In’s & Out’s of buying a new construction home
By Thomas Nielsen
Buying a new construction home offers some real benefits but also a few downsides – how they weigh in on the scale depends on your priorities.
UPSIDES
Great deals
There are three types of deals available in new construction. Be the first, the last or pick up a spec home (a home a buyer walked away from after specifying all the upgrades). When a developer first starts out he has nothing more to show than a few models and lots of “dirt” – no community pools, no basketball court or hiking trials - just promises. So initially prices are kept low to entice people to "sign up" by putting down earnest money. Once these homes are build and title can be delivered to the buyer (many month later) money starts rushing in and the developer begins construction of the promised community amenities. At this point prices almost always goes up as dirt has turned into playgrounds, nice front yards and greeting neighbors.
Among all the buyers signing up and customizing their home, there will always be some that are not able to follow through as planned. This leaves the builder with a move-in ready home customized to the likes of a buyer who bailed out. These “spec” homes are sold at reduced prices, 10-15% discount is not uncommon.
Finally when the subdivision is almost sold out, the builder often discounts the remaining lots in order to move them fast. That way sales staff can move on to the next site and model homes can be released for sale.
Warranties
Unlike a resale home, a new construction home always comes with some warranties, for instance: 10 year structural, 5 year termite, 2 year plumbing, electrical & HVAC + more. The fact that everything is brand new means much reduced maintenance for years to come.
Customization
From the get go, you get exactly what you want. With a resale house you may love the house…but with it comes a backyard that will have you trim roses and cut grass every 2 weeks, or the seller’s flagstone projects has much to be desired…
Incentives
Lending money to homebuyers is good business. Large builders usually have an “In-house lender”, so it is a natural progression for the builder to offer incentives when the buyer uses their company for lending as well as for building. Incentives can be several thousands of dollars. As your Realtor I will carefully review the builders loan package to make sure it makes sense given the incentives. Sometimes a builder’s in-house lender commands higher closing cost & rates.
DOWNSIDES
Waiting for the infrastructure
Master planned communities usually have a lot of promises to deliver – and they will. But exactly when you can expect the community park or that nice playground will largely depend on how fast the community sells out. If your community is out on the fringes of town the question may be when schools, retail stores and possible road improvements will accommodate the growing community. For the first couple of years, new subdivisions tend to have a somewhat uniform & naked look – mature vegetation and all your neighbors’ garden enthusiasm will take time to manifest!
Neighbors
Unlike resale homes where you usually know what you get, new construction, particular if its out in the fringes, could have surprises: The awesome views or the privacy may soon disappear to the ambitions of another developer. As your Realtor I will help you bring forth any available information on what kinds of developments are planned in the vicinity. The public report, which must be made available to you before committing, may address some of these issues.
REPRESENTATION
The sales staffs on the new construction site are licensed real Estate professionals who are perfectly capable of serving you - however, they represent the builder as much as a new car sales man represents the car dealer. There are significant advantages to working with a Realtor. First off, the builder pays the Realtors commission just the same as a sellers will offer a commission to any Realtor who brings buyers to the table. Your Realtor works as your advocate: I will help you ask the right questions and address important issues. I will help you negotiate and evaluate upgrades and incentives offered, and makes sure you have read and understand the implications of the public report. I will assist you digest the technical Real Estate lingo as presented in lenghtly contracts, disclosures, deed restrictions and HOA Rules & regs.
CONSTRUCTION
When buying a new construction home – you may be given choices to upgrade insulation, windows, patio cover, A/C unit – the list goes on. You will also be presented to a host of specifications such as furnace efficiency, insulation, wood frame thickness and other measures of build quality. I recommed that you familiarize yourself with basic components of construction, so that you have a basic idea of what the homebuilder has to offer: Is R-30 insulation sufficient in the attic? or will a SEER 13 A/C unit be sufficient and cost effective. (See below for additional resources) Too verify that the construction is up to par and as promissed, I recommend my clients to hire an independent homeinspector prior to taking possesion of the new home. Note that some "new home" sale contracts do not allow third party inspections.
CUSTOMIZING
One of the great benefits to buying a new construction home is the fact that you can choose exactly what you want from wall color to counter tops. Keep 3 things in mind:
1) Not all upgrades pays off in terms of resell value: Don’t spend extra money on insulation or other hidden build quality if you plan to stay less than 10 years. Upgrading to stainless steel kitchen appliances may be in fashion now, but completely outdated in 5 years – white always goes.
2) Some upgrades are cheaper to do using your own contractor: These typically include elevation packages (front landscaping), patio cover, and sometimes tile/carpet options. Each case must be judges individually, but it is not uncommon for the builder to charge up to 30% extra to do these upgrades, in fact, upgrades is where a decent amount of the builders profit is made.
3) How will the home be (ab)used: Pets, teenagers, rental, 2.nd home?: If high volumes of traffic is expected through the home, then consider tiles in all common areas – a must in hallways. When picking carpet – spend the money on an upgraded pad rather than the carpet. A high quality pad will not absorb stains (that keep resurfacing) and it will make you carpet look and feel better than it is.
ADDITIONAL RESOURCES
-
DIY network - Excellent site for gaining basic understanding of construction.
-
Insulation - Many builders offers to upgrade the insulation - learn the facts here.
-
-
-
-
-
|
