When people are buying new construction, they must choose between two options: 1) A smaller, custom home builder or 2) a high-volume, production builder.
What’s The Difference?
The difference between the two is simple. A custom home builder will create a one-of-a-kind home for you, on a single lot, that offers a greater range of deign choices. If you’re the type of person who wants a lot of input in this department, a custom home builder may be best for you.
On the contrary, a production builder will build a community of homes, on multiple lots. And because the homes are part of a city-planned community, they have certain restrictions that they must abide by from the city. The builder also wants to get every home built as quickly as possible, so extreme customization is not in their business model. These restrictions means that there are less opportunities for you to customize your home the way you want.
Advantages Of Choosing A Production Builder
The beauty of going with a production builder is that they are highly systemized and focused on volume. As a result, they can buy materials in bulk and pass on those savings to the home buyer. This means that a production builder can usually deliver the same sized house for less money that a custom builder.
Another advantage of going with a production builder is that the developer will often give careful thought to protecting open spaces — This is usually demanded by the city and its residents. The developer may also provide an enticing array of community amenities – such as a clubhouse, fitness center, swimming pool, Tot Lots, hiking trails, sports fields and more.
However, the downfall may be that many of them are actually publicly traded companies, which means that they have to answer to shareholders and boards — And profit margins mean everything.
Production Builders Usually Include…
According to the National Association of Home Builders (NAHB), most production-based home builders will include:
- Both the home and the land as a package
- A range of house plans to choose from
- Selection of products and appliances
- A variety of homes for first-time, move-up, and luxury buyers
What Happens Next With A Production Builder?
When working with a production builder, you’ll typically start by selecting a lot for your home. Then you will select a floor plan and an elevation. After these selections have been made, you and the builder will work together – often in a design center – to personalize your new home even more. It’s here where you will choose the finishes, flooring, appliances, cabinets, countertops, lighting fixtures, etc.
What If I Choose A Custom Builder?
A custom builder is best under any of the following circumstances:
- You have your eyes on a particular piece of land
- You want to build in an established neighborhood
- You already have a set of floorplans you want to use, or
- You want to be heavily involved in each step of your home’s design
The World Is Your Oyster With A Custom Builder
As the name implies, building a custom home is less scripted than a production home. There are no pre-defined choices or menus to choose from.
With custom homes, you can:
- Build on land you own or land that you buy
- Supply a floorplan or draw up a set of plans from scratch
- Work with an architect
- Be more involved in the process make more decisions
- Pick from any products you want, rather than selecting from a menu of choices
However, you can expect to pay more for a custom home than a production model of similar size and floor plan. Again, the typical custom builder doesn’t enjoy the economies of scale and labor efficiencies that a production builder does.
Also, because the process of building a custom home is customized, you’re going to spend a lot more time designing and constructing your new home — than you would if you work with a production builder.
The Choice Is Yours
And given the sheer amount of choices involved, it’s not unusual for new home buyers to experience a few more emotional ups and downs in their new home journey. That being said, when it’s all over, you’ll have the home of your dreams — And that is priceless.
What Is A Realtor’s Role When You’re Buying New Construction From A Builder?
A buyer’s agent’s primary responsibility is to protect the buyer’s interests. Contrarily, a builder representative’s primary responsibility is to protect the builder’s interests. You can immediately start to see how these two responsibilities are diametrically opposed. There’s no way that a builder can represent you and the builder simultaneously.
Will they make sure to negotiate a deal where everyone wins? Sure. Will they abide by all of the laws and ethically during the home buying process? Most of the time, yes. But that doesn’t mean that they will fight on your behalf to protect you. It’s impossible as long as they are wearing the builder’s name tag and cashing the builder’s paychecks. It’s not personal, it’s just business.
What Are The Advantages Of Using A Realtor When Buying A New Home From A Builder?
First, there is absolutely no cost to you whatsoever when you use a Realtor, so this is the primary advantage of using one. This is because the Realtor is paid a finder’s fee whenever the Realtor successfully introduces and matches a buyer with a new home. This finder’s fee is a commission that most builders will gladly pay because the Realtor found a buyer for one of their homes. Since there is no cost to the buyer at all, it would only make sense that you use a Realtor during the new home purchase.
Second, the Realtor will make sure that all of your interests are protected. The Realtor will do a market analysis on the home to make sure that you are not overpaying for the area. By the time that you add on all the upgrades, you could be the highest priced home in the community and that is never a benefit when you need to sell the home down the road.
Furthermore, there have been lots of foreclosures after a builder sells the last home and moves on from the community. Technically, as long as they are on site selling homes, they control the value of your home. Once they move on though, every homeowner is on their own. What has happened in the past is that the home will appraise for a certain price when you purchase it, but will appraise for a much lower price when you try to sell it. A Realtor may advise you not to buy a new construction home if you may have plans to leave within 2-5 years for this reason.
Third, the Realtor also knows the area and can tell you if you if there are pitfalls coming down the road. For instance:
- Is the builder also planning to build a mall as an attraction across the street?
- Is the density of the housing to high, which has a significant impact on the demographics of the community?
- Are there Homeowner Associations (HOA) fees?
- What are the Covenants, Conditions, and Restrictions (CC&Rs’)?
- Are there special assessment taxes — to build new parks, schools, and roads — that the builder is now passing on to you. These are called “Mello-Roos” taxes and every builder is subject to them here. They will either absorb them or pass them on. Which scenario do you think happens more often?
Fourth, the real estate agent will guide you through the processes — such as the contract, the construction, the final walkthrough, and closing. The agent will be able to help you when things go awry, and it’s construction, so they often do. Unfortunately, many of the builder sales representatives are not licensed agents, so when something goes wrong, you are literally subjected to the builder and have no one on your side to protect you, advocate for you, or advise you. Since real estate agents help people buy and sell homes every day, they can foresee and protect you from these situations even before they arise.
