08/04/2007

Finding and purchasing a newly constructed home is a completely different experience that looking for a resale home. In the case of the resale home a potential buyer may have difficulty looking past the clutter and condition and picturing them living in the home. Many resale homes do not show well, particularly when compared to builder model homes which may be loaded with upgrades, features and options and are professionally designed, decorated and furnished to show at their best.

Another difference is that interested buyers will normally have to be accompanied by a real estate agent to look at resale homes while a visit to a new home builder model can be undertaken like visiting an open house, with even more convenient hours.

It is wise to remember however, that, just like a professional real estate agent can assist you with researching and finding the right resale home and helping you with the offer and working through the myriad of details as you proceed to closing, they can also play an important role in helping you find and purchase a newly constructed home. It might not seem necessary to involve a real estate professional in a transaction where a buyer can deal directly with a builder. However, by using a real estate professional, you have someone to protect your interests and guide you along the right path. Here are 10 advantages to using a real estate professional when buying a newly constructed home.

Just as a real estate professional calls on experience and knowledge of an area to help buyers locate pre-owned homes in a community, he or she can also direct buyers interested in newly-built homes to developments and communities that match client specifications.

A sales professional can suggest builders with reputations for delivering a high-quality product, responding quickly to issues, and being financially sound.

A sales professional may be familiar with how a builder prices his products and where there may be room to negotiate price or upgrades.

Without representation, you are one buyer purchasing only one home. But a sales professional can significantly impact a builder’s bottom line by providing a steady supply of customers. This leverage may work in your favor at the negotiating table.

The lender approval process may go smoother if a sales professional schedules visits, accompanies you to lenders, and helps expedite required documents.

What may seem like a simple transaction can grow legally complex and risky. On signing a contract you may receive literally hundreds of sheets of papers and documents, covering not only the purchase contract but soils information, builder warranty and other disclosures, home owner association documents, covenants, conditions and restrictions, lists of options and upgrades, title and closing information and much more. A sales professional is familiar with these documents and with the complexities and risks inherent in the home buying process. They can explain the process to you and when questions arise, they can steer you to the right advisors and services you may require.

When relocating to a new area, sales professionals can be particularly valuable resources. In addition to providing local area information regarding schools, day care or elder care services, public transportation, proposed development, and so on. Once construction is under way, they can periodically stop by the work site, supply you with progress reports, and photograph or videotape phases of the construction.

A sales professional can assist you as you face hundreds of design choices and consider which upgrades could potentially add value to the home when it comes time to sell.

A sales professional can accompany you at the site while you okay the plumbing and electrical locations prior to dry walling, as well as on the walk-through or builder orientation.

Lastly, most often the builder pays your sales professional’s commission. You enjoy individual attention and support at no cost to you.

The most important thing to remember is that if you decide to utilize the services of a Realtor to assist you in finding and purchasing a home from a builder, you need to select that person at the beginning of the process. Most builders require you to be accompanied by your agent when you first visit their model home or, at the very least, to register the name of the agent you will be using should you decide to purchase from that builder. This requirement is usually posted at the sales office / model home, if not be sure to ask about the registration procedure prior to signing in at any builder model home development.

• Building Your Dream Home
• Building Your Own Personal Custom Dream Home

In a prior column we discussed alternatives to the “start from scratch” design / build custom home. If those other options do not work for you then you are faced with the task of creating your own, personal, unique custom home. That is the path that we embarked on when we found a lot in the spring of 1999. A full twelve months later our home was finally completed and during that year we learned a great deal about the custom home building process.

Obviously the two most important things for you will be the location and your ideas for appearance, floor plan and features. You have toured many homes, studied numerous design books and have copious notes and ideas and now you must find the lot or location for your dream home.

In this market, this can be difficult to do. Most subdivisions have builder or other restrictions that might limit your options. You will probably have more flexibility with country acreage but this creates another set of problems. You may find that a Realtor will be helpful in the search for the ideal location for your home. Once you have found the location you will need plans. This could involve finding and purchasing a set of ‘canned’ plans from one of the many design books but these will normally have to be revised and redrawn prior to construction. Another alternative is to use an architect to blend the style, location and appearance together with a floor plan designed to best incorporate your wants and needs. In addition, you need to be practical and want to end up with drawings that a builder can quote and build from. An architect, a builder or a real estate professional can counsel you on which of your ideas may be impractical from a cost point of view.

Now that you have a building lot and a set of plans you need someone to build it for you. In your research you have probably looked at new home construction and talked with other people about their experience and recommendations. This is a good place to start. The local Home Builders Association can also supply you with names of builder members and a Realtor can be a good resource for information and recommendations.

The important thing is to meet with several builders, interview them and talk about their experience, look at the work that they have done and check out their references. You may want to end up with two or three builders you are comfortable with and who are prepared to quote on the construction of your custom home.

You will then submit your plans to them and review the guidelines for their quote. You want to compare “apples and apples” so you need to make sure that the materials and specifications are reasonably the same and that exclusions, inclusions and allowances are similar. As an example, on a custom home you can spend anywhere from $5,000 to $25,000 or more on windows so you need to know what you are getting and what the differences are. In order to properly compare, you want to get a line item quotation, which shows prices for all of the various components of the construction.

Once you have selected the builder and finalized the price you will need to enter into a contract. The builder may have a Realtor and may use a residential real estate contract or he may have his own contract that has been prepared by his attorney. The real estate contract does not address new home construction very well and the builder contract will probably favor the builder. In either case, you should consider the use of a Realtor to assist and advise you in the negotiation of the contract or use an attorney to review the contract.

One of the important items the contract will address will be how you are to pay for the home. There are many options available to you but mainly it will come down to whether you or your builder are going to arrange the construction financing. It will also need to be determined how the builder will access the money through construction draws. Again, an experienced Realtor can advise you and make recommendations on your financing options.

The planning and construction of your custom dream home can be a wonderful and rewarding experience and forming the right team, including designer, architect, builder, lender and real estate agent is a good way to start.

For more information on custom home construction or for answers to any of your real estate questions, please call or email us.

Question: We want very much to have our dream home built for us but we don’t know where to start. Do you have any suggestions?

Building a new home can be a very challenging and rewarding experience. It can also be a very frustrating, expensive and time-consuming effort. We recently built and moved into our dream home and it was all of the above. And we had it easier that most because a lot of our experience is in new home construction. We are involved daily in a myriad of details with our builders, developers and contractors including finding building lots and suitable plans, setting budgets, financing, finish details, decorating and, of course, the marketing and contracts.

You have no doubt heard the stories about construction, whether it is remodeling or brand new, that mostly end with remarks about the inconvenience and the time and cost overruns. Most of this is the result of poor planning and unrealistic expectations, problems that you and the builder will share. Normally the results will more than justify the time and the effort put into the project as long as your original ideas were carefully considered and the project properly planned. Extra time spent in the beginning is the key to a successful venture.

If your hearts are set on a brand new home there are several options to consider. Before going the ‘start-from-scratch’method, you may wish to check out the existing new home market…your dream home may be out there already! In this area, about one-third of the homes sold are brand new and you will find lots of choices. There are about one hundred homebuilders who are members of the Home Builders Association of Northern Colorado and there are probably a hundred more small independent builders who build in this market. At the present time, there are 1,265 new single-family homes listed for sale in all price ranges and all stages of construction from the planning and permit stage to finished product. Many of the larger builders will have model homes and this is a good place to start but don’t forget all the other builders who may not have the resources to display a decorated model home, but typically are ‘hands on’ small businessmen who take a lot of pride in their work. We encourage you to have representation by a real estate professional to assist you in your search and most large homebuilders with model homes want your agent to accompany you, otherwise you will be left to deal with the builders’ representatives. A real estate agent is also the best way to reach the smaller builders, many of whom have just one or two homes or lots to build on.

During this stage of your research, if nothing else, you will gain ideas about the features to include, things to exclude and a better idea of your wants and needs. There are, seemingly, thousands of books and magazines on home building and decorating and the Internet can be a valuable resource with sites like www.homebuilder.com. You can also visit home design centers like at Sutherlands and Home Depot to get ideas about everything from exterior finish to hard surfaces, lighting, plumbing and hundreds of other details and selections you may want to be aware of.

Obviously if you find a home in an early stage of construction, in a location and with a basic floor plan that works, you should be able to make some small customizing changes and, perhaps, be able to select cabinets, appliances, lighting fixtures, floor coverings, countertops, colors etc. The builder will have allowances for most of these items and can suggest suppliers that you can visit to make your selections. This approach to your dream home will normally be your least expensive option.

The second option is to find a builder with a lot and with stock plans from which to make your choice. Stock plans are ones, which the builder is familiar with and may have built before, and he will have a basic price, specifications and allowances. Obviously the home needs to fit the lot and the location but if you find one you will be able to make some changes to the plans and make most of the finish selections, subject to the allowances.

If the choices, selections and details become overwhelming, you are probably a candidate for a new home that is already completed. You can still customize and personalize this home with decorating; furnishing and landscaping but you will save yourself weeks and months of wondering and worrying and a considerable expenditure of time and money.

In a future column we will discuss the other option; to design / build a unique ‘one of a kind’ custom home and the process, including the design, plan, lot and builder selection, financing and the contract.

If you are considering the sale of your home this year now is the time to start getting your home ready to sell. Using recent closed sales data and making the assumption that the average closed sale is under contract for four to six weeks and buyers begin looking at least a month or so prior to writing a contract, we have come up with the following ‘Showing Activity’ graph:

Note how the activity picks up in February and runs through June before slowing down. Almost 50% of the year’s showing activity occurs during the four months from March to June and nearly two-thirds of the entire year’s activity occurs in the six-month period starting in February.

A good place to get started is to select a real estate professional to market your property. This person can provide you with a detailed market analysis and help you determine the right asking price for your home. This is a very important step because the wrong asking price can mean the home does not get sold, takes too long to sell or, on the other end of the scale, can cost you money by not getting the full fair market value for your property.

An experienced real estate agent can also help you in determining what repairs and improvements should be made to the property and give you tips on presenting and showing your home in the best possible condition. The agent will also give you a marketing plan, which will include all of the ways they will promote the property to reach the broadest range of qualified buyers.

If you don’t have a favorite, qualified agent check with family, friends and business associates for references. Look for signs in your neighborhood, attend open houses, check the internet or call several of the real estate agencies in the phone book and ask for a ‘top producer’ or someone who is experienced in your neighborhood or price range. You should normally ask two or three agents to prepare a market analysis and marketing plan and during the presentation you will have an opportunity to interview them to determine their knowledge and qualifications. Ask for references and call them. You want to make sure that you end up with an agent who you have confidence in and also one with whom you are comfortable since you will be probably be spending several months together in the business of selling your home.

If you are arranging to sell your home, this is also the time to begin planning your move. If you are going to purchase another home in the same area, the agent listing your home may be the best person to work with on another purchase. With the possibility of two transactions, you may be able to secure a better deal from one agent. If you are moving to another town or state, your listing agent may be able to assist you in locating an agent in the new area to assist you. The Internet can also be a valuable tool to find real estate agents and agencies in the new market plus a wealth of other information on the community, schools, recreation, and weather and nearly everything else you want to know.

The next step is to implement the repairs and improvements that may be required prior to showing your home. At the very least this will probably involve a de-cluttering which could mean a garage sale, a few trips to the dump and renting a storage locker. Don’t forget the garage, basement, yard, shed and other storage areas. It may also mean some cosmetic improvements like painting, new carpet, perhaps a new light fixture, window coverings, tile, mirror or other decorating tips. There may also be some repairs to be done like checking the HVAC system, fixing that plumbing leak or electrical outlet, perhaps a roof inspection or fence repair.

The initial steps of selecting a real estate professional to market your property and getting your property ready for the market can obviously take a few weeks. With increased showing activity starting in February and peaking in just 90 to 120 days NOW is the time to get started.

Well it came down to the wire, but on the back of an 11% increase in the average selling price of new home construction, we managed to keep the record on track – there has never been a decrease in the year to year average home selling price in the Fort Collins area. The average selling price of single family resale homes, which account for 70% of the market, actually declined by 0.26% from $265,111 in 2006 to $264,431 in 2007 but this was offset by the 11% price increase in new homes from $309,085 to $343,621. In total, the average selling price in the Fort Collins area for all homes – new and resale, single and multi-family increased 1.8% to $253,594. The median price for single family resale homes actually increased 0.04% from $229,900 to $230,000 but we are talking fingernails here. Overall, the median price increased 0.5% to $215,900.

It is worth noting however that the reported sales figures for 2007 probably include a lot more seller concessions – for both new and resale homes – even if it was just seller repairs and upgrades that would not necessarily have been done in a different market

The ‘Average Sales Price’ graph shows how slim the increases have been since 2000 which is the last time there was a double digit increase. In the seven years since, the average selling price has increased 29% or just 3.5% per year. But an increase is an increase and this puts the Fort Collins area above the crowd with Loveland reporting a 2% price decline, Greeley and Weld County a 2.5% decrease and the Denver Metro area also down 2%. The national figures will not be released until the end of the month but the median selling price of existing homes is expected to be down 1.9% and new homes down 2.1%. This is the first time there has been a year to year decrease in the national median home price.

Total home sales were down another 15.2% in December, marking the fourth month in a row of a double digit decreases. For the four months in total from September to December, sales were down 187 units, 17.5% lower than the previous year. This took us from an increase of 3.3% at the end of August to a 2.8% decrease for the year. We finished 2007 with 3,611 closed home sales compared to a final total of 3,712 for 2006. Resale single family homes actually recorded a small increase with 2,507 sales compared to 2,495 in 2006, an increase of 0.5%. New single family home sales were down 15% to a total of 367 homes. This is on top of a decrease of 22% in 2006 and way below the peak of 788 homes sold in 1999. Part of this can be attributed to a lower demand last year but over the last decade it is due to an increasing amount of new home construction outside of Fort Collins and a number of national builders who utilize their own sales people and do not list or report sales through the local multi-list service.

The ‘Total Home Sales’ graph shows sales in the Fort Collins for the last ten years. The 3,611 sales in 2007 are the lowest since 1997.

Sales were down 12.1% in Loveland, 4.7% in Greeley / Weld and existing home sales in Denver totaled 46,789, a decline of less than 1% from 2006. Nationally, 2007 home sales are expected to total 5.66 million compared to 6.48 million in 2006, a decline of 12.7%. New home sales were hit even worse with 2007 expected to total 773,000, down 26.4% from 2006.

In spite of the low sales and very marginal price increase for the year, it is important to note that the total sales volume for 2007 was $916 million which is the fourth best year on record and just slightly behind the $921 million for 2006. The record year is 2005 with 4,006 homes sold at an average of $245,243 for a total volume of $983 million.

Our crystal ball has not been working very well the last couple of years but we really expect that in 2007 we hit the bottom of sales activity. Other than tighter rules and qualifications for mortgage financing, the lingering foreclosure problem and a related decline in consumer confidence there are a lot of positives in the local housing market. The housing inventory is at a respectable level to allow buyers a choice. For the most part the inventory is properly priced, the homes are dressed to sell and the sellers are motivated. They will look at offers and they will consider making any required repairs. Fixed rates are back and there are plenty of mortgage financing options available at very attractive interest rates. The local economy seems very stable and there are prospects for job growth. The housing sales over the last two years are off 10% from the peak of the previous two years and this has to reflect some pent up demand on the buy side and as buyers get into the market, there also are sellers waiting to jump in to maintain an adequate inventory.

The national forecast is for a very flat year for resale home sales projected to total 5.7 million, up from 5.66 million and another difficult year for new home sales expected to drop further from 773,000 to 669,000 with selling prices virtually exactly the same as 2007. Locally we expect sales to increase slightly to get us back to the 3,712 level of 2006 and while the average selling price will depend on the mix, we anticipate that the string of consecutive annual price increases will stay intact and a modest 2.5% increase would get us to an average price of $260,000. This would equate to a total volume of $965 million, within a couple of points of the record set in 2005.