If you have been in the market for a new home, you are probably finding that a large percentage of homes available are listed as “Pre-Sales”. A pre-sale may be a home that hasn’t even had a building permit issued, or it may already be in construction. While home pre-sales are very common in the real estate industry, it is critical that you have an understanding of the process that the builder goes thru, the time line to complete the home, and the considerations that must be taken about your appraisal, closing and possession.
Prior to building any home, the builder must demonstrate to the permitting jurisdiction that the lot will support the home. There must be water, sewage (or an approved septic plan), and no restrictions for ecology or zoning reasons. Most residential builders have completed this process prior to putting the pre-sale on the market. If you are not on a city lot, or are in some other unique situation, the process will take a minimum of 30 days, and can take up to a year.
Assuming that the builder has a buildable lot, the next piece is the building plans themselves. Again, many volume builders have “pre-approved” plans, which can be permitted over the counter. However, if you are building a custom home, or making major modifications to a builders plans, the permits can take days to weeks.
The building process takes 75 to 150 days for most standard homes. I have never seen a stick built home finished in less than 75 days…and that was in the case of very standard cookie cutter homes, and everything fell into place perfectly. Some builders claim to be able to complete a home in 60 days. A home in Thurston or Pierce County requires a minimum of 7 inspections during the construction process, if you assume 3 re-inspections, there goes 10 days, the plumber overbooks 2days, the electrician…….you get the point. If the alternative to the 60 day time line means you will be in a hotel, it is important for you and your Realtor to be realistic…the builder may not be.
The construction of the home is the largest component of this topic, but not all of it. If you are buying a pre-sale, the home must be substantially complete before the appraisal can be done. If you are a VA borrower, the standard is 90%. If for some reason the appraiser feels that the home is not 90%, he or she may require a re-inspect. Obviously, all of this takes time. Once the appraisal is done, the lender can move forward with underwriting your loan and should be ready to close within about a week (a good local lender usually closes quicker, 48-72 hours).
The appraisal was completed when the home was 90% complete, the builder still must finish the home, complete final inspections, and obtain the Certificate of Occupancy (CO) from the building department. Normally this falls into place pretty well with the appraisal/closing time line, on rare occasions it doesn’t.
Most new homes start out as pre-sales, and most close in a timely manner. I don’t mean to scare you about the process, my intent is to educate you so that there are not false or unrealistic expectations. If you are purchasing a pre-sale, and you are looking at a “ready to build” vacant lot, plan on 120 days from contract signing to completion. If the home is already in construction, make the builder or your agent talk you thru the remaining steps and the corresponding time frame. If the builder (or your agent for that matter) can’t do so in some detail, I would proceed with caution.