The Locals Email About Everything St Augustine

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Huge Problems with New Construction – [Clauses, Delays, Mistakes]

Getting into contract – No move in ready homes. Unless something falls out between an individual buyer and the builder (rare) most builds are going to be 4-6 months out. If you want to do new construction I would expect to be in the 8-10 month period. Price point is going to drive how soon a home is going to be ready. If you are under 500k; there is not really too many builders that will allow you to go to the design center. They make the decisions get the plans approved and move forward. Above 500k going to the design center is still feasible; though you need to account for that in time. The design center adds another 3 months or so to the process because they have to order all the material you choose.

Monthly releases and availability – Like stated previously most things are several months out in order to move in. In reaction to how fast the market is moving, builders have also reacted.
Some builder are only releasing a certain amount of lots for sale per month. They are doing this because they are trying to control pricing, quality and timelines. Some communities are in a higher demand than others based off of amenities, location and price.

Bidding wars are also common in new construction. Because there are a scarcity of lots available in certain communities, you may end up competing through a bidding war or highest and best. I had one situation where a buyer was interested in one specific lot that backed to a preserve and water feature. The lot was released but because of the restrictions they were not allowed to sell it that month. The following month the sales rep calls me and informs me there is another person that is interested in the property. Luckily the buyer ended up finding a resale in the community and decided to move forward on something else.

Need to know about contract: Escalation Clauses have become common place in the new contracts. They had to put them in because of the inflation in costs of material and labor over the past couple of years. Last year I heard some horror stories about the escalation clauses (80k difference in some cases). Now most builders have it in there as a precaution.
If the price goes up 5% they will eat it in most situations; if it goes above that then the buyer will have to make up the full difference (ex. it cost them 7% more;the builder does not cover 5 and you cover 2, you cover the full 7%),

Contracts state builder has up to 2 years to build your home. I had a buyer go under contract in December of 2020. They go in right before pricing and inflation got out of hand in 2021. Because of the contract they signed (no escalation and lower purchase price); the builder decided to wait on their home til materials came back down. Homes in the neighborhood that were not released for sale when my buyers went under contract were completed before my buyers got drywall. Contractually there is not a thing we can do. My buyer was highly analytical and looked over his contract with a local lawyer. They ended up closing in February of 2022. Over a year later. Now the builder will never admit that this was the case, but the writing is on the wall.

Depending on the builder and how you are paying; your binder on the contract could be anywhere from $5,000 – 20% of purchase price. If you are using a mortgage you may be able to get some incentive if you use the builders preferred lender. I have seen some paying up to 10k in closing costs. If you are utilizing cash; they may give you money off purchase price or incentive in the design center. The main thing is you have to ask. They are not going to just offer to give you the incentives.

In Contract: Delays with Supply Chain – I have a military buyer who just went under contract a couple months ago. The slider glass door for his future townhome was on an 8 week delay. Without making the environment climate controlled, you cant start on other finish work needed to do. Drywall cant go up, finishing and painting cant be done. Most finish material requires a temperature controlled environment.

Delays with labor force – I had one buyer waiting on a garage door to be installed. The builder was so upset because without a garage door you cannot get a certificate of Occupancy. He was waiting on the garage door installer for 7 different homes that week. We closed about 2 weeks later than expected. In todays market contractors have more leverage then ever before. They can essentially name their price when it comes down to hourly pay for the day. If the builder needs it done by a certain time they are going to have to pay for it these days

Mistakes in production – These large builders are building 1000s of homes in the area at a time. They have multiple site supers, General Contractors and Subcontractors on any given day. Throw in the shit show of supply chain issues and Covid and you have a lot of problems. I just recently had a builder install the wrong color cabinets in the home. Getting cabinets is already an 8 week process. Luckily my buyer caught it on one of their walkthroughs; otherwise it would have went un noticed til the next inspection. One mistake like this can cause a whole host of delays in the process. In this situation my buyer may need to pay for a rate lock extension; they are obviously not thrilled.

The Locals Email About Everything St Augustine

Sent twice a week, this 5 minute email will give you all the insights on news, events and the real estate market

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