As of August 2023, about 39% of OKC's current home inventory is new construction homes, and 19% of sold homes since the start of the year have been new construction. Home builders are becoming increasingly more open to negotiating concessions to get their vacant, brand-new homes sold.

We've gathered the six most often unknown or overlooked issues that new construction homebuyers face. From negotiations and contracts to neighborhood dynamics, inspections, and new legal regulations, arming yourself with knowledge will empower you to confidently make informed decisions and secure the home of your dreams. So, let's dive into these crucial insights and ensure your path to owning a new construction home is smooth and rewarding.

COSTS YOU CAN NEGOTIATE
...and What You Can’t

When buying a new construction home, it's important to understand what aspects of the deal are negotiable and what isn't. While the base price of the home is typically non-negotiable (as it can impact future home prices in the neighborhood), there are several areas where negotiation is possible. Upgrades such as window coverings, garage door openers, and fencing can be negotiated as part of the purchase agreement. Additionally, concessions, incentives, and upfront costs are often open for negotiation. Builders might be willing to assist with buyer closing costs or even cover interest points for a certain period. This is especially common with newly built properties to stimulate sales, create momentum for the development, and fund the builder for completing future homes.

STANDARD OKLAHOMA CONTRACT
VS. THE BUILDER'S CONTRACT

Understanding the type of contract you're signing is crucial when buying a new construction home. The standard Oklahoma real estate contract is more “consumer-centric," while builders tend to use "builder-centric" contracts. If you've negotiated highly-personalized changes or upgrades that deviate from a typical homebuyer's tastes, builders might require you to cover the cost of these upgrades upfront and make the cost non-refundable. It's essential to verify if the contract provides similar protections to those offered in Oklahoma's New Home Construction real estate contract—in particular, that the buyer's earnest money can be refunded due to the builder's non-performance. Additionally, note that some builders may require you to make your earnest money payable to them directly rather than with a licensed brokerage or title company, a term that can be subject to negotiation.

KNOW THE PLAN FOR THE NEIGHBORHOOD
It Could Cost You!

Researching the future plans for the neighborhood is a strategic move. If the developer struggles to sell remaining, less-desirable lots, lower-quality builders could be allowed to construct homes in the area. Such homes could negatively impact the value of your property. By staying informed about the neighborhood's future developments, you can ensure that high-quality builders continue to contribute to the area, preserving the value of your investment.

KEEP UP ON THE HOME OWNERS' ASSOCIATION

Stay informed about the progress of shared amenities promised by the developer, such as playgrounds, community pools, and clubhouses. Ensure these amenities are completed and/or properly funded before the homeowner's association is handed over to homeowners for management. Review neighborhood covenants early on to ensure you're comfortable with the restrictions. Additionally, consider street ownership—whether the neighborhood or the municipality is responsible for street repairs. Changing street ownership could lead to thousands of dollars in unexpected special assessment costs for homeowners. A handy tip: Check the street signage to match the color or style of the local municipality, which can be the first indicator of street ownership.

PERFORM YOUR OWN INSPECTIONS

While municipal code inspectors oversee construction at various stages, their inspections are general and not exhaustive, only requiring them to deem the home fit for current building code standards and safe for occupancy. The best practice for beginning your inspection period is after the municipality issues a Certificate of Occupancy. Immediately after this occurs, you should schedule your own licensed independent home inspector for a detailed review. This step is crucial to catch additional issues that might not have been identified during the code inspections (such as most often overlooked unpainted window lentils that can rust if not painted). An independent inspector works solely for you and aims to teach you about your new home while uncovering potential problems that could arise in the future, protecting your investment. An independent inspection is a standard for new construction homes, and reputable builders are happy to stand by their work and correct any problems.

ENFORCE YOUR WALKTHROUGH PUNCH LIST
A New Oklahoma Law Limits Your Legal Recourse

After closing, getting repairs and touch-ups done becomes more challenging. Builders may have less incentive to chase down subcontractors to schedule repairs promptly once they've been paid, and taking time from your schedule to meet contractors can be stressful during the first month of your move. To ensure your satisfaction, work with your Flotilla Partner and your own inspector to create a punch list of touch-up items and repairs. Continue walkthroughs until all items are completed. We recommend postponing your closing until they are complete. If you do choose to move forward with closing (perhaps for a delay with an item on backorder), you should put the agreement in writing and set a reasonable time frame with a remedy should the original repair agreement not occur.

With the new Oklahoma law (SB 1597: Notice of Opportunity to Repair Act), effective November 1st, 2023, it's even more critical to ensure repairs are completed before closing. This law introduces procedural steps homeowners must follow before filing a lawsuit for defects: (1) provide written notice to the builder or contractor informing of the defect(s), and (2) allow the builder or contractor to inspect & present the homeowners with a written response that includes an offer to repair the defects or compensate the homeowner within 30 days after receipt of the homeowners’ written notice. Homeowners are prohibited from filing for any legal remedy until these conditions are met.

CONCLUSION

Buying a new construction home is an exciting endeavor, but it requires careful consideration of these key factors to protect your investment and ensure a smooth experience. By understanding what you can negotiate, reviewing contracts, researching neighborhood plans, staying on top of HOA developments, performing thorough inspections, and enforcing your walkthrough punch list, you can navigate the process with confidence and make informed decisions for a successful home purchase.

© 2023 Flotilla Holdings, Inc.