What is Turnkey Construction Project? New home buyers have a lot of decisions to make when it comes to deciding on what type of home they want to purchase, one decision is whether or not to buy an existing home or go with a newly built home, also known as turnkey construction.
Buying an existing home is great since you don’t have to wait around for several months until your home is built. Generally, you can move right in after closing.
On the other hand, building a home gives you more flexibility with respect to design and cost. This allows you to create a home that is truly unique to you and your needs. You also know that all the features of the home are essentially brand new.
However, many borrowers don’t realize that they can have their cake and eat it too. Turn-key construction is a perfect melding of benefits from buying an existing home and a new construction.
While many reputable builders offering in-house or partnered financing solutions to new buyers, that doesn’t always mean you are getting the best financing available. In most cases, shopping around for financing will be in your best interest.
New Century Mortgage specializes in financing turn-key construction builds. We help borrowers just like you purchase their next dream home.
Explore how turn-key construction works and why you might want to choose it for your next purchase.
What is a Turnkey Construction Project?
Turn key construction is a type of construction contract that obligates a home building firm to complete a project according to a pre-arranged set of criteria and fixed price.
The property described within the contract is being sold as completed. This means that any overage for materials or labor, unless agreed upon by the buyers, is at the obligation of the builder to cover.
The build also is subject to a deadline, meaning construction must be completed by the specific time frame indicated in the construction agreement.
As property values continue to climb on existing homes, turn-key constructions become more lucrative assuming construction costs remain reasonable.
Benefits to Buying a Turn Key Constructed Home
Similar to if you were purchasing an existing home, you would follow the same mortgage application process for a turn-key construction. However, in most cases, you will not be able to close until the new home construction has been fully completed (some exceptions may apply).
Lenders will require a completion certificate from the appraiser. The appraiser signs off all the work that has been completed to the specifications outlined in the construction agreement.
Additionally, lenders will typically require a copy of the occupancy certificate or permit . This attests that an inspector has reviewed the property and found it to be safe, habitable, and ready for use.
Make sure you consider your upfront costs of buying versus building. In general, turn key construction is safer than other types of new construction. The entire project is being contracted up front from the get go, meaning little not no fluctuations in the overall budget.
Also consider potential ongoing maintenance costs that come with owning a home. Newer homes should require less maintenance than a home that has already been built.
1 Cost of Constructing a Home. (n.d.). Retrieved August 5, 2020, from https://www.nahbclassic.org/generic.aspx?genericContentID=248306
2 Cost of Constructing a Home. (n.d.). Retrieved August 5, 2020, from https://www.nahbclassic.org/generic.aspx?sectionID=734&genericContentID=271883&channelID=311