Question: Are there any differences between buying new construction from a developer vs a regular (resale) purchase from a homeowner?
In additional to all of the developers knocking down old homes to build large new single family homes, there are some great condo and townhouse projects on the market likeRosslyn Key in Rosslyn, Columbia Place and Carver Place off of Columbia Pike, andPotomac Yard in Alexandria. There are a number of key differences you should be aware of when buying new construction:
Builder Contracts: Most builders use their own contracts, not the normal Northern VA Association of Realtors (NVAR) contracts. As such, the language tends to favor the developer and it’s very important to read their contract a few times, understand what you’re agreeing to, and don’t be afraid to ask questions or contest specific language you’re not comfortable with.
Higher Earnest Money Deposit (EMD): A month ago, I wrote that 2-3% EMD is appropriate, but most developers usually require additional security of 5-10% EMD which makes sense when they’re doing a custom build because they want you to be more invested in the finishes you’re choosing.
Negotiations: In a normal re-sale negotiation, each counter is delivered in writing with the signature(s) of the seller. Most developers will only make verbal/email counters, but the buyer is expected to put their (counter) offers in writing with signature(s). Once all terms are agreed to, the developer will finally sign.
Custom Design: Being able to select your own finishes and design a custom home is one of the most appealing reasons to buy new construction (note: not all projects allow for customization), but it’s a blessing and curse. For some, going to a showroom to select appliances, flooring, cabinets, and countertops is thrilling. However, builders are on a tight schedule and require selections to be made on time, so indecisive buyers can get overwhelmed by these choices and end up disliking the process. This is particularly true if there isn’t a model unit or its not modeled after your tastes.
Determining Value: In many cases, developers deliver a community that’s the first of its kind in the neighborhood. Columbia Place is a perfect example, being the first high-end condo development along Columbia Pike. Without true comps, it’s much more difficult to gauge value and the chances of the developer significantly over or under pricing a project increases. Given that uncertainty, some of the best deals can be had in new construction, especially at the beginning of the sales period. When there are fewer comps, you should negotiate more aggressively.
Brand New: Of course, buying new construction means you’re buying brand-new everything, with fully intact warranties. In addition to the manufacturer warranties on the systems (water heater, stove, etc), most developers also guarantee their work for years to come. You also have the benefit of the latest codes to maximize your home’s energy efficiency.
If you want to see some impressive new construction in Arlington, stop by Rosslyn Key’s luxury townhomes (some with elevators). They’re getting close to wrapping up their sales, but should be around for another month or so and worth a look!