New home or resale? Here are 5 things to consider.

Whether buying new or resale homes, choices abound in todays home buying market. Buying a newly constructed home may be top of mind as many factors come into play. One reason buyers go the new home route is that they are given plenty of choices and options in the level of customization of their home. These options may range from being able to choose color schemes, upgrades like trim moldings, kitchens finishings, selection of flooring options throughout the home, home automation and more.

Among other factors that home buyers should think about when purchasing a new home vs. a resale home are:

Buyers input:

New home buyers have plenty of choices in features and amenities. New home buyers can have their builder add their personal touches that satisfy their personality, personal tastes and needs. Being able to choose homes fixtures, carpet type and colors, wall covering designs, countertop finishings among other things, gives greater flexibility and control for a home buyer who is looking to build their home, their way.

No home repair cost:

This is a significant factor when buying new. Home repairs on a new home are kept at a minimum. And even if repairs are needed, todays builders include warranties for certain period of time. Most builders cover home repairs for the first year you live in the new place. In addition, many builders offer complete warranties covering both inside and outside the house. Resale homes in other hand, can offer warranties, but often are limited in the items it covers. Many times these warranties need to be purchased separately by the buyer. In the case of new homes, the extended warranties provided by new home builders can give the buyer peace of mind when it comes to potential home repairs and maintenance.

Home automation:

Home automation also makes buying a new home that much more appealing. In the case of a resale home, implementing todays new technologies may be cumbersome and not necessarily cost effective. Since more and more builders are integrating new technologies on new home designs, the costs savings can be dramatic. Technologies such as wireless internet access, intercom systems, and surround sound are just some of the aspects of new home technologies that can be expected in the todays new home designs.

Home construction considerations:

Materials found in older homes can be hazardous to your health. From lead-based paint to asbestos insulation, the materials found in resale houses can be costly replace, many times impossible to replace. New homes are subject to more stringent building codes and safety requirements than what older homes have. In addition, materials used in new construction, asbestos and lead have been eliminated. This in turn benefits the new homebuyers and their families from hazardous materials or unsafe environments. Then there is less risk of fire in today’s new home construction. Wiring systems have improved as well. In addition, most of todays new homes have hard-wired smoke detectors with battery-powered backup.

Energy efficiency:

As home buyer become more conscious of the environment, having a home that is energy efficient, has become an important factor when buying new. The appliances available today are far more energy efficient than they were 10 years ago. Energy efficient solutions found in today new homes can help greatly reduce overall energy cost. This in turn helps to save in utility bills. Improved heating and cooling systems and better insulation techniques in new constructions offer greater efficiency than older homes. This can in turn offset the cost of a new home.

New home buyers after having considered all the hidden costs of resale homes, may actually save money by buying new. The level of customization, home automation, energy efficiency and construction durability as well as safety, are among the many benefits that buying a new home would bring.

Building a house is a landmark event in any person’s life. The decision to build a house comes after a long analysis of the sources of funds to facilitate the process. Luckily, there are a lot of lending companies that offer loans targeted at new home construction. New home construction loans and stated income construction loans are the two types of loans that are offered to people in the process of constructing a new home. Both types of loans offer funding for new home construction, but the difference lies in the way in which they can be obtained.

The first and very crucial step in obtaining a home construction loan is choosing a lender. New home construction loans are offered by all major national lenders and can also be obtained from regional banks or mortgage companies. The important point to note is that the lender must be kept informed of anything and everything that has been planned about the home construction. Typically, the interest for a new construction loan is paid over a period of 12 months, and then replaced by a mortgage, once the home’s construction has been completed.

New construction loans themselves are of two types. The first type is known as the all-in-one loan, in which the loan is automatically converted to a regular mortgage on completion of the construction of the home. The second type is the construction-only loan, which as the name suggests covers only the construction costs of the home. This type of loan is due as soon as the construction is done and must either be paid off or replaced by a mortgage. Lenders have very specific ways of paying for the construction of the home. The payment of funds is divided in to several “draws”. The home-owner must draw up a plan at each stage of the building process clearly stating how much funding was used at that particular stage of construction. For example, a draw can be done after the pouring of the foundation of the home, or maybe during the framing of the home. This drawn up plan is then sent to the lender, who examines it and allocates the funds to be paid.

The other type of home construction loan, called the stated income construction loan is a loan that does not require the verification of the home owner’s income. This type of loan is a boon and is best suited for self employed individuals. Anyone who cannot produce verification documents for their income, or chooses not to reveal their earnings can benefit from this kind of loan. The benefit of a stated income construction loan is that it is generally approved much faster than other kinds of loans. The downside to this type of loan is that the interest rates associated with it are much higher than other loans. Correspondingly, the down payments are also significantly higher. The procedure to apply for a stated income loan is quite simple and all it requires is an online application or a direct application at the office of the chosen lender.

There are many techniques to negotiating a new home purchase. Almost everyone has their own brand and approach to negotiating, as evidenced by the dozens of books written on the subject. There really isn’t a right or wrong way to negotiate as long as you have the basics down. The biggest difference in negotiations is the personality and egos of the people who are negotiating.

That being said, I thought I would chime in and share some of the negotiating tips I have learned over my last 15 years in the mortgage business. These are what I would call “the basics”, with a twist of my personality added for good measure. I hope you enjoy.

The Golden Rule

Negotiating is a game of leverage, meaning the person that has the advantage in a negotiation is most likely the one to emerge victorious in that round of the negotiations. I emphasized “that round” for a reason, because when buying a home, the price is only the first battle in a long string of negotiations. Knowing who has the advantage in each round of negotiations is a key factor to winning the war.

For example:

Let’s assume that you and your wife have found a home that you love and want to buy. Whether you know it or not, when you make an offer on a home you are negotiating from a position of weakness. The owner knows that you want to buy the house or else you wouldn’t be making them an offer to buy it. Apart from those sellers that are in bad financial shape, the seller will usually win the first battle. Advantage seller

However, most people forget that the negotiations last throughout the length of the sale until the deal is closed. A mortgage transaction could take as long as a month and maybe longer to close. You still have appraisals, home inspections, mortgage issues and many other negotiating battles to be fought and won. So, don’t be too hard on yourself if you didn’t come out of the first round of negotiations “smelling like a rose,” just get ready for the second round.

Meanwhile, the seller has put a chunk of his own money down on a new home in anticipation of you buying his home. He has scheduled movers, picked out drapes, and applied for a mortgage. The savvy negotiator realizes that the once reluctant seller is not so reluctant anymore. The power in the negotiations has now shifted, just in time for the home inspector. It’s now the seller that needs you to do something for him, namely buy his house. Advantage buyer.

Deal with a motivated seller:

Have you ever began negotiations with someone who has the attitude like “I don’t really care to sell this, but make me an offer anyway?” That’s usually just a negotiating gambit used to get the buyer to make the first offer. Much like the home shopper who plays coy with the realtor or home owner as to how badly they really want the home. However, there really are people in the market who really don’t want to sell and whole-heartedly expect you to make them a ridiculous offer. Your first job in negotiation is to be able to distinguish between the two. If you are dealing with the latter, you should walk away or be prepared to pay a lot for the home.

Know when to walk away:

I have walked away from a dozen homes in the last 15 years, partially over the mechanics of the deal but primarily over emotions. Personal emotions have no place in a negotiation, and I should know since I have blown quite a few good deals over my ego. The point I am making is for you to be prepared to walk away. I tell most couples in the market for a new home “that after you find the perfect home, go find another one that is near to perfect.” If you are using a realtor, don’t let on which home you want to buy until you have the two homes picked out.

To negotiate price from a position of power, you must be prepared to walk away and you must do it if you don’t feel you have a good deal. Some of the best deals I have made on properties materialized two weeks after negotiations had broken down. Don’t get me wrong, you won’t always get that second call and that great deal, most often you won’t. However, one way to improve your chances of getting that second call is to always leave the negotiations in a civil manner. I always like to use the “oh shucks” method which basically says “I really like your property, and it is probably worth every dime you’re asking, but I just can’t afford it and thank you anyway.” This will leave the door open for further negotiations.

Ask for it all and then some :

Everyone likes to think that they are a shrewd negotiator and **** to feel like they have lost in the negotiations. The best negotiators in the world get exactly what they want and leave their opponents smiling at the table. The way to do this is to make a fair offer on the home, and by fair I mean a price a little higher than you would like to pay. Then, attach a laundry list of things you would like the seller to address. Ask them to fix the roof, put in carpet, leave the refrigerator, paint the inside and anything else you can dream of.

This creates a myriad of issues that you and the seller can each give and take on. By offering the seller a fair price, you have their attention and haven’t insulted them with a low opening offer. I wince when I see new homebuyers, aided by inexperienced real estate agents, throw a low-ball number at a home owner and expect them to capitulate. The entire negotiation will end with two counter offers and be decided by an impasse on price. If someone could say “I’ll pay that price, but you give me the roof and carpet,” each negotiator has an opportunity to win.

My last bit of advice is that you pick a good experienced Realtor who isn’t going to pass you off to one of her newbie buyer’s agents. Begin your negotiations with her commission and keep in mind that you want her to work for you. This means if you beat her up too bad on the commission, she will email you houses from the MLS and call you every two weeks. Pay her a fair commission and make her earn it.