Homeowners love smart design and the latest trends and bells & whistles. Model homes are built to entice us into drooling over expansive kitchen islands, trendy cabinet colors, flex spaces with barn doors, and lush outdoor living areas perfect for hosting those family get togethers. All those HGTV shows inspire us and make it seem so attainable! Although we all know there’s some fantasy involved, what exactly are the challenges in remodeling or building new?
New Construction In Charlotte
Demand for new construction is strong in the Charlotte region and has been since 2015. With around 100 people a day moving to Charlotte (wow!), builders struggle with pent-up buyer demand.
Many prospective home buyers stroll in and out of gorgeous model homes, tempted to commit to a new home build. However, these days, there is a premium that comes with building – and it isn’t necessarily just the price. When buyers have expressed sticker shock to me, there are many things to consider…the biggest issue is a national construction labor shortage of about 30%, there have been enormous increases in material costs since Hurricane Irma and last years forest fires as well as tariffs on Canadian lumber. Add a shortage of county inspectors, and we are seeing not only higher pricing, but slower builds, and the risk of disappointment with the final product.
Building from scratch is not for the weak hearted. While there can be inevitable delays and disappointments, the reward can be great. I find that many buyers can deal with almost anything if they know what they’re getting into. Here is part 1 of some pitfalls I help my new construction buyers understand and avoid:
Biggest Challenges in Building a New Home Right Now
• Disappointment or misunderstanding of what the yard will look like once the house foundation is poured. Buyers often underestimate how much space that new foundation will take up on the lot. What looks like an expansive yard when empty, can often look too sloped or small when the house is placed further back than expected. I get around this potential risk, by asking the builder to stake the foundation before signing a contract. While it doesn’t eliminate every potential site issue, it does give us a good picture of how much of the lot the house will take up.
• Delays and stand stills in construction. Every builder is using sub-contractors that are working for multiple builders. We also have a shortage of county inspectors. Every layer of construction requires the one before it to be inspected and permitted before moving on. For example, framers can’t start until the foundation inspection is complete. Insulation can’t go in before mechanical inspections are done. There may be lengthy periods a home seems to be sitting without work happening. While this can be frustrating, there is simply no way to micro-manage this process. If this will be too hard for you as a buyer, move along and choose an inventory home that’s almost complete.
• Closing date. The builder will give an “approximate” closing date at the time of contract, but we really don’t know for certain until about 30 days before the builder is ready to close. Also, with all the issues listed, we are seeing even our most reputable builders delay closing often just with a few weeks notice. I prepare my buyers so we have a contingency plan in place in case the inevitable happens.
• Deposits. Some of our mid-range builders have more reasonable deposits requiring $3,000 to $5,000 down. It’s not uncommon for mid to high end builders to require 3%-10% of the price of the home. Sometimes they allow you to break it up into payments. But…it’s always NON-refundable – ouch! Make sure you’re committed to your decision and you have the liquid cash to meet this obligation. Remember, your new home is NOT contingent on appraisal. There are ways to give a buyer some assurance around this, but it takes the right questions and often some legwork to make sure you’re not overpaying.
In the end, if a new home is your dream home, the most important thing is to have realistic expectations about both the process and the final product. My best recommendation is to consider a builder inventory or spec home when possible; these are often built with the most popular design choices, sometimes have discounts attached, and best of all, are usually up and out of the ground eliminating much of the unknown.
In part 2 of this series, I’ll discuss some other tips and tricks of managing through a new home contract and the builder process. There’s more ways to save you money and headaches before you move to the next step!