It is understandable that many people prefer to purchase a brand new, never-lived-in property over existing homes and condos: no dishes done in the sink, no toilets used, appliances with plastic wrapping still stuck on the doors. These could be anything from custom made spec homes designed and built for the buyer, to new Planned Urban Development (PUD) homes and condo complexes built in the hundreds to create a new neighborhood.
It can be a similar feeling to purchasing a brand new car straight off the lot. Gently snuggle into the driver’s seat, inhale that fresh new car smell deep down into your lungs and enjoy the satisfaction of your new ‘baby’.
Almost half of the buyers entering the market prefer a property that is brand spanking new. But before you join this band, consider what is wrong with existing homes. Most are in good working condition and, more often than not, located in a preferable area to their newer counterparts.
Maybe the exterior is an older style; or there is a poor interior ‘flow’ in the home, with small, segmented rooms rather than the large, open plan living currently adored by the majority. Then there is the consideration of the problems you are purchasing, which will need to be fixed: many parts of the home may have already run their lifespan and can cause expensive issues.
Most considerations need looking at based on your purpose for buying: do you want an opportunity to remodel and add value to the home to potentially make a profit? Or are you going to be living there in the future? This will help decide the extent to which you can tolerate problems with interior walls, plumbing, and electrical, for instance.
Following is a quick breakdown of the pros and cons of purchasing a new home:
- Purchasing in pre-construction phase allows you to customize certain areas of the home during construction and is a cost-effective way to select finishes up front.
- If purchasing in a large development, financial benefits may apply, such as only paying a small initial deposit and the balance once complete.
- Construction materials today are more energy-efficient and can lower the living and running costs such as water, electricity, and gas.
- Maintenance-free living: furnaces and air conditioners have manufacturer warranties, and you should have a workmanship warranty from the builder from anywhere between one and five years after close.
- Ready to move in: no painting or picking up a hammer, other than installing your family furnishings and hanging pictures.
- All the bells, whistles and lifestyle options are available: smart lighting, heating, and AC systems, remotely operated security features, and a ton more.
- If you are having trouble financing through banks, the developer may carry the note at a little higher rate; this may be appealing if you have had previous credit issues.
- Purchasing in the first phase of a project can be very lucrative; when the developer releases additional phases, they are usually priced higher, giving you some unrealized gains until sale.
CONS (NON-CUSTOM HOMES)
- New homes usually cost more than similar existing homes: purchasing an older home and remodeling may enable you to capitalize on the upgrades.
- When purchasing off a model home, the developer will show standard features, but may ‘nickel and dime’ you to death for upgrades; I have seen hundreds of dollars charged for a change order to move an outlet a few inches in the plans, prior to construction.
- New homes, especially those in a PUD, have relatively repetitive architecture, inferior and immature landscaping, and less charming characteristics than many older homes; there is less of a ‘welcome home’ feel to many of these newly developed properties.
- New homes tend to be further from amenities and favorable school districts.
- You may be living in a temporary construction zone, with the noise from heavy machinery and power tools, as well as dangers for small children; the estimated date of the complete neighborhood build-out should be a concern.
- New homes tend to have much smaller footprints than older neighborhood properties, as the developers try to squeeze more homes into the area for a larger profit margin.
- Many people purchase a property in a new development to sell at a higher price once the development is finished; the problem is, many others think this way, and the market can become flooded with similar homes on the market at the same time.
- Buying a new property in a new development means you will be using the developer’s own purchase contract; this is essentially written to protect their interests, not yours, and they are rarely as fair as the standard Real Estate Purchase Sale Agreement written up by an agent; the developer may include arbitrary clauses about weather and supply delays, covering ‘the sky is falling, it’s not our fault, and you have to wait’.
- When the economy fails, developments go bankrupt and remain unfinished; this leaves a half-built property, if you are lucky; there is a chance you will never see the home finished or your 30-50 percent deposit again, so be as sure as you can about where the economy is in its cycle; lawsuits are commonplace, expensive and, if the developer does happen to pay retribution, the banks and taxman will usually be first and you will be last in line.
Weigh up the pros and cons of buying a new development property, versus those of buying an existing property in a well-established neighborhood. It may result in a big difference to your level of happiness.
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