Buying a new home to be built by one of Denver’s major builders is a fun and at times stressful process. The construction of a new home involves many moving parts and people. From the buyer, buyer’s broker, builder’s sales representative, design center staff, construction supervisors, mortgage lender and the actual contractors constructing the new home everyone must work together for a successful transaction and outcome. For a detailed discussion of the process click on Tips For Buying New Construction.
The purpose of this blog is to track and share the experience of two home buyers, Laura and Alex, as they work through their home buying experience. In this case, Alex and Laura are purchasing a new home in Southeast Aurora ( Southlands Area ). Alex and Laura are purchasing a new home in Serenity Ridge from Richmond Homes. Richmond Homes is the number one homebuilder in Denver according to the Denver Business Journal. Tom Gross of the Tom Gross Team is representing Alex and Laura in their purchase of their new home. We will share the process and experience from start to move in day. Along the way you will have the opportunity to meet Laura and Alex. The blog will be updated on a regular basis so please come back often to follow Laura and Alex in their new home buying experience.
Background – Laura and Alex are past clients of Tom Gross and the Tom Gross Team. Tom listed and sold their condo a few years ago. Laura and Alex have been preparing to buy their next home. Their goal is to buy a home in 2018.
January 13, 2018 – Laura contacted Tom on Saturday to let him know they were out looking at new neighborhoods and found an opportunity in Serenity Ridge. The house was under construction (foundation and frame). They spoke with the on-site sales representative, Meghan of Richmond Homes. Laura had questions about the process and her mortgage options. Richmond Homes encourages their home buyers to use Richmond’s preferred lender. Tom responded and set an appointment with Laura for Monday to discuss the situation.
January 15th – Tom and Laura (Alex was working and unable to jump on the call) discussed their interest in the home as well as the entire process including mortgage financing options. Tom recommended that Laura contact Matthew Hibler at Cherry Creek Mortgage for an independent mortgage pre-qualification and consultation. See Tips For Buying New Construction for a discussion of the benefits of securing a mortgage pre-qualification from an independent mortgage lender. While Laura was connecting with Matthew, Tom contacted Meghan at Richmond Homes to confirm the details (sales price, incentives etc.) as well as to register as the broker representing Laura and Alex in their purchase of the new home. Meghan had also arranged for Laura to visit the Richmond Design Center to review the features, pre-selected finishes and upgrade options for the home. Later in the day, after Matthew confirmed Laura and Alex’s ability to secure acceptable mortgage financing and Laura completed a visit to the design center, Laura and Alex decided to move forward with a lot deposit to hold the lot. Based upon Laura’s visit to the design center, Laura felt she would want to change many of the pre-selected finishes in the home. Tom recommended that they proceed with the fully refundable lot deposit to secure the lot and gain more leverage with the Richmond and the design center to allow Laura to negotiate desired changes in the selections. It was agreed that Laura and Alex would not proceed with executing the Richmond Sales Contract until Laura was satisfied with her ability to change finishes and selections in the home. An appointment to deliver the lot deposit of $9000 was schedule late in the day on January 16th. Meghan was scheduled to be off on January 16th so the appointment was confirmed with Meghan’s partner (John) in the Serenity Ridge sales office.
Note – this particular home was already under construction so the ability to change finishes and selections was critical to Laura and Alex.
January 16th – Tom, Laura and Alex met with John late in the day to deliver the lot deposit. John confirmed the basic details of the transaction. It was agreed that Tom would coordinate with Meghan to schedule an appointment later in the week to execute a sales contract. This would allow time to confirm Laura’s ability to change pre-selected finishes and features in the home. The lot deposit would be fully refundable so Laura and Alex could decline to proceed and get their lot deposit money back if it was determined that Laura could not change the pre-selected finishes and features. Laura and Alex took a deep breath and wrote the check for $9000 to hold the lot.
January 17th – Bad News! Meghan informed Laura that the price and incentives for the home were changed sometime on January 16th. John was unaware of the changes when he met with us for the lot deposit. Richmond would not honor the price and incentives based upon a lot deposit. Of course, this was a terrible way to start a transaction. After further discussion with the sales management team at Richmond, Meghan informed Laura that Richmond would honor the price and terms if Laura and Alex agreed to use Richmond’s preferred lender. As explained in Tips for Buying New Construction the builder’s mortgage lender often charges considerably more (higher interest rate and closing costs) then a lender such as Cherry Creek Mortgage. In this case, Richmond Homes was offering a $10,000 incentive for Laura and Alex to use Richmond’s preferred lender. However, based upon past experience the added closing costs and higher interest rate charged by Richmond’s preferred lender would offset the benefit of the $10,000 incentive. If Alex and Laura agreed to this stipulation they would be at the mercy of Richmond’s preferred lender when it came time to finalize the mortgage terms and rate (approximately 60 days before completion of the home).
It was agreed that Tom would contact the management team at Richmond Homes to discuss and hopefully negotiate acceptable terms for Laura and Alex. It was Tom’s hope that he could leverage his past sales track record and credibility with Richmond Homes to negotiate acceptable terms. Tom proposed a provision for the sales contract giving Alex and Laura the right to still use their own lender (Cherry Creek Mortgage) if the closings costs and interest rate proposed by Richmond’s lender exceeded the closing costs and interest rate offered by Cherry Creek Mortgage by agreed upon margins. The challenge with new construction financing is the delay in the buyer’s ability to lock in the interest rate and closing costs until the home is about 60 days from final completion.
January 18th – Good News! Richmond Homes reconsidered their position and agreed to honor the original price and incentives and to allow Laura and Alex the right to use the lender of their choice. Plus Richmond Homes agreed that Laura could work with the design center to change the pre-selected finishes and features in the home. Although the change in pre-selected finishes and features might delay completion of the home by a few weeks Laura and Alex were thrilled with the outcome. Tom confirmed an appointment with Meghan for late in the day (after Alex got off work) to execute the Richmond Sales contract. Once the contract was fully executed the terms were locked in which would eliminated any more surprises. Tom, Laura, Alex and Meghan met late in the day at Richmond’s Serenity Ridge sales office to review and execute the sales contract. After thoroughly reviewing the lengthy sales contract Alex and Laura signed the contract to purchase their new home.
The lot deposit of $9000 was applied to the sales contract. Laura and Alex were on their way to purchasing a beautiful new home. Completion of the home was projected to be in July or August.
January 19th – a question regarding the half wall on the upper level loft came up. Alex really preferred an open railing with balusters rather than a half wall that was currently planned for the home. Alex and Laura asked if that could possibly be changed. The initial response from Meghan was not encouraging. The option of the balusters was a “structural option” that typically cannot be changed after commencement of construction as explained in Tips for Buying New Construction. I advised Alex and Laura that based upon past experience with Richmond Homes it was unlikely they would agree to the change but there was certainly no harm in asking. We submitted the request to Meghan who agreed to speak with the Richmond management and construction teams regarding the request.
January 24th – Good News! Richmond Homes agreed to change the half wall to an open railing with balusters. Alex and Laura were now moving forward with the flexibility to select the finishes and features. It was agreed that Meghan would help Laura coordinate visits to the design center to make her final selections.
February 7th - Tom, Laura and Meghan met with the construction supervisors at Richmond’s Serenity Ridge sales office. The purpose of the meeting was for Laura to meet the construction team that will be supervising the construction of the home. The construction supervisors reviewed the entire construction process and time line. They reviewed the features of the home (including the open loft railing with balusters) in detail. It was agreed that Laura needed to make some final electrical selections (extra outlets and canned lights) by the end of the week to stay on schedule. Laura would also continue to finalize selections at the design center. The two hour meeting was very productive and informative for Laura. It appears Richmond has a strong team working on the construction of the home.
February 9th – Laura and Meghan finalized the electrical selections on schedule. Meghan prepared the required paperwork documenting the selections and changes. Moving forward!
February 16th - Quiet week. Laura is finalizing her selections at Home Gallery. Construction work continues. The mortgage process is on hold until about May when a projected closing date is determined.