Home Buying in Downtown>Question Details

Trulia Sacra…, Home Buyer in Sacramento, CA

What are the risks of committing to buying new construction?

Asked by Trulia Sacramento, Sacramento, CA Wed Nov 28, 2012

Is buying a resell more or less risky?

Help the community by answering this question:


Sue Archer noted several "risks" -

First I'll spotlight on the word "committing". Some of the money a buyer puts up for a new home may be "non-refundable" For example, if you are ordering special non-standard upgrades. The builder may require a non-refundable deposit from the buyer that is choosing tangerine carpeting, or a wall of electrical outlets.

If you change your mind about buying at the last minute, by nature the non-refundable portion of the deposit may be reasonably retained by the builder.

New homes usually cost more per square foot than comparable used homes, especially
when you consider the additional after sale costs such as draperies, curtains, blinds, and other window coverings, and backyard hardscaping and landscaping. I don't call that a risk, though. It is a known factor.

A great empty field still sits across from the home I bought new in 2002. I was shown plans for a swim and tennis club that was proposed to go there. It was never built. Though I loved having the privacy of no neighbors to the south and west, and the wide open view - prospective buyers fear a vacant lot for the worst case scenario. -- Ever watch the show "Arrested Development"?

Construction Dust: Unless you are among the last in your community to move in, there will be construction activity and dust, nails or screws in the street for your tires to drive over.

Realtors think this question means "financially risky?"

Another interpretation is health and safety. Other than the forementioned construction dust, newer homes are often safer - according to my insurance advisers - They have smoke detectors in each bedroom and on each floor, Carbon Monoxide detectors, fire suppression sprinklers, strapped and vented water heaters, also much less likely to have mold issues. Very unlikely to have asbestos or lead paint. Against that, though, some of the brand new materials might, for a few months, be off-gassing unpleasant chemicals such as formaldehyde and volatile organic compounds.

Pick your poison.

I have bought used and new, sold new and used. There are good reasons for an individual or a family to buy either. I advise my buyer clients to consider the homes that fit their budget and search criteria, sometimes that includes new homes.
3 votes Thank Flag Link Wed Nov 28, 2012
Jim Walker, Real Estate Pro in Carmichael, CA
the idea of buying a new home, where you're the first person to live there is sometimes an exciting idea. Especially if you're good at establishing the decor, picking colors etc. But it also can lure you into a false sense of secuity that 'everythign will be perfect' of which nothing ever is.

some things to consider are:
You will most likely need to design and install your back yard landscaping. Design and installation can be a cost not budgeted for as you are picking out your colors and imagining that your home will look like the model...it most definitely won't. it will be more basic unless you've paid for all fo the upgrade options.

You won't know who your neighbors are, or how they will be doing their landscaping either. Unlike an established neighborhood, where you can already observe whether there are parked cars, nicely landscaped neighbors ...this will al be an unknown.

You will want to be represented by a buyer's agent. When you go to a new home develpment, they often ask you to sign in. That restricts an agent from representing you. Therefore, when you are railroaded through the process, you have little to no say. The listing agent is little more than an order taker and follows a standard process and timing that they want you to adhere to. Who is checking for your protection? such as is there transfer tax after the first purchase? special fees or assessments?

In most cases, the financing option is a great deal that can't be beat by an outside lender. They will offer incentives to use their lender but again, this lender gets alot of business from the developer. You want to make sure you have someone on your side. it doesn't cost you a cent but will make you a more informed buyer.
3 votes Thank Flag Link Wed Nov 28, 2012
Buying in a new home community is exciting because there are still unknowns. The build-out of the shared facilities may not be exactly what you expect. The construction of units after your own will mean that you are living on a construction site for some time. The positives are that you have the builder on-site if you need any additional touch ups and warranty items. You just don't get that in a resale.
1 vote Thank Flag Link Wed Nov 28, 2012
Sue Archer's response is excellent. I worked for new home builders for 9 years before starting in general real estate in 2008. I can tell you that building a new home comes with it's own set of issues. You may not be buying the previous owners problems, but you are buying the builder's problems and possible mistakes.

I totally agree with Sue's advice about having a buyer's agent to represent you through the process. An experienced agent who has worked in new home building will be looking out for your interests, not the builders. Here in Florida when you visit a new home community and talk with the on site sales representative that rep is most likely working for the builder directly. They are employees of the home builiding company. Or they may be general real estate agents that the builder has hired to help them sell their homes. Either way they work for the seller, not the buyer.
1 vote Thank Flag Link Wed Nov 28, 2012
When I'm purchasing investment property, I look at all risks and weigh all options. When purchasing my primary residence, and planning on stayting for 7 plus years, I buy the house that makes me the happiest! Life can be short so go where you are most happiest. My Financial Advisor agrees :)
0 votes Thank Flag Link Thu Nov 29, 2012
There are no additional risks. In fact, most new homes come with at least a 1 year warranty from the builder that covers everything... and you get to live in a Brand new home.
0 votes Thank Flag Link Wed Nov 28, 2012
There are no additional risks to buy new construction. You could inspect it just like any resell. Of course, most new construction buyers don't do an inspection and instead depend on the builder's reputation and warranty.
Web Reference: http://www.archershomes.com
0 votes Thank Flag Link Wed Nov 28, 2012
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