasn’t ordered them from the supplier, then there’s a chance you can pick out the floors and countertops at the builder’s design center.

Does the house price include the cost of the lot?

f it’s an inventory home, yes.  If it’s a custom / spec home, then no.  In most cases the price you see advertised is just the base price of the floor plan.  You will also have to pay for what’s called a “lot premium”, which is the cost of the land.

What does 40’ homesite, 50’ homesite, 60’ homesite, 80’ homesite, etc. mean?

The number simply refers to the width of the lot.  In new master-planned communities, land is split up into sections of similarly-sized lots. The result is that homes in the section end up being around the same size.  This prevents the look of the neighborhood from being super random.

Moreover, what this means to you the homebuyer is that different homesite sections might fit your budget, while others may not.  For example, let’s say your budget is $350,000.  You noticed that Perry Homes, Meritage Homes, and Lennar have homes on 50’ homesites ranging from the $310s and up.  You might have liked the Partners in Building model home, but they only have 60’ homesites priced at $425s and up. To stay in budget, then, you’d have to find something from Perry, Meritage, or Lennar since Partners In Building isn’t building anything in the 50’ section.

What are the costs of design options and upgrades?

Homebuyers will often see ads for “homes starting in the $300s”, or something like that, i.e. some price point that’s within their budget.  Intrigued, they plan a visit to the model home and fall in love.  Everything is so beautiful, and it should* be in their budget, right?

Not quite.  The advertised base price of floor plan is the like the bare, bare minimum, and much of what you see in a model home is an upgrade from the builder’s base offering.

Each category of design options - e.g. flooring, countertops, cabinets, light fixtures, etc. -  will be offered in levels, e.g. Level 1, Level 2, Level 3, Level 4, and onwards.  The number of levels is specific to every builder, and the additional cost above the base price will vary.

Let’s look at a quick an example.  By default, a lot of builders will often put carpet or a basic-looking tile in the main living area and in all the bedrooms for their base.  If you want wood floors in the main living area, they might offer laminate flooring as Level 2, but for real hardwood you would need to select Level 3 or 4.  If you want the same wood floors in the bedrooms, you need to upgrade each room as well. 

This is why it’s such a hard question to answer when clients ask us how much do these options normally cost. It really depends on which selections you personally want, and the builder’s individual pricing. 

One of the ways to get a more accurate idea of pricing is to ask the sales rep what’s standard and what’s an upgrade when you tour model and inventory homes,  And if there’s something specific you like, like a specific flooring, as what Level it is. You might also want to ask if they have a booklet of design option levels and pricing that you can take with you.

Can I save money and get a discount if I don’t use a Realtor?

The honest answer to this question is no.  Builders budget for Realtor commissions out of their marketing budget – it has nothing to do with the cost of the home. 

It’s actually to a homebuyer’s benefit to use a Realtor (and this isn’t just some sales pitch).  The builder’s sales rep is an employee of the builder, and though most sales rep are honest, fair-dealing people, at the end of the day they’re looking out for the builder’s best interest.  A Realtor’s job is to look out for your best interest, and it’s always good to have an advocate and experienced professional on your side.

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