If you are looking to purchase a home, you have two options: a pre-owned home (one that someone has lived in previously), or new construction. There is a definite cachet to being the first person to own a home, especially when you get involved in the building process. You have the opportunity to customize the home to your specifications in a way that you just can’t do in a pre-existing home… at least, not without hiring a contractor and shelling out thousands of dollars on renovations. The choice to buy new vs. old is a personal one, but here are some things you should know before signing on the dotted line for a new-construction home.
The price might not be flexible.
Normally, when you buy a home, there’s the bargaining game between buyer and seller that allows buyers to offer a lower price than what’s listed for the home. That isn’t really the case with new homes. Builders know that, if they cut the price for Family A, Family B will expect the lower price as well. When you are selling lots of homes, as opposed to just one, you have to take that into consideration. What you CAN negotiate with a new home sometimes are upgrades: maybe hardwood floors instead of carpet, or higher-end appliances in the kitchen. These upgrades may end up being worth more than a reduction in price, so be open-minded.
You might be buying before the house is built.
Often, homes in new developments aren’t built until they are sold. That’s just the nature of the game. Buyers have to take a bit of a risk, because they will be required to pay a down payment before actually seeing the finished product of the house. This can also have benefits, however. Builders sometimes offer discounts or upgrades to the first buyers in a development, because it looks good on them to have homes sold as the development gets underway. Of course, if the economy takes a nosedive and the project stalls (as happened often during the Great Recession), you might find yourself stuck. Educate yourself on the potential risks and rewards of being the first to jump on a new development.
The model home =/= a standard home.
When you tour the model home of a new development, it’s easy to get starstruck by the beauty of the home you are shown. The model home will almost always boast top-of-the-line finishes and every potential added upgrade, such as a larger foyer, granite countertops in the kitchen and bathroom, and a high-performance air conditioner. Each one of these upgrades comes with a pricetag, and, often, it’s a hefty one. If there’s an upgrade that you truly desire, look into the possibility of having it installed yourself by hiring a contractor after the fact. Sure, you’ll have to pay cash upfront (instead of having it financed into your mortgage), but the savings can be significant.
Expect to be part of a HOA.
Homeowners’ associations (HOAs) are part and parcel of living in a new development. The association will have a long list of rules and bylaws, and can control everything from the color of your house to the length of your grass when you cut it. On the other hand, well-run HOAs ensure that a neighborhood stays looking smart in the long run. Make sure you know upfront what your HOA dues will be and review the bylaws before you buy, to make sure you are willing to abide by them. Some HOAs prohibit (and this is just a short list): sheds, solar panels, satellite dishes, and lawn ornaments. If you are among the first to reside in a new development, the builder may pay your HOA fees until a certain percentage of the homes in the community are sold.
These are just a few considerations to think of before buying a new home. Always consult with a qualified real estate agent for help making the best deal on a home purchase, whether new or pre-owned!
