If you are shopping for new construction properties and find a newly built, never occupied house. When the property is new, whether single-family, multi-family, or a condo, what will the Veterans Administration require? Why will this new construction property possibly be more complex than, say, an average lived-in property?
The home buying process is usually a buyer and a seller. With new construction, it can be the buyer, and sometimes multiple sellers & builders. This may bog down the paperwork process, as the sellers huddle up to make decisions. Now add in the lender, attorneys, and the Veterans Administration.
The Absolute First Thing to Check is Whether the Road is Public or Private
(The VA has loosened its private road rules in 2022) Private roads might require a private road agreement if the new construction shares driveway access from the house to the main street. The VA wants to ensure that the roads will be maintained. If there is shared access, the VA will require the neighbors sharing the private road from the new construction to the main street to sign a Private Road Agreement. This agreement will break down responsibilities and expenses (should there be any).
A Homeowners' Association
Might need to be established to represent the owners on the road. (HOA) Ask your agent to look into it. The builder and seller will know if the road is private or public, as they will have to apply for town permits and conduct a survey before building.
Pest Inspections and Pest Treatment
Most home inspectors in Massachusetts do a complimentary pest inspection. A pest inspection is required for any VA loan product property. With new construction, the VA wants to know what treatment was done to the property. This will include chemical composition and areas treated. Also, the VA will ask if the materials of the property are pest-resistant, such as pressure-treated lumber.
Builder VA ID
If they do not already have one, the builder will need to apply for this VA identification number. This involves sending a packet of documents to the builder to fill out. These documents include a letter on the company letterhead. Sometimes builders operate under multiple LLCs, the VA will & lender will want evidence tying the ownership to the builder. Your Real Estate Agent will handle the shuttling of documents from the lender to the sellers and the VA. New construction builder documents are a collection of documents/surveys that ask the builder various questions about the property. The builder will need to fill out these documents.
(Subject: Instructions for obtaining VA builder acceptance and builder ID number. To become an accepted builder, you must complete the following: 1. Builder Information and Certification (must be completed on Builder's Letterhead) 2. VA Form 26-421 (Equal Opportunity Certification) 3. VA Form 26-8791 (VA Affirmative Marketing Certification)
Other Things to Be Mindful Of
Sometimes builders use the cheapest contractors, and quality can vary. Definitely do a home inspection! However, issues can arise at the close, or after moving in, and it can take time to get the contractors back to the property to fix and issues. The VA mandates that the seller/builder do a warranty on the property for a year. The Sellers’ financial situation can pose issues. The seller can run out of funds. This can delay projects and throw off closing timelines. Sellers/builders have high-interest short-term loans, and the debt service is expensive.
Closing on Time
The previously discussed issues, like doing paperwork, finances, permitting, private roads, etc., all can delay a new construction property. Appliance allowances. My personal arch-nemesis. Often, builders will allow the buyer to pick some appliances. Usually, a set monetary amount is listed in the purchase and sale. The buyer can spend their allowance and pick said appliances. Then they are delivered and installed. An agent has to let the appliance people in and wait around while they install. Sometimes there are different install windows. It can take 1-6 trips to the property to deal with this. At 2-4 hours per trip.
Appraisal
Unlike standard properties, the appraisal happens at the end of the process, once the property is done, or very near done. The appraiser will check to make sure the construction as stated in the purchase is done. Also, septic installs, appliance installs, and any other construction elements need to be done.
Condos vs Single & Multi-Families and New Construction
Condos with new construction have the added element of having to be approved by the VA regional counsel and need to get on the VA condo-approved list. However, condos are generally uniform, and builders have a chance to ‘refine’ their construction methods, and generally run into fewer construction delays than, say, single-family properties. For condos and their VA approval process, please see my other guide on the VA Condo approval process
