Welcome to the World of New Construction - Advantages, Tips and New Home Terminology

There are considerable advantages to purchasing a new construction home over a used home. Because the home is brand-new, there are no problems to inherit from the previous owner. The home is built with all new products and will most likely come with numerous warranties providing protection for the new homeowner, as well as for ones’ pocketbook.

Sometimes there can be confusion when searching for the perfect new home in a specific price range as well as included and available options. For example, an advertisement may indicate the company offers homes from the $250s, however you know there are significantly higher- or lower-priced homes in the neighborhood. The following explanations may help you, as a home buyer, to understand some of the more commonly used terms relating to new construction and how a home’s price is determined.
 

• Base Price (Starting Price): The beginning price of the home, with no added upgrades or options other than those specified on the ‘Builder’s Included Features’ list though it may also be referred to as ‘Standard Features’. When given a range, this includes the beginning price of the lowest-priced floor plan available in the neighborhood to the beginning price of the most expensive floor plan available in the neighborhood.
   
• Lot Premiums: Most floor plan pricing considers a certain amount of money toward the price of the land. If you choose an exceptional home site, such as a lot that is wooded, larger than normal, or situated on a corner or next to a marsh, the price of the land becomes more valuable. An additional fee may be added to the Base Price to accommodate the added value of the chosen premier lot.
   
• Included Features: Usually neighborhood-specific, these are designated features that come with (included in) your home at no additional cost when purchasing the home at its Base Price. For example: Ceramic tile floors in kitchen and baths, or carpet throughout the rest of the home might be listed as Included or Standard Features.
   
• Upgraded Features (“Upgrades”): Are features the Builder will allow you to add to the home for an additional cost. For example, if the neighborhood’s Included Features list specifies that the entire house is carpeted, but you would like hardwood floors in your living room, you may be able to pay an additional fee to cover the cost of this upgraded feature.
   
• Incentives: Depending upon the market demand and the number of completed or nearly completed houses in inventory, Builders may at times find it necessary to lower prices to move their standing inventory. For example, a reduction of $20,000 off the advertised price of a home may be classified as an Incentive. Sometimes Incentives are offered contingent upon the buyer’s fulfilling some sort of obligation the Builder has set. For example, $20,000 off the price of the home if the home closes on or before “X” date. Think of an Incentive as the type of special promotion many retail stores offer from time to time to attract buyers and move merchandise.

If you are new to the home buying process you may encounter additional unfamiliar words and terms. Below is a helpful glossary or mini home buyer’s dictionary of relevant terms you may encounter during your search for your new home.  If you have any additional questions, the neighborhood’s new home sales consultant is always there to help you!


Assessment. A tax levied on a property or a value placed on the worth of property by a taxing authority.

Binder. A receipt for a deposit paid to secure the right to purchase a home at terms agreed upon by the buyer and seller.

Certificate of Occupancy. A document from an official agency stating that the property meets the requirements of local codes, ordinances, and regulations.

Conditions, Covenants, and Restrictions (CC and Rs). The standards that define how a property may be used and the protections the developer has made for the benefit of all owners in a subdivision.

Condominium. A home in a multi-unit complex; each purchaser owns an individual unit, and all the purchasers jointly own the common areas, such as the surrounding land, hallways, etc.

Credit Rating. A report ordered by a lender from a credit bureau to determine if the borrower is a good credit risk.

Default. A breach of a mortgage contract (such as not making monthly payments).

Density. The number of homes built on an acre of land. Allowable densities are usually determined by local jurisdictions.

Due-on-Sale. A clause in a mortgage contract requiring the borrower to pay the entire outstanding balance upon sale or transfer of the property. A mortgage with a due-on-sale clause is not assumable.

Equity. The difference between the value of a home and what is owed on it.

Hazard Insurance. Protection against damage caused by fire, windstorm, or other common hazards.  Many lenders require borrowers to carry it in an amount at least equal to the mortgage.

Infrastructure. The public facilities and services needed to support residential development, including highways, bridges, schools, and sewer and water systems

Interest. The cost paid to a lender for the use of borrowed money.

Level Payment Mortgage. A mortgage whose payments are identical for each month over the life of the loan.

Mortgage Commitment. A formal written communication by a lender, agreeing to make a mortgage loan on a specific property, specifying the loan amount, length of time and conditions.

Mortgage Loan. A contract in which the borrower’s property is pledged as collateral and which can be repaid in installments over a long period. The mortgagor (buyer) promises to repay principal and interest, to keep the home insured, to pay all taxes, and to keep the property in good condition.

Note. A formal document showing the existence of a debt and stating the terms of repayment.

Property Survey. A survey to determine the boundaries of your property. The cost will depend on the complexity of the survey.

Recording Fee. A charge for recording the transfer of a property, paid to a city, county, or other appropriate branch of government.

Real Estate Settlement Procedures Act (RESPA). A federal law requiring lenders to provide home buyers with information about known or estimated settlement costs. The act also regulates other aspects of settlement procedures.

R-Value. The resistance of insulation material (including windows) to heat passing through it. The higher the number, the greater the insulating value.

Sales Contract. A contract between a buyer and seller which should explain, in detail, exactly what the purchase includes, what guarantees there are, when the buyer can move in, what the closing costs are, and what recourse the parties have if the contract is not fulfilled or if the buyer cannot get a mortgage commitment at the agreed-upon terms.

Transfer Taxes. Taxes levied on the transfer of property or on real estate loans by state and/or local jurisdictions.

Walk-Through. A final inspection of a home before settlement to search for problems that need to be corrected before ownership changes hands.

Warranty. A promise, either written or implied, that the material and workmanship of a product is defect-free or will meet a specified level of performance over a specified period of time. Written warranties on new homes are either backed by insurance companies or by the builders themselves.

Zoning. Regulations established by local governments regarding the location, height, and use for any given piece of property within a specific area.


Source: National Association of Home Builders

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Thank you for reading and sharing our articles from The Greater Charleston New Homes Guide. Our business is to know Charleston, SC's new home construction, home builders, neighborhoods and homes so we may assist you as you take your new construction home journey. Please take the time to explore our site. The Greater Charleston New Homes Guide is considered the best and most reliable ‘local’ resource to new home construction, builders, neighborhoods and homes throughout the Lowcountry since 2004.
 

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