In the current market of high demand and low inventory, it’s common practice to be outbid numerous times when trying to purchase a home. Therefore, lots of homebuyers are opting to forgo the bidding wars and simply build a house.
This can be an attractive option on paper but not necessarily simple. Labor shortages and pandemic supply chain delays have kept builders waiting on everything from roofing supplies to doors and windows. What was originally a 9-month project could be well into month 18 with no firm completion date in sight, depending on the builder.
Meanwhile, interest rates always have a chance of going up. Traditional lenders offer rate locks, but they don’t last long (30-90 days). If your rate expires and your home still isn’t finished, it will end up costing a lot more than you’d planned, which leads to homebuyers getting hit with price shock at the settlement table. It is important with new construction that you investigate ALL lending options. I hate to say this, but sometimes it is better to go with the lender provided by the builder. Oftentimes, they offer nice incentives and and can offer extended rate locks to get you through any variability in interest rates.
In worst case scenarios, buyers have signed contracts to buy homes, but can no longer qualify for a mortgage to buy the same home they could afford just 6-9 months earlier. This leads to the inevitable canceling from the homebuyers, which leaves their deposits hanging in the wind.
As always, my team and I can help you navigate these situations. One of the worst myths in real estate is that people who build homes don’t need buyer’s agents. Here is yet another reason why this is false.