Buying A New Home in Jacksonville Florida - Part 5 - Negotiating the Contract and Financing

If you are buying a new home in Jacksonville Florida and you have chosen your community, lot and house plan, then it's time to negotiate the contract and arrange financing.

Here are 6 things you need to know to negotiate the contract with a builder:

1. Builders have their own contracts and the terms favor the builder. The builder is putting their money on the line to develop the lots, market the community and build the homes. They are taking all the risk. That's just the way it is.

2. Builders do not usually negotiate the language in their contracts. It is possible to add to the contract in an addendum in some situations.

3. Buyers can negotiate with builders, especially in today's market. Builders will reduce prices on their homes to a point. After that, they are risking the values for every home in the neighborhood. Sometimes there are other ways to negotiate other than just reducing the price, such as upgrades, closing costs, buydowns on interest rate, etc. Focus on what is most important because you won't get everything you ask for.

4. Builders may ask a buyer to qualify with their preferred lender even if they plan to use someone else. Some contracts also reserve the right to screen outside lenders or have a list of outside lenders who are acceptable. The reason for this is the rash of unknown, small lenders who have not been able to fulfill their promises to buyers to fund loans and have ruined or delayed many deals at the last minute.

5. Builders require a deposit and may require a deposit for upgrades. They have the right to use the deposit for building the home but the buyer has the right to ask the money to be put in a separate escrow account, per Florida law.

6. If you are building a new house, per Florida law, the builder is given two years to build the house. This is not to discourage the Buyer because the builder doesn't get paid until they sell the house if it is an end loan, so their motivation is to build and sell the house. The provision is there in case there are extenuating circumstances such as weather, not being able to procure materials, or damage to the house.

Here are 5 things you need to know about financing a new home:

1. Buyers have a set number of days to apply for a mortgage after the contract is written. Even if it will be months before the house is finished, a builder wants to know that you are qualified for the loan.

2. Builders will usually pay some or all closing costs if you use their lender. If you select your own lender, they usually pay no closing costs. (But this could possibly be negotiable.)

3. Builders do not usually pay customary sellers' closing costs, which is about 2% in Florida, so be sure to include that in what the total closing costs will be.

4. Some contracts have no financing contingency. Every buyer is treated as a cash buyer and the deposit is not held with a real estate broker, so it is not subject to FREC guidelines but would be settled by binding arbitration if there were a dispute.

5. There are two types of loans - 'end loans' where you pay for the house when it is built and 'construction perm' where there are draws taken throughout the building process. In construction perm, the buyer buys the lot and pays interest on the draws and converts to permanent financing when the house is finished. This type of loan is mostly for custom homes.

Production homes are usually end loans. They add the cost of carrying the note into the price of the house. The buyer makes a deposit and secures a mortgage, just like buying a resale home.

If you're thinking of buying a new home in Jacksonville Florida, we can help you answer these and other questions about "Negotiating the Contract and Financing" We work in the Jacksonville area, specializing in Clay County and portions of St. Johns County and Duval County. Call or text us at 904-673-2308 or email us at sharon@teamalters.com.

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Part 2 - Should I Buy a Spec Home or Build?

Part 1 - How Can a Realtor Help Me?

Part 3 - Choosing a Community

Part 4 - Choosing Your Lot and House Plan

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