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New Construction Presents Home Buyers With Distinct Rewards, Challenges
Every year, approximately 15 percent of those buying homes decide to purchase new construction, according to statistics compiled by the National Association of Realtors and the National Association of Home Builders.
RE/MAX agents across Northern Illinois agree that new construction presents buyers with a distinct set of challenges, as well as its own special rewards. Among the key issues to consider when thinking about new construction:
The Unknown -- Frequently, builders will have completed new homes available for sale, but most often buying new construction means signing a purchase contract before the product actually exists. "An experienced Realtor can help buyers work through their natural hesitation in such a situation by showing them homes with dimensions and features similar to the new home being considered," says Jim Merrion, regional director of RE/MAX Northern Illinois.
Cost -- The price of a newly built home rarely provides everything that a buyer feels is essential, including many things that might come with an existing home. Buyers need to put aside money for the deck, the landscaping, the window treatments and appliances. After moving in, they can be surprised at the cost of these additional items."
Buyers can become confused when two apparently similar new homes differ substantially in price. The reason is that one builder may include items the other builder doesn't. It's like buying a new car. You have to find out what is included in the quoted price. The price of one house provides air conditioning, a refrigerator, a fireplace and a full basement, while the other house may have only some or none of those things.
Quality -- Making sure a new home is well built should be a top priority. Existing homes offer the advantage of time-tested performance. If there are problems, the seller probably knows about them and is obligated by law to tell a prospective buyer. With new construction, problems tend to emerge after closing, so much depends on the builder's commitment to a quality product.
The only way to protect the buyer (of new construction) is to know the architect and developer and find out about their past products, "The buyers and I will drive by these properties too." While it makes sense to deal with a builder who has a good reputation, don't rely too much on references a builder gives you. "A builder is not going to provide the names of dissatisfied customers, but there are other ways to check a builder's performance. A real estate agent who does a lot of work with new construction can be a great resource, and you can learn a lot by looking at the builder's previous projects to see how they are holding up. Check the builder's reputation with the village building department and the Better Business Bureau.
One real plus in buying new construction is that most homes come with a warranty of one year or more. However, buyers should make sure they understand the warranty, how and when problems will be handled and who will responsible for fixing what.
Options -- One of the most exciting aspects of buying new construction is the buyer's ability to choose the finishes, colors and various optional features that go into the home. Still, with so many choices to make, the process can be stressful.
Completion -- An often-ignored risk involved in buying new construction is that the builder won't be ready to deliver the home on schedule. When a family orders a new construction home, they will set up the sale of their existing home to coincide with the completion of the new home. The trouble is, builders don't always hit that projected completion date precisely. Many things can go wrong, especially the weather. Now, the buyer has to be out of the old house, which has been sold, but there is no place to go. Often, the buyer ends up in temporary housing, which can be very expensive, not to mention the added expense of moving the family's belongings to some interim space. It is a good idea to have a contingency plan in place when buying new construction -- for example, an arrangement to stay with friends or family for a few weeks if the new house is not completed on schedule.
Custom vs. Production -- A key distinction in new construction homes is between "custom" homes and "production" homes. Custom homes are built on a one-at-a-time basis by builders who may produce only a few homes each year. Production homes are built in larger numbers by builders who may be developing an entire community or several communities at the same time. Both offer advantages. The buyer often gets a better, more individualized product with a custom home -- and a higher product price. Custom builders usually use a better grade of materials and pay more attention to detail, Production builders deliver solid houses and normally give you more for your money in terms of square footage, but they offer a more limited choice. With a production home, buyers won't be able to alter the floor plan except in a few carefully defined ways.
Resale -- Especially for buyers who know they may have to move again in a few years, the resale implications of the purchase should be a major consideration. For example, buying a home in a subdivision where the homes are all similar is better from an investment point of view. When the buyer gets ready to sell, there are other similar homes nearby to help establish a price. When you build a custom home, you run the risk of being at the high end of the neighborhood real estate market, which makes it more difficult to get your price.
A Realtor can really help from that perspective by guiding a buyer to choices that are consistent with easy resale. For example, if you love color, put it in your drapes and furniture, not in things like paint, wallpaper, carpeting or bathroom fixtures, that are difficult to change.
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