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FAQ's
Should we buy new or a resale?
New homes vs.
resale is a dilemma for many buyers. One way to help you decide is to look
at your own personality and that of your family. Can you deal well with all of
the details that buying a new home entails? You get to choose the carpet, and
tile, and countertops, which is great--but what about the construction noise,
the pool contractor, the blinds people, the landscaping? Lots of phone calls,
sketches, and little odds and ends that can take months to tie up.
The upside
to new construction is that the home itself should be pretty much maintenance
free for about 7-10 years before things like the dishwasher need to be
replaced. New homes are great for families in that all of your neighbors are
having the same experience.
Landscaping
and lot size are the big advantages of a resale. Resale neighborhoods tend
to have more character and individuality. Many of the new homes being built by
the large production builders are very similar as far as the look, floor plans,
and price per square foot. Take it for what it is, this is not a knock, but
when out of state people buyers first ask me what do the new homes look like, I
reply: "Do you like tile roofs and stucco?" You'd better!
Do the homes come with swimming pools?
Probably
about 1/2 of the resale homes have pools. Many of the new builders are
offering either a free pool, (basic $10,000 package), or that amount can be
used towards upgrades in lieu of the pool. More on that later. Most people
spend between $15,000 to $20,000 for a swimming pool which will be an upgrade
from the basic pool and will include features like: extra Kooldeck, perhaps a
water feature, a few boulders, Pebbletec surface--these are a few. Figure on
about $5000 to add a built in spa. Two of the biggest pool builders are Shasta
Pools and Paddock Pools in this area. Many times a builder will have a
preferred pool builder that they insist you use in order to get the
incentives.
Incentives?
New home
builders here by and large have developed a pricing scheme, (if you will),
that is designed to maximize their profit yet give the buyer the feeling that
they are getting a deal. Much like the car ads that blare: "get cash back!" or
the grocery store clerk who tells me every week, "look how much you saved by
using the card!" new home builders set their pricing up and then offer a
discount.
This is a
typical scenario:
Acme Homes
builds a subdivision with 100 lots and obviously would love to sell them all as
soon as possible. But not too soon...because the construction crew can only
build so many at a time. What they typically do is release a number of lots,
usually about 10 -20 at a time and upon each new lot release they increase the
base price of the homes. This setup allows the new home builder to tell
perspective buyers, "look, buy now before the price increase next
Friday".
At the same
time that you are being told "hurry up and buy!", you are also told about
the current incentives. The most common incentive is to give either 2 or 3% off
the base price of the home to use the builder's preferred lender.
Many of the
large builders here also own the mortgage company and they have set the
incentive program up to be right on the threshold of where it wouldn't make
sense for you to get a loan elsewhere and lose the incentive. They will allow
you to use any lender that you'd like but if you don't use their preferred one
you lose the incentive or they will reduce the percentage of the
incentive.
Truthfully I
don't think that the builders necessarily look at their lending operations as
huge profit centers. They just want to have control over where their buyers
are going to ensure that the loan is going to fly. It can actually sometimes
work to the advantage of a buyer because the builder's lender will bend over
backwards when needed to keep the builder happy.
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Can you negotiate price with a new builder?
By and large,
no. Keep in mind that a new builder has at any one time 30 or 40 people
trekking through the subdivision sales office checking on the status of their
homes. Imagine the chaos that would be caused by giving the new buyers a better
deal and then letting them loose to talk to their new neighbors whose homes
have yet to close. Dangerous waters. Builders will deal on things occasionally
like lot premiums on new construction or in the case of a "spec"
home.
What is a "spec" home?
Built on the
speculation that it will sell someday. Builders need to keep building in
order to keep their construction crews. Often times there will be 4 or 5 homes
for sale that will be ready sooner than the typical 4 to 6 month construction
time. Another reason for specs is that when a builder releases a number of lots
and a few don't sell they need to complete the neighborhood so that
construction people aren't bouncing around the subdivision. Specs also come up
when a buyer can't close usually due to an unexpected job change or a loan
problem.
Depending on
how far along the spec is you can usually choose your own flooring up until
about 2 weeks from completion. Cabinets are usually ordered well in advance
on specs; you can depend on them being neutral in color. As of this writing in
1998 natural finish maple cabinets are the "in" cabinet. The last phase was
whitewash. Remember harvest gold appliances and orange shag carpet? The
nineties are light, bright, open plans and neutral earth tones in new homes.
Will I pay extra to have a real estate agent represent
me?
Of 142 new
home builders in the greater Phoenix area, I know of only one that does not
offer a commission to a buyer's agent at no additional cost to the buyer.
Builders like working with Realtors® here in Arizona by and large because
they bring in serious buyers that close a high percentage of the time.
Buyers with
representation I think get better treatment because the builder's employees,
from the sales staff to the construction superintendent, know that there is
a knowledgeable advocate that must be dealt with in the event that anything
isn't going as promised. (OK, I'm biased!)
I have
noticed that builders tend to dislike real estate agents when it comes to the
walk through prior to closing. That is the most important event in the
transaction and it is the buyer's best opportunity to have the builder correct
anything that doesn't look right or operate correctly. Truthfully, builders
have gotten a lot better over the past few years on having the homes ready, but
there is a big difference between the service you get before the closing and
after.
What do home inspections cover, how much are they, and are
they worth it?
Home
inspections should always be done on a resale home and occasionally on a
new home if you have concerns about the builder standing behind their warranty.
Most new builders will offer at least a one year "bumper to bumper" type
warranty, and many will extend that to two years. In addition to the builder's
warranty are the warranties of the various manufacturers, such as the
dishwasher, air conditioning unit, and roof tile companies.
Items that
are covered in a typical home inspection are all of the plumbing, mechanical,
electrical, heating and cooling systems, pool equipment, --basically
anything that can be turned on is considered to be a "warrantable item" which
must be made to be "in working condition". A good inspector will use devices to
check the outlets for grounding, check GFI's, check the differential between
the intake for the air conditioner and the output. I even know an inspector who
puts a thermometer in the oven to verify the temperature!
Many of the
mundane things that we overlook in our daily lives like the window that won't
open, the lock that won't lock, the toilet that rocks--all will be
dutifully noted on a 12 to 25 page report. From this report the buyer then
decides what to ask the seller to do, (it must be in writing), and the seller
must respond.
99 out of
100 times the seller will correct any reasonable requests, although
occasionally a seller will balk at doing anything. In that case the buyer would
have the right to cancel the contract and have their earnest money returned.
Expect to
pay anywhere from $175 to $350 for a home inspection. The price differences
are for larger square footage and swimming pools. Some companies will discount
the fee if you purchase an additional one year home warranty. Make sure the
inspector is certified by the American Society of Home Inspectors,
(ASHI).
Are they
worth it? Definitely. It is a buyer's best opportunity to get something
after the price and terms have been negotiated.
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How high are typical heating/air conditioning
bills?
Unlike the
eastern and northern states the high bills in Arizona are always in July and
August, when the temperature is well over 100 degrees in the day and can be
in the 90's at night. Newer homes are of course much more energy efficient than
older homes. Still expect to pay about $225 to $300 per month for your 2500
square foot home. The winter months are much more pleasant with average bills
in the $100 to $125 range. Condos will range from about $40 in the winter to
$125 to $175 in the summer.
Ceiling fans
help a great deal to keep the air moving. Most Arizonans have figured out
that the best thing to do in the summer is: leave! Popular vacation spots are
Flagstaff and Prescott as well as the White Mountains in Northeastern Arizona.
San Diego is a 5 and 1/2 hour drive or a nifty one hour flight. Also gaining in
popularity is Rocky Point, Mexico.
Who pays for what in a typical transaction?
All fees are
subject to negotiation; however, it is worth knowing what the local customary
buyer/seller fees are in the majority of transactions. Buyers generally pay
for their own loan fees, including points, appraisal and the lender's required
policy of title insurance. Sellers pay for the owner's title insurance policy,
which is the seller's largest expense excluding real estate commissions. In
addition sellers typically pay for a termite inspection, a septic
inspection/certification (if needed), any assessments that are due, included
real estate taxes up to the closing date, and recording fees.
Attorneys
are not used in most residential transactions; the escrow is usually held
by a title company that will also issue the title insurance. Escrow fees are
usually split 50/50 between buyer and seller.
How long is a typical escrow?
Usually
anywhere from 30 to 45 days is about average. Unlike many states the
closing date is something that is agreed upon at the time of the contract. More
specifically, the buyer makes the request on page one of the offer.
Are termites a problem in Arizona?
Yes, in fact
they are quite often found in older homes. The most common termites found
are subterranean termites which are most often discovered by the tubes left at
the junction between the foundation and the house. When they are discovered,
and this is a required inspection, the treatment consists of drilling holes and
applying chemicals that kill the critters. Lenders will require a full house
treatment which generally runs between $750 to $1000 on most homes. The termite
company that does the treatment will also issue a one year guarantee which
lenders will require.
One of the
only items not covered in our incredible all inclusive 9 page contract is who
pays for the termite treatment if termites are found. Although logically
you would think that the sellers would think it was their responsibility, that
logic might change if they, for example, have a higher back up offer. It is a
good practice to ask the seller to pay for up to 1% of the purchase price for
any required termite treatment to avoid a possible "issue".
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| REAL ESTATE TRIVIA |
| Q |
Where is the world's largest wine cellar, and how big is it?
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| A |
A company in the center of the wine-growing district of South Africa has a cellar that covers an area of 54 acres and has a capacity of 27 million gallons. |
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