Editor’s Note: This periodic sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty. Please submit follow-up questions in the comments section or via email.
Question: I am considering a new construction condo in Arlington and am wondering if you have any advice?
I love new homes as much as the next guy, but I can not stress enough to be careful during the buying process. The purchase of new construction can seem almost too easy at first. There is a charming salesperson ready to tour you through the gorgeous model homes. Next thing you know you have a contract in hand and are drafting a check for a 5-10% deposit.
Slow down. Even if it is the perfect home for you, please take time to read the entire contract at least once. I’ll save you the suspense by telling you now that it is a very one-sided contract. The developer holds most of the leverage. That said, you need to understand what you are agreeing to, what is expected from you and what is expected of the developer. There are certain benchmarks you both agree to meet and you need to be sure you are on top of these dates. Make sure you get all of your questions answered before signing and have all agreements in writing. You may want to have an attorney to review the contract for you.
You’ll also want to take your time reviewing the condominium disclosure package. This will include financial information and bylaws that pertain to the condo association. In Virginia you get a 10 day rescission period to review these documents if you are buying a new condo. You get three days if you are buying a house or townhouse that is part of an HOA. Believe me, I know how boring this information can be for some of you, but please read it thoroughly so you are not caught with any surprises.
Before negotiating the price and concessions, find out what other buyers have paid for similar units. Sales prices for closed sales are available online on the Arlington County real estate assessment web page. If sales have not closed yet, you are at the mercy of the sales person and whether they will provide you with the most recent sales and concessions. I find that many of them are forthcoming with this information.
One thing that drives me crazy about new construction is how the the developer will try to strong arm you into using their preferred lenders and title company. In most cases it is to your advantage to be able to shop for your lender and title company on the open market. Therefore, I usually try to negotiate for my clients to be able to receive seller concessions without them being tied to the developers preferred lender and title company.
If the developer is requiring you to use their preferred lenders to receive closing cost dollars or some other incentive, make sure you are comparing apples to apples when considering the preferred lender versus an outside lender. Sometimes the $10,000 you are receiving in closing cost help will be nullified by an origination fee charged by the preferred lender at closing.
Virginia clearly gives all home buyers the right to choose their own title company, but watch out for penalties that the developer will stick you with in the form of “document review” should you actually want to exercise your right to choose your own title company. One local developer charges a $1,000 document review fee! It aggravates me just writing about this.
One last piece of advice is to hire a home inspector. If you are going to have the opportunity to conduct a pre-drywall and pre-closing walk through – hire a home inspector to inspect the property at both of these opportunities. Some salespeople will discourage you from doing so because you are going to receive a home warranty. Don’t listen to them. You are spending too much money to not want your home in as perfect condition as humanly possible by the time you take ownership.
I hope this helps and you enjoy your new home for many years to come.