Buying a New Construction Home in Austin - Local Guide

When buying a home in Austin, Texas, you have many options. The city is growing in leaps and bounds as folks from all over America make their way to the Lone Star State. 

Some people opt for a condo by Lady Bird Lake in Seaholm, and others want a large home on a sprawling property in West Lake Hills. But some of the best properties in Austin are the new construction homes popping up in places like Barton Hills, Las Cimas, and Colton.

These homes are popular with every generation of homebuyer, as they are turnkey properties. But the reality is that buying a new construction home is different from a regular house, and many people do not know the differences. 

That is why our team at Prevu Real Estate put together an essential guide to help folks navigate buying a new construction house in Austin. 

What type of new construction do you want? 

When considering a newly built home, you must ask what type of development you want. 

New neighborhoods are springing up all along the eastern side of the 183, but not all of them are the same. Some are fully managed communities with homeowner associations, while others are new homes built on single plots of subdivided land. 

Each developer is different and specializes in varied types of homes. Some custom builders only work on individual homes designed professionally for a specific buyer. Conversely, tract builders buy a plot of land, subdivide it, and sell the houses built on individual lots, and are called production home builders. 

The developer usually makes a model home first with a few different floor plans, where they can welcome prospective Austin buyers to show off what types of countertops you can get, the appliance packages available, and the different floor styles that can be installed. There is little wiggle room for design input, however it offers the most affordable option among new builds. 

The next step up from a tract builder is a speculative home builder. These developers buy a plot, subdivide it, and then connect with buyers to get a personalized design. They can offer you more nuanced customization, but you do not choose the plot of land. Once they get enough buyers for the subdivided lots, they will build each home and have buyers move in when they are done.

If you want to choose the land your home gets built on, you will want to partner with a semi-custom builder. These developers let you choose the plot to build on and then offer you a set of templates to choose from. Once the property is complete, you can move right into the home. 

The most expensive and desired option in Austin is a fully-customized home. This is when you call a custom builder and provide them with the lot you've bought and the materials needed to bring your dream home to life. The trade-off is that perfection takes time, so do not expect a quick turnaround. 

Be ready to wait for your home 

When you buy a resale home, you can start moving in and putting your new home together almost immediately. The same is not true when purchasing a new construction home, even when there is no building supply shortage. 

Organizing materials, construction crews, and the permits needed to break ground on a new home can take time. So make sure to research Austin's local permitting and zoning laws before choosing a plot of land to build on. Without the proper permits, the city can swoop in and shut down construction on your home. 

So if you are building a home from scratch, make sure you have a place you can stay while construction is underway. This way, you are prepared for any hiccups that may delay the building process and your target move-in date. 

Plan out your financing options

Whether you are buying a storied home in Old East Austin, or a new home near the new Tesla Giga factory, chances are you will use financing to acquire the home. But unlike buying a resale home, lenders will not provide you with funds until the developer finishes construction. 

So you either have to finance the build with your own money, or wait until the entire project is done, if you buy from a tract builder or a production home builder. This could be a complication for folks trying to time their move-in date with the beginning of the school year in Austin. 

Luckily, there are few options available for folks buying new construction homes. If you already own a house, a bridge loan might be your best bet, as it lets you access your home's equity before you sell it. A lender provides you with a loan based on the home's value, and you usually have six to seven months to complete the sale. But beware of timing; if you do not sell your house fast enough, you are on the hook for the loan and debt incurred. 

Construction loans are an option for folks getting a custom-built home who need short-term financing. This option is excellent for opening up a line of credit to kick-start construction on a home. Yet you can expect to pay a higher down payment on this type of funding, and the interest rate can be higher too. 

There are chances for you to connect with your developer, and access their lines of credit using builder financing. Since building a home takes a lot of money, developers build relationships with lenders so they can always have credit near at hand. 

When a developer offers up a line of credit, you will want to vet the developer and their lender to cross-check interest rates. No matter what avenue you choose, make sure to meet with multiple lenders to compare and contrast rates. 

Better yet, if you have an agent helping you out, you can use them as a sounding board to discern whether you are getting a deal or getting taken for a ride. 

Work with an agent experienced with new construction  

Buying a home is no walk in the park, and this is true for newly-built ones as well. 

A buyer’s agent can educate you on each stage of the process, from getting the plot of land to educating you on the necessary permits and land-use law, among other steps. And most importantly, they will advocate on your behalf to get you the best price for the home. 

Builders usually have an agent at the ready, selling their services by offering to pay their fee. While this is enticing, you should still seek out agents of your own to interview, ideally before you even consult with a developer. 

If you live in the Austin area, you can have your agent help you sell your home and help you negotiate a deal while your new home is under construction. Plus, you want your agent present when you first meet the developer at the building site, as they must get registered to the project early in the transaction process. 

Lastly, some agents can even help you save money if they offer commission rebates to new homeowners at closing. 

Save on a new build with a commission rebate 

Buying a new construction home can quickly exhaust your savings, and the prices can be higher than purchasing a resale home. 

Yet Austin buyers can save a fair amount of capital if they work with an agent providing commission rebates. As you speak to different agents, ask them if they can offer you a commission rebate. This tool, also known as a commission refund or buyer rebate, allows your agent to provide a portion of their commission to you when they represent you on your home purchase.

The practice is legal in 40 states, including Texas, and can net you significant money at closing. Tech-focused companies like Prevu Real Estate streamline the transaction process for buyers and their agents, unlocking substantial savings for new homeowners. 

This cash goes a long way when buying new construction, as it can replenish your savings or help you furnish your new home. 

Seek out developer concessions 

Depending on what type of market you are buying a home in, you may be able to win some concessions from sellers to sweeten the pot. The same is true when dealing with the developer of new builds. 

Over the past two years, it was hard to win any concessions from sellers as buyers were flush with low-interest financing and competition among buyers was intense. But as mortgage rates have risen in recent months, the field of qualified buyers has shrunk. And while there are still many buyers, not all can afford new construction homes. 

This change in the market is putting developers in a position where they might be open to giving a few concessions. Often, buyers ask for a reduction in the sale price, but you can get creative with your offer and ask for additional upgrades not included in the original plans. 

Now might be the time to pose the question, as developers will want to retain your interest in their project as other buyers fall to the wayside. This moment is one of many when your agent will come in handy, as their local expertise in selling and buying new construction homes can help you craft the perfect offer. 

They will know and understand the developer's position and what types of concessions you are most likely to win if you ask. So as you meet with agents, ask them what upgrades or lowered costs you can expect to make with a specific developer. 

Then they can approach the developer on your behalf to ask for the custom closet system you always wanted in your primary bedroom or a reduced fee on the luxury appliance package in your new kitchen. 

What upgrades will complete your new home? 

As you get closer to your move-in date, you will want an idea of final upgrades to finish your custom home experience. 

High-impact areas of the home should be your first focus, like the kitchen, living room, and bedrooms. While selling may not be on your mind, you will want these facets of the home to have top-of-the-line features to help raise the value of your new home. This means securing high-end material countertops in the kitchen, wood floors instead of carpet, and upgraded cabinets. 

But the main thing to watch out for is cheap appliances, as tract builders try to find bulk deals from manufacturers to offset their costs. And while it helps their bottom line, it can leave you with subpar appliances and fixtures that will need to be replaced sooner than desired.

For instance, light fixtures are easy upgrades, and the chances are that your developer only has a limited range available to them. 

You can get upgrades for the exterior of your home too, but you may want to wait a little bit for those. Houses take time to settle into the ground once they have been built. 

So while it seems like a good idea to install a patio while the construction crews are on-site, you should wait a few months for the home to sit into the foundation, that way, it will not crack the patio as it settles in. 

Interested in buying a home in Austin? Browse listings and learn how much you can save with Prevu’s Smart Buyer Rebate.