Today I want to talk about the process of buying a new home. There are a few different stages at which you can write a contract on a new home. You may decide to build a custom home right after purchasing a lot. You may find a “spec” home that is partially built, and in that instance you get to choose some of the finishes, depending on what has been ordered and installed by the builder. Right now, in 2022, we are finally seeing builders able to finish homes before people buy them.
In the Southern Utah market it has been harder to find finished homes until just this year when the Covid-19 surge in demand finally slowed down. But even when a home is brand new, there are a few things that need to happen in order for a buyer to move in, so my purpose here is to go through those in detail.
Who says the home is finished? Well, that’s the builder. Builders will complete the home, and then they let a couple different people know. They tell the city, and then the city will come and inspect. If the city inspector finds that the home is up to building code, they give it a certificate of occupancy, referred to as a “C of O,” stating that the home is ready for someone to live there.
The next person the builder tells the home is done is the buyer. The realtor already knows the home is done because she has been over there checking on the house regularly, but she may have waited for the builder to say he has the C of O to tell her clients, because until the city says so, the home can’t be lived in. Once the buyer knows the home is ready to close, there will usually be a buyer review of the home. The buyer can look for anything that may have been overlooked by the builder or inspector, and they usually create a “punch list.” This list needs to be done in conjunction with the builder so they know what needs to be completed. Once the punch list items are completed, the buyer can close on the home.
Pitfalls to Avoid Before Closing a New Home
One challenge I have often seen is that buyers are usually ready to move in as soon as the Certificate of Occupancy is given. This puts a lot of pressure on everyone to get the purchase of the home closed. While under this pressure, it’s important to remember that once the builder has his money, his motivation to finish the punch list is significantly decreased. From a buyer’s perspective, it’s better if you can reign in that enthusiasm to close, and wait to sign documents until the home is in the condition you expect.
On occasion there may be an item that takes longer than the one to two weeks you are willing to wait to complete. If that is the case, you as a buyer can ask the seller to withhold money from your purchase in the event that the lingering punch list items are not done in a timely manner. If that happens, the money can be released to you to complete the items on your own.
Ready to Close?
If all goes well, and both buyer and seller are ready to close, the last few steps can be seen in the illustration above. The buyers bring any monies they have to the title company. If the buyer is using a loan, the lender likewise delivers. Both parties sign paperwork for the sale, and once the paperwork is all correct and the loan is funded, the title company will record the transaction with the county. Once the sale is recorded, the buyer gets the keys to their new home. And then they live happily every after. Or at least for 12 years, which is the “shelf life” of a new home, according to the real estate school I attended.