Can YOU Actually Buy a New Construction Home?
Have you ever thought about buying a new home, but wrote it off because you thought you couldn't afford it? You might be wrong! Karen from Allen Edwin Homes and Kristi Roberts talk about monetary possibilities and why a new construction home might actually be the best option for you, especially in a market where every property you look at is drowning in offers.
So that's a big obstacle for folks when they think, “Oh, i'm doing um a VA or an RD loan, and it's no money down; I can't build a home.” There are definitely ways that you can do this, and that's a roadblock I would say where you don't even consider new construction because you you don't think you are able to do it.
Hi I'm Kristi Roberts here today with Karen Nouhan with Allen Edwin Builders. Allen Edwin is one of the - is the top builder by the numbers in the state of Michigan, and she's here today to talk about inventory, cost of home ownership, and all kinds of things that make buyers eyes open to find out that building their home is a possibility. So thank you for joining me this morning. How are you?
Great; hi Kristi! Thank you so much for having me today.
Sure! So hey I wanted to talk to you because we are still very much in a seller's market, and I'm still having tons of buyers getting frustrated having to deal with low inventory counts, um competing against multiple offers, anytime that their home - there's a home that's fairly priced that's in move-in ready condition. It's.. you know it's a monopoly game. We don't know if we're even gonna get a chance to get into the door before it goes off the market. So i wanted to introduce you to all of our clients and friends, and you know the people out there in cyberspace; so you can tell us some of the options that Allen Edwin has as a builder, and kind of open our eyes up to some other options and possibilities.
For sure, and it's a very frustrating market for buyers. With the low inventory, there's so much competition; so when they finally find that perfect home there's 20 other people..
Looking at that very same home and what I see from our perspective at Allen Edwin we’re builders, sometimes we’re one of their last options - their last stops - thinking that it's not possible. Folks like yourself, who know that it is possible, bring those customers to us but prior to that they're not thinking as new construction - as a viable option - to get into a home.
And why do you think that is?
You know - I don't know. Sometimes I think they're trying to get all of their options; when you're building you're thinking of a forever home, and statistically what do you say how long do people stay in a home?
Usually about five to seven years.
Five to seven years, and even that becomes true with new construction, maybe a little bit longer, but a new construction home, or building a home, could be a short-term thing for a customer; and if it is a short-term thing, how do you feel resale would be if they bought a new home today and sold it in seven years compared to buying a used home and selling it in seven years? Do you see any benefit to that?
I think the biggest benefit would be at seven years, you're not quite at that replacement stage yet; when you buy a resale property, sometimes you - depending on, you know, how updated the home was when you purchased it or how old it is - that's always something to keep in the back of the mind, and that's something that I tell my buyers about. Like look, you know the windows aren't an issue for you today but this house is 20 years old and the windows have never been replaced; so probably in the next five to ten years you're gonna have to start replacing, if not sooner. So to sell a new construction home that's five to seven years old you're not quite at that stage yet. I think, for the most part, it starts once you start like i would say 15 years is probably like that peak and then from there it's like down from there.
Furnaces, ac, roof, windows - major things - and then just aesthetically.. You know, people's taste and styles change so that white beautiful kitchen with the gray counter, granite countertops, you know it's popping today -
- but is it what's going to be popular in 15 years? Have you outdated yourself?
Correct; and folks will tend to replace those items as they go out of style. So new construction doesn't have that replacement cost - everything's brand new. So you have a new furnace, new hot water heater, new roof, all the biggies; the structures build to today's code - so you can take a lot of that worry off of your plate. So replacement costs - if you're buying a used home versus a new home - you're going to probably have what would what a dollar amount would you put on that - that someone would have to over the next three years - allocate towards replacement costs versus new, if they're buying a used home?
You know, and it's a loaded question, because there's so many different possibilities; but I would - what I normally uh consult with my first time especially first-time homebuyers is you know always have a nest egg set aside with a minimum of at least five thousand dollars.
Because you don't know what could happen, and when, but if your furnace breaks - you're looking at at least five thousand dollars for replacement.
Okay so a five to ten thousand dollar replacement cost on an existing home versus a new home that's not going to have that replacement cost built into it for quite a long time; 7, 10, 15 years, where you're hitting the big items that are you know five to ten thousand dollars. So what I like to help you know just give people the ability to think about is: where do you get that money from?
If you're coming in on a low down payment - interest rates are so low - why put all your money as a down payment, when you can get money so cheap right now?
Well, let me stop you right there real quick so we're talking about financing. One of the things that I come across with a lot of buyers is they think that to do new construction - no matter who the builder is, no matter what the situation is, that they have to do a construction loan. Is that the case with Allan Edwin?
No. So any type of financing that's available: VA, Rural Development, FHA, or Conventional financing, is a viable way to purchase a home with Allen Edwin. We don't require you to get a mortgage until the home is completely finished, and we only require you to pay the amount of the down payment associated with your type of loan.
So it is the same type of financing that you would have for any resale, without the competition I might say, you can do building a home as well. So that's a big obstacle for folks when they think, “oh i'm doing a VA or an RD loan and it's no money down. I can't build a home. There are definitely ways that you can do this, and that's a roadblock I would say where you don't even consider new construction because you you don't think you are able to do it.
Right. So you had said that you only require what the with the loan amount is down. Rural Development and VA has zero down, but I'm assuming you're not going to build a home with nothing out of pocket to secure it for the buyer. So what would you do in a situation like that?
So we would have an earnest money deposit. So as low as $2500 for the initial purchase agreement, and as much as eight thousand dollars, during the whole process; which can go towards closing costs.
So uh truly zero down payment, and then you have to have uh earnest money deposit as you would with any purchase.
So kind of like a piggy bank.
Yeah, so that can be as low as 2500 and we can take payments.
So um and if you're truly - if you're starting from scratch, the whole process can take, you know, up to eight months, and that's another kind of sticker for people. They think that's a long time but if you're looking for a specific type of home, and you want not to be in a competitive market, then it's not as long as you think. It is - it goes pretty fast.
So if I were to go out to any of your subdivisions, and I found either a lot or a house that in the process of being built today my client will not have to compete against other people?
Correct; so it's first come first serve. Um once we take um a customer in on a on a home, take an offer for them - from them, there's no other uh offers accepted. We take it off the market immediately.
Okay; that's awesome…
…and with that, that's when the earnest money (or the deposit) comes into play.
Yeah; just two things the earnest money deposit and a signed contract. That's your home.
So it basically takes out a lot of a lot of the compromise that a buyer would have to do with the resale property, and allows them the opportunity to do some customization.
So with your homes, just how much can they customize? Do you have set floor plans and specs that you - that the buyer - has to work around? Is it kind of like package a, b, or c? Or is it something that they can truly customize to them, to what they want?
So across the state of Michigan, in our particular area - Livingston, Genesee, um into Lansing - we have 25 different communities in our regional area, and then we go all across the state. So we're speaking to Kristi - your licensed through the whole state of michigan -
We can talk to a customer here, and they could be building in grand rapids, whatever area they're looking in across the state where we have product. We have 30 different styles of homes; so if you're building, you have more choices and opportunity to customize it. We have a seven thousand square foot showroom where they have their own HD experience, they go with the design consultant and pick everything that goes in that home. So it's our um locations, our style of homes, and then they customize with this great opportunity to pick anything they want in the showroom. So we consider ourselves some “my custom” in that respect; so if you're building you can get, you know, a lot of what you're looking for. The other part of our business is we carry a tremendous amount of inventory of homes - so we call them showcase homes - that we build without a customer. We have several that we multi-list, and hundreds that are not multi-listed; so working with a professional like Kristi, you can tap into those homes that aren't on the market and could be just what you're looking for. Now the homes that are already started - the showcase homes - we pick the selections that are most popular today, so they're all going to have hard surface granite, white, or chocolate cabinets…
…you know easy to maintain flooring; but if you're looking for something really custom, it's going to be more of a build than it would be one of the inventory homes.
And the inventory homes are usually done much faster, I’m assuming. At what point do you start advertising them?
After we have a basement in; but sometimes if we have multiple in a community, we might only multi-list one.
So there could be three in the similar you know space and location that are not advertised at all.
So just basically ask, because it's not always a given that what you see is what you get.
What I would encourage your customers - anyone who's listening - to do, is to call you Kristi for a time to sit down with us and kind of go over the options, because you're the professional. You're going to know their locations and some of the things that they need. That first part of it is super important and then introduce them to us so we work together with Kristi - our realtor - to help find solutions for customers looking all over the state.
Now we only have a couple minutes left, but I really want to hone in because I actually live in one of your homes, so obviously I like your product, but why don't you tell our listeners some of the benefits of Allen Edwin; what are your homes all about, and why should they choose you?
Okay; so we're Michigan's largest builder by the numbers. We build over 700 homes a year; this provides us with a consistent um product, and we offer a full one-year warranty and a 10-year structural warranty based on customers living in our homes for 90 days. So after you've lived in the home for 90 days, we have a 93 percent customer approval rating as rated by a third party. So it's a Guild-Quality Award that we get, and the last thing I would want to mention is utility bills. So we talked about replacement costs, but the actual operation of the home your utility bills because we built to energy smart standards - are going to be 40 percent less expensive than you would pay for an existing home. So 350 dollars a month on an existing home versus about a hundred and fifty dollars for an Allen Edwin home for gas and electric combined.
And that's huge, because I, just in my experience with helping clients that build homes, they have a tendency to spend a little bit higher on their budget. So that helps because then it really helps offset their total out of packet every month; so where they might pay a little bit higher of a mortgage, they'll be paying less in the utility. So it washes, or sometimes is still less expensive.
We call this the total cost of home ownership, and we're very happy to sit down with any of your customers and review the total cost of home home ownership that would be specific to their um scenario.
We have a program for it, and you know at the end of the day when you're living in your home, and you're comfortable, there's going to be other expenses and you know folks get really focused in on that mortgage principle and interest…
…and they're not thinking about the -
The big picture.
- yeah, the cost of ownership, replacement costs, and where that money comes from. So we can really help folks to come to a really good budget and live within that budget.
Well thank you so much for sharing some information on your product; and you know I would like to have you back on where we could talk about the cost of home ownership, and you know, even a lot of our clients are putting off buying right now because of the shortage of inventory and the aggressiveness of the market. So maybe you can help break it down, what the - what it looks like to wait.
Is it going to cost you to wait? or should you take advantage of everything now? So I would love for you to come back out and talk about those items.
It's always a pleasure Kristi you're top-notch professional, I love you -
You can kiss my butt some more…
She does a great job for her customers it's - she's always putting her customers first - so appreciate it.
Well thank you so much.
All right, thanks Kristi.