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Ask Adam: Buying New Construction in Arlington

by ARLnow.com July 24, 2012 at 12:45 pm 3,425 29 Comments

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.

  • curious george

    I think the nice thing about an older condo (mine was built in 1974) is you have already found out most of the ways the builder screwed you. If you have a good board and good management you can then fix things correctly when they do break. If there are still original owners in the building after 2-0-30 years that is a good sign.

    With new construction you do not know how the builder has screwed you but be assured that they have.

    Also just because it is built to code does not mean it is done right. Watch an episode of Holmes on Homes for some pretty scary stuff on new construction.

    • CW

      Yep. Also doesn’t help that most new construction around here is pretty hideous. The condos are the least offensive by far. Can’t wait to see how those wood frame townhouses at Lee and Veitch turn out. Also I can only imagine how much people are throwing down for this hideous megaboxes next to the radio tower up on George Mason. Just throw it up and collect the cash before the bubble pops.

      • HighViewPunk

        1.3 M for the megaboxes. I can’t understand how anyone could need that many square feet.

        • CW

          But they get great radio reception.

          • Whitney Wilson

            I know you are joking CW, but I have a friend who used to live in a house which backs up to that property (it fronts on Harrison). He said that his radio reception was actually terrible, that he couldn’t even use a clock radio in his bedroom.

          • CW

            Hah, yeah it probably was terrible for all but whatever they broadcast out of that tower. I’m no RF engineer, but it was my anecdotal understanding that there is significant bleed over into the other frequencies near the transmitters.

          • Chimi-churri

            People still use clock radios?

        • WhoCares

          What’s your point? Nobody “needs” a BMW, expensive cloths, fine dining, etc. If someone has nothing better to do than spend $1.3 for a “megabox” why does it matter?

  • JimPB

    Thanks for the candid and informative piece. Kudos to ARLNow.Com for making electronic space for your regular pieces. (I look forward to them.)

    I’ve had indirect engagement with monitoring of construction. In each case, numerous faults were identified (beyond what a government inspector would be checking on) that otherwise would probably would have slipped by. There is a need for a truly independent (think of Consumer Reports) construction monitoring entity to check on and provide consumer reports on the new buildings.

    New construction should also be independently assessed for economically viable (pay-off within a decade) energy saving measures that could be incorporated. Incorporating energy savings in new construction is usually easier and less expensive than doing later (for some things, like increasing insulation in walls, a significant increase is virtually impossible). Landscaping should also be assessed; it can be attractive and contribute meaningfully to energy saving.

    Government building codes should be strengthened, e.g., to promote safety, require installation of smoke/fire sprinkler systems.

    • Sherriff Gonna Getcha

      dont worry, I am from the government and I am here to help!

  • JamesinEFC

    Good info, but primarily seems to relate to condo developments. What about purchasing a newly built Single Family Home? What should you look out for?

    • CW

      Maybe he’s assuming that if you can afford a new SFH, you can afford to fix whatever’s wrong with it?

    • Juanita de Talmas

      Not many of those being built in Arlington.

      • Sherriff Gonna Getcha

        are you referring to developments only? there are plenty of new SFH. just drive thru the village or any other older neighborhood.

        • Reading is Fundamental

          “What about purchasing a newly built Single Family Home?”

          • Tommy

            RIF, you misread SGG’s comments. There are lots of older homes being torn down in older neighborhoods, such as Lyon Village, and replaced with newly built SFHs.

      • Chimi-churri

        Aka, McMansions.

        3 of those monstrosities are sitting un sold (well, 2, one under construction) right at the door of EFC metro.

        this developer didn’t think it all the way through. They though the metro was the appeal to the buyer. People with 1.3million most likely can care less for metro and hideous view of a parking lot and power station. They drive to work cause they can afford to pay the parking garage at the job that pays for the McMansion.

        The land was great for some TH in the 600-700k range. would of sold like hot Tamales.

        • Tommy

          Yes, and those that have sold have taken forever to sell. Although $1.3 mill. buyers may also want metro, the parking lot and power station are a huge turn off and can’t be changed by the buyer. I think the developer probably made plans during the bubble when everything was selling and some idiots thought buyers would continue to pay more and more regardless of incurable defects.

  • Marie

    Re the document review fee, what is this fee for? For them to give me access to condo documents to review?

  • yes again

    Good article! You should of added both a home warranty and a window for a “punch list. Although punch lists are most often used for custom built houses they should be used on a spec house too. There should be a contractual period where the builder is liable for any issues in particular settling of the foundation and resulting cracks in either the dry wall or exterior walls. You should also get the spec and “as built” documentation (aka blueprints) documentation. Its important to know if you have copper or pvc plumbing and how the septic and and HVAC was engineered. This is needed to ensure that your house is built to code and to expose any issues potential issues and to validate the price for the property. You would think that the building code here would save you but the code it self is weak and the enforcement for builders (design build and large scale commercial) seems to be a less stringent as compared to either general contractors and trades people around here….

    Buyer beware, and if you look objectively you will find that even the older houses built in the late 40′ when there was the war time building materials shortages are actually better constructed that most if not all of the new construction going up today.

    • Hattie McDaniel

      My house was built in ’41 as working-class housing. It is solid as a rock. You’d be hard pressed to find anything as sturdily built nowadays.

      Of course the trade-off is that it is small by today’s standards, only one bathroom, and no garage.

  • Chris

    I happen to be under contract for one of those townhouses at Lee and Veitch. We are just a week or so out from closing and I will answer any questions about the process if anyone is interested.

    Chris

    • CW

      Good location; curious as to how they will compare to the THs up the next block on Lee and Adams. The one on Zillow for $630k looks pretty darn nice, but you know realtors and their photography…

  • love old houses BUT

    There seems to be a bias here against new construction. Old houses are charming, who isn’t rooting for all the originals left in Lyon Village to stay original. Yes they may have superior construction in some aspects.

    But come on people, old homes have problems too! Sometimes major ones. Plumbing can be bad, there can be asbestos or lead paint. There could be no central air and major items like boilers and heaters can be terribly inefficient and expensive to replace.

    From an efficiency standpoint, new construction can save you hundreds or thousands a year if efficient appliances, windows, hvac units and water heaters are used.

    Totally agree you have to be smart when purchasing new and follow all the same inspection guidelines as if you were purchasing an existing home. Yes Holmes on Homes is terrifying, but so are so many of the remodeling/flipping shows you see when an older home is filled with asbestos or has a giant crack in the foundation.

    • new houses are fine BUT

      “efficient appliances, windows, hvac units and water heaters”

      These things all have to be replaced at some time or another, and all can be put in an old house.

      • love old houses BUT

        Don’t disagree–merely pointing out there are pluses and minuses with both.

        To me, it pretty much comes down to a lifestyle choice. At this point in life, I’d rather spend my disposable income the first few years in my home on decorating…taking some vacations, enjoying life. Not replacing every major appliance and system so that it isn’t bleeding energy praying that the roof doesn’t go next. Just a thought.

  • CourthouseMom

    Even conscientious excellent builders (and their subs) make mistakes. Better to discover it before the drywall is finished, everything is painted, and your antique rugs are in place! Inspections make good sense for all.

    Advice for anyone constructing or renovating a house: take lots of photos before the drywall goes up. If you ever have a plumbing leak, for example, you will know how it’s all configured.

  • Zack

    I haven’t had a good experience with the home inspection I got before buying my house in NC. He was licensed and accredited, but he still missed some significant problems including an unsafe gas water heater installation (it was new). The plumber we hired to fix that suggested spending a little more than we would have on an inspector by bringing in trade experts separately – like a roofer, a plumber, a framer, an electrician, and possibly even a GC. I think I would do this even if buying new construction.

  • gm

    Question for Adam: What is up with escalation clauses? We recently offered on a house but our bid was thrown out because there were two other offers that had escalation clauses for much higher prices. How do you compete with that? How do you know if a property will attract a buyer who will write in an excalation? Also, we hear that buyers are dropping contingencies (appraisal, home inspection, etc.)– what do you think of this practice in such a competitive market?

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