New construction homes represent a significant and valuable segment of the housing market, particularly in regions where housing inventory is scarce. The addition of fresh inventory is often a breath of fresh air for potential homeowners facing limited options.
This might lead you to ponder: Is a new construction home the right choice for me?
The straightforward answer is that it depends entirely on your specific needs and preferences.
In this article, we delve into the advantages and disadvantages of new construction homes to assist you in determining the best course of action for your situation.
The Pros of Buying New Construction
Your Home Can Be Customized
The level of customization available in new construction homes can vary significantly from one builder to another. For those looking to create their dream home from scratch, including a unique exterior design, be prepared for a higher price tag.
Alternatively, many builders offer a more a la carte approach, allowing for interior customization within a predetermined exterior framework. This means you can select from a set of customization options to tailor the interior to your tastes, though the basic layout of the home remains unchanged.
Through my experiences with various new home builders, I've found that customization options for homes already under construction are typically quite limited. For example, a client of mine was interested in purchasing a new construction home and had several minor adjustments in mind for both the interior and exterior.
Unfortunately, the builder was unwilling to accommodate almost all of her requests, indicating that true customization often requires purchasing a yet-undeveloped lot. This route can lead to waiting periods of 12 to 18 months, influenced by the builder's current workload and other variables.
Major builders usually offer a selection of available lots and compatible floor plans. Once you've chosen your lot and floor plan, you can start the customization process, which might include exterior modifications like adding brick accents or customizing the landscaping, as well as selecting from a variety of paint options.
Interior upgrades, on the other hand, can vary widely depending on the builder. For instance, in Madison, Wisconsin, a prominent builder offers enhancements such as superior appliances, integrated speakers, home humidifiers, upscale fixtures, and much more.
The key takeaway here is that if customization is a priority for you, it's essential to plan ahead and be prepared for the associated costs and waiting times.
You Get Modern Amenities and Technology
The appeal of the latest and greatest technology in your home will depend greatly on your personal preferences. New construction homes often come equipped with a host of modern amenities and technological advancements, some of which may seem more luxurious than necessary.
The concept of smart homes has become a standard, with features that offer convenience and efficiency at your fingertips.
Imagine receiving alerts every time a door in your home is opened, or being able to control your water heater, lights, and garage door all from a smartphone app. These capabilities not only enhance the way you interact with your home but also contribute to its overall security and functionality.
Beyond the technology that facilitates day-to-day living, new construction homes are designed with energy efficiency in mind. They incorporate the latest in energy-saving technologies and materials, from high-efficiency HVAC systems to improved insulation techniques.
However, it's worth noting that while these homes are indeed more energy-efficient compared to older, existing homes, the degree of efficiency may not always justify the premium cost, which can be 7-10% higher than that of existing homes.
So, what truly makes buying a new construction home worth considering? Let's delve deeper into the aspects that justify this choice.
Warranties Offer Peace of Mind
One of the standout benefits of new construction homes is the inclusion of comprehensive warranties, typically extending for one year post-purchase. These warranties serve as a safety net, covering unexpected issues that may arise.
A real-life example comes from a client of mine in Madison, Wisconsin, who experienced a plumbing leak that caused water to flood out of an electrical outlet during a guest's shower.
Thanks to her home's warranty, a plumber addressed and resolved the issue promptly, showcasing the valuable peace of mind such warranties provide. This level of coverage, especially for potentially hidden issues, is a luxury not afforded by older homes.
Furthermore, these warranties often extend to cosmetic defects, ensuring that your new home remains in pristine condition.
You Will Have Less Major Repairs
For both investors and homebuyers alike, anticipating major repairs and budgeting for them is crucial. New construction homes significantly reduce the anxiety surrounding the potential need for significant repairs in the near future. Equipped with brand-new appliances, HVAC systems, and roofing, these homes promise several years—often 7 to 10—of stress-free living without the worry of major repairs.
However, it's essential to remember that new construction homes in areas like Madison, Wisconsin, can come with a price premium of 7-10% over comparable existing homes. Despite this, the peace of mind offered by reduced repair concerns and the security of warranties can be invaluable, making it a factor worth considering in your decision-making process.
Increase In Property Value Before You Move In
Investing in a new construction home can also present the opportunity for an increase in property value even before you move in, depending on the dynamics of the real estate market and the timing of your purchase.
While it's important to note that this benefit is not guaranteed, as market conditions can fluctuate, it can indeed be a significant advantage when it occurs. This potential for appreciation in value during the construction phase is a delightful bonus for new homeowners, offering not just a brand-new living space but also the possibility of an immediate return on investment.
However, since market trends can vary widely, it's wise to consider this as a potential perk rather than a primary reason for choosing new construction.
The Cons of New Construction
You Will Pay A Higher Price
The most notable drawback of purchasing a new construction home is undoubtedly the price. The premium associated with new homes, often ranging from 7-10% more than comparable existing homes, can be a significant factor for many buyers. For those enchanted by the prospect of being the first to live in a brand-new home, this premium may seem justifiable.
The argument that one could instead allocate this extra cost towards renovations or upgrades in an existing home holds merit, particularly for those with readily available funds for such projects. However, for buyers who are channeling the majority of their resources into a down payment and have limited cash on hand for immediate repairs or upgrades, the higher initial outlay for new construction becomes more palatable.
In these instances, the appeal of new construction, with its warranty protections and reduced need for early repairs, may outweigh the cost concerns, making it an option worth considering despite the higher price point.
You Will Usually Have to Wait Longer
Life's unpredictability often influences our ability to plan ahead, and this is particularly true when it comes to purchasing a new construction home. Opting for a customized home necessitates a considerable amount of planning and patience, as the process involves not just designing the home to your specifications but also coordinating the sale of your current residence if necessary.
While a new construction home that has already been completed offers the advantage of moving in as soon as the closing process is finalized, this option lacks the personalization benefits that come with a custom build.
Moreover, construction delays are a common occurrence, especially with builders who offer the option to design your home from the ground up. These delays can extend the waiting period further, complicating timing for buyers who have strict timelines.
On the other hand, builders, typically larger firms, that provide semi-customizable homes generally adhere to their projected timelines more closely, with deviations of only a month or two being common.
Therefore, when embarking on the journey of buying a new construction home, especially one tailored to your preferences, it's crucial to factor in these potential delays. Planning your move and the sale of your existing property should take into account the extended timelines associated with custom construction projects, ensuring a smoother transition to your new home.
It's Harder to Negotiate
For those adept at negotiation and keen on striking a deal, navigating negotiations with large home builders may prove challenging, and often, efforts to significantly lower prices are unsuccessful.
This limitation stems from the builders' pricing strategies; a price reduction on one home could necessitate adjusting the prices of all similar homes in their inventory, which is not a viable option for most builders.
However, there may be some room for negotiation in the form of credits, which can be used towards closing costs or upgrades. Generally, with many builders, the price and the home's features are set in stone, reflecting a "what you see is what you get" policy. In particularly hot markets, builders are confident in their ability to find buyers who are willing to accept these terms without negotiation, and this confidence is often well-placed.
Furthermore, if you're hoping to make custom changes to a home already under construction, you're likely to find resistance. Establishing a contract with the builder before ground is broken is crucial for any customization.
Builders often purchase materials and accents in bulk to obtain discounts, limiting the possibility of incorporating third-party or custom elements not initially selected by the builder.
An aspect worth considering is the builders' practice of finishing the primary living areas, such as the first and second floors, while leaving basements unfinished. This can be seen either as a drawback or an opportunity, depending on your perspective. An unfinished basement offers a blank canvas to create your ideal space but be prepared for additional costs.
For instance, adding an egress window to facilitate a guest bedroom in the basement is an upgrade that will incur extra expense. Therefore, while the prospect of customizing an unfinished space is appealing, it's important to factor in these potential costs when planning your new home.
The Area Surrounding Your Home Will Change
A crucial consideration when purchasing a new construction home extends beyond the property itself to the evolving nature of the surrounding community. The picturesque view you fall in love with today may not remain unchanged in the future.
The reality is that areas around new developments are often subject to further construction and changes that can significantly alter your initial outlook.
Consider, for example, a scenario from my early days in real estate. A team leader shared the story of a client who invested in a multi-million dollar condo in downtown Madison, Wisconsin, primarily for its breathtaking view of the Wisconsin Capitol—a view considered worth the hefty price tag.
However, the buyer was unaware that plans were already in place for a new apartment complex to be constructed directly in front of their building. Within just two years, the prized capitol view was obstructed, resulting in a substantial decrease in the condo's value.
This story serves as a poignant reminder for prospective buyers of new construction homes: if your heart is set on a particular view, it's essential to acknowledge the possibility that it might change.
While it's natural to be drawn to scenic vistas or open landscapes, understanding that the development of the surrounding community could alter these views is vital. Ensuring you are prepared for such changes and can accept them is an important part of making an informed decision when investing in a new construction home.
Summary
New construction homes offer the allure of customization, cutting-edge amenities, and the peace of mind with warranties, alongside the potential for property value increases. However, these benefits come with a premium price, longer wait times, and less room for negotiation. Deciding on a new construction home depends on weighing these pros and cons against your personal needs, financial situation, and timeline, ensuring you make a choice that best suits your lifestyle and future plans.
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