Saturday, January 10, 2015

The pros and cons of buying a new home.

Should you buy new construction when you’re shopping for a home? For some people, turning the key on brand new construction is like a dream come true, while other people prefer the stability and maturity of older homes and established neighborhoods. There is no one right answer for everyone so it’s important to understand the advantages and disadvantages of new home ownership, and then make a balanced, educated choice. One thing is for sure – you should always use your own buyer’s agent to represent you in the process and definitely get a home inspection, even when buying new.

New Home cons:

Smaller yards.
One trend is consistent over the decades of home building: the yards keep getting smaller and smaller. Or more accurately, the houses get bigger while the lots tend to shrink as well, resulting in less yard. Some new developments are on postage-size lots where you can practically reach out and touch your neighbor’s house, so if you want a big, spacious backyard you may want to buy in an older neighborhood.

No mature landscaping.
The extent of the landscaping in newer developments is laying of sod lawns and planting a few shrubs, flowers, and young saplings. So it may take 10 years or so before the flora is grown out enough to look natural and mature.

Investors.
New developments get their fair share or investors – or some would called speculators – who get in on early phases of construction hoping to see the price rise quickly. These same investors usually put renters in the homes they buy. Of course people need places to rent, but if you have a community that swings too far toward renters, the values could be impacted and problems may arise. Before you buy in a new development, always check their policy on owner occupied buyers and rentals.

Special assessments.
It’s not uncommon to move into a great new house and then get whacked with a special assessment or bond shortly after, as the infrastructure and public utilities still need to be built out – and paid for.

Suburban sprawl.
New home developments tend to be on the outskirts of city centers and areas with lots of land but little development. So it may take a while for restaurants, stores, parks, and schools to fill in, and when they do they may be generic strip malls.

Their lender.
When you start the buying process, the builder’s sales person will strongly push you to use their lender, maybe even offering extra incentives to do so. Builders prefer you use their financing so they can keep an eye on the transaction and keep the deal under thumb, and of course they like to make an extra bit of profit on the deal. But many times the new home builder’s lender won’t necessarily give you the best deal or the best loan possible, so you might want to still shop around or use your own lender.

Possibility development may go under.
It’s not uncommon for a builder to break down and start selling homes and then go out of business or bankrupt before they get to complete construction, leaving the buyers out in the cold (and without their deposit). Or they may just be very late on finishing your home, which turns your living arrangements into chaos. So when you sign the purchase contract, make sure you get a cancellation clause or a refund of deposit clause in case the builder does not complete by a specified promise date.

No control.
When you buy new construction, there is very little you can do to improve or impact the value of your home. While many people see rice increases just based on getting in on early phases of development, they sometimes see price drops in subsequent years with nothing they can do about it. Your value will be dictated only by what other homes in the neighborhood sell for and since they are all essentially the same, there will be little you can do to control or increase your price. At the same time, it’s easier to track values and buy quality or improve value in older homes and established neighborhoods.


New home pros:

That new house smell.
Let’s face it – there is a great upside to walking into a brand new home that no one has ever lived in before. To some families, that’s a huge selling point.

Customize it exactly how you want it.
With new construction, you can plan your home and all of the upgrades you want exactly to your liking.  From tile to counter tops, fixtures to fans, paint colors to bull-nosed corners, you’ll be able to get it all right from the start. Just be careful because builders tend to grossly overcharge for simple upgrades so you’ll want to negotiate aggressively (another reason to have a buyer’s agent representing you).

Energy efficiency and new appliances.
New homes have energy efficient windows, heat and AC systems, water heaters, gas fireplaces, and new appliances. “Greener” houses means lower utility bills every month and less problems down the road. With new construction, you can probably also get integrated current technology like speakers, home monitoring, and other hi-tech features.

Lower repair costs.
With new heat and AC systems, appliances, and construction, you can expect far less maintenance and repair costs during the first years of home ownership. Anyone who’s bought an older home and the immediately had to fork over big bucks to replace pipes or put on a new roof can attest to this!

Bigger.
Homes have gotten bigger over the years, starting in the 1950’s and 1960’s when a one-story 1,400 square-foot home with 3 beds and 2 baths was considered big, until the high point in the mid 2000’s when new homes were immense. New construction is almost always bigger than older homes, so if you have a big family or want lots of room, new may be for you.

Great rooms and floor plans.
Design trends have evolved over the decades, so newer construction is more likely to match your needs. Great rooms, huge, family-oriented kitchens, big garages, and outdoor living amenities are just some of the features you’ll find in new homes.

The purchase process can still be the same.
Even though you’re buying from a builder, you can still use your own lender, use your own buyer’s agent to solely represent you (highly recommended), and always get a home inspection (essential)!

Builder’s reputation.

With new construction, it’s pretty easy to research the builder’s track record and see how their other projects have done over time. You can drive around their developments that are a few years old, check values, talk to homeowners, and see if there are problems or lawsuits.

2 comments:

  1. Thanks for all of the awesome tips. I've been trying to find a new home for the longest time now. I just want to get out of the place that I'm in now, because I'm honestly not a really big fan of management. I'll definitely have to try out some of your tips, and hopefully I'll be able to find a new home with them.
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  2. Wow, this really is an all inclusive list and helps me greatly in my decision! I do want a sizable yard for my dog and kids to play in, however I also would enjoy the energy saving appliances of a new home. I think that to settle in the middle I will just have to end up paying a bit more for a large home and a large yard, in the end I think I am OK with that.
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