I am looking at a new construction house with no lot premium How will that impact resale value? Is their anything that I should be checking?

Asked by kishore.letter, Charlotte, NC Wed Sep 26, 2012

The reason for no lot premium: The lot is closer to the road and this is a corner lot.

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Suz A’s answer
Suz A, Agent, Longmont, CO
Wed Sep 26, 2012
The community sales manager can offer some explanation. What you can expect to hear is that the premium is associated with a value - perceived and actual. For instance, a lot premium can be associated with the lots on a golf course or next to open space. They are the better lots.

In many descriptions in real estate listings, you'll notice the agent prominently mentions things like "lake front," "on the fairway," "backs to open space." The more desirable the property, the better chance it will sell at a premium. The time worn adage holds: people pay more for the right location.

The salesperson always has a map of the subdivision. Consult the map and look for what is available. You may want to spend some time considering what lots are available.

You certainly can bring along an agent when you look at new builds. If you are working with a buyer's agent, make sure you mention this early on to the builder's salesperson.

Best regards,
1 vote
good answer Boulder Suz. I gave you another 'thumbs up'. Hasta la vista...
Flag Wed Sep 26, 2012
Wisdom Real…, Agent, Denver, CO
Thu Sep 27, 2012
This is very dependent on the lot, location, and lot premiums of the other lots. When you go to sell, you will more than likely be competing with the same floor plan or very similar. So at the same price, the buyer will probably pick the more desirable lot. When you sell, you will need to price it at a discount over the more desirable lots to attract a buyer.
0 votes
Chuck Strau…, Agent, Denver, CO
Thu Sep 27, 2012
The answers below address a lot (no pun intended) of the issues associated with lot premiums. A great deal depends on the builder and development. In some areas, the variance in lot premiums is small, as there isn't a great deal of perceived (or otherwise) difference in the lots. They may vary slightly based on the size of the lot, but view, setting and other variables don't amount to that much and, therefore, the builder does not charge a great deal for the more "premium" lots.
In other areas, and with different builders, the lot premium may vary a bunch. If there are truly premium lots (back to open space or a golf course or other desirable area; mountain view, etc.) then the builder may charge thousands of dollars more for these lots. If, as stated in answers below, you are comfortable with a lot that isn't "premium" and your Realtor agrees that the lot isn't horrible, then you will probably be OK with purchasing a lot with no premium. However, keep in mind that, when you do go to resell this home, the homes on lots with truly amazing lots, will probably sell faster and at higher price. But then again, you are paying less for the home now.
Sorry for the ramble, but hope this helps.
Chuck Strauss
Your Castle Real Estate
0 votes
Robert McGui…, Agent, Denver, CO
Wed Sep 26, 2012

The answers below are good to consider. The fact that it has no lot premium is an indicator that it is one of the least desirable lots. Traffic, noise, power lines and other things will not only affect your resale value down the road; but will affect you quality of life while you are living there. I would consider all of these things and the advice below, discuss it with your Buyer's Agent of course anyone who will be living with you at the home. Then make a practical decision as to whether this is the right home for you.

Anytime a builder offers a discount or no lot premium, there is a reason for it. I have sold many new build homes and sometimes advised my buyers not to purchase for the reasons mentioned. Another reason to have a good Buyer Agent looking out for your best interests. The Builder Reps are hired because of their cordial approach. But make no mistake about it, they are looking out strictly for the builders best interest and their best bottom line net profit.

Robert McGuire ASR
Your Castle Real Estate
Direct - 303-669-1246
0 votes
James Ponzi, Agent, Denver, CO
Wed Sep 26, 2012
Backing to a road can certainly affect resale value. I suggest you try and "comp" out the property against other similar homes and lots if possible; even if they're a couple of years old. This will give you the best indication of what to expect in the future. I recommend you have representation from a competent REALTOR, because there are a lot of builder tricks and gimmicks and if you don't know how to negotiate, it could end up badly later on. It won't cost you any more to buy the house with a Realtor representative, so I would highly suggest you do that. Also, get a home inspection. Many buyers don't think about doing this on a new home, but trust me, it's worth it. A home inspector with local building code knowledge is even better. I hope this helps...good luck!
0 votes
Rodolfo Canon, Agent, Denver, CO
Wed Sep 26, 2012
It is a great idea to buy the cheapest house in the neighborhood. Just make sure that it is priced as an inferior lot should be priced. Builders love to find ways to charge you more money. The truth is that they already have "upgrades" built into their cost and anything they are charging you goes straight to their profit. "Lot Premium" means absolutely nothing. They are finding ways to manufacture value within the neighborhood. That lot didn't cost them a dime more than any other lot in the neighborhood because they probably purchased it as one giant chunk of land. They make their money by subdividing the neighborhood. Please call me if you need any more information. I have a development team in Denver, so I'm very familiar with builders.

Rodolfo Canon
0 votes
Jim Hendry, Agent, CO, CO
Wed Sep 26, 2012
I would buy a home in an area you like. Lots vary in every area but beware of power lines steep yards anything that would affect resale. Buy in area you are comfortable with. If the lot premium is too expensive than maybe that area is too expensive.
0 votes
Jean Stevens, , Denver, CO
Wed Sep 26, 2012
It depends upon the lot and the community. If the other lot premiums are $1K - $3K, there's not a hefty price differential. Does the lot back or side to a street or high tension power lines? Does it have a "ski hill" in the backyard that slopes toward the home? Is there virtually no back yard? Those are some of the items that would negatively impact the sale or resale of the home. It's a good idea to work with an experienced Realtor when you are buying new construction. That way, if there are any problems along the way, it's not just you vs. the builder... Plus, it generally costs you nothing. Let me know if I may assist you in any way. Check out our website below. Jean Stevens
0 votes
Jesse Dixon, Agent, Lakewood, CO
Wed Sep 26, 2012
Obviously the lot premium is waived because the lot is less desirable than the other lots. This will certainly impact the resale value, but to what degree is anyone's guess, as there are too many variables, scenarios and considerations. One probable advantage is that the zero lot premium homes will set the bar for the low end of the price range for resales at that site. If the builder offers few options, and most of the builds are very similar, then homes priced at a discount, due to the lot, attract more attention and could be easier to sell.

Feel free to contact me if I can be of more assitance.

Jesse Dixon
0 votes
Marianne Ban…, Agent, Englewood, CO
Wed Sep 26, 2012
My experience has been that on resale, the original owner, now seller, does not recoup the amount of the lot premium they paid when they purchased the property. Real estate always has been and always probably will be location, location, location. So, your property won't fetch the same price with no view as would a property with a mountain view, but then again, you didn't pay an inflated premium for the mountain view in the first place. If the lot isn't horrible, with a very undesirable location, and lot premiums are ridiculous, I think you'd be OK. But, that's just my opinion, based on experience.

And, we always suggest that if you're purchasing from a builder, that you have your own representation from a Buyer's Agent. The sales person works for the builder, not you. That leaves you on your own, trusting that things will go well.
0 votes
Julie Montgo…, , 80238
Wed Sep 26, 2012
It will have a huge impact when you try to re-sell. Lots without premiums are the WORST lots in the subdivision. Don't do it! Also, their are a lot of "hidden" expenses when you buy from a builder. Things like window coverings, fences, landscaping, etc. add up big time after you close. The bad news is when you go to sell, you won't a dime back from these improvements, as they are expected on a resale home. You might want to shop newer resale homes before stepping into a new one. Let me know if I can help further. Julie Montgomery, RE/MAX Masters, Inc. 303-906-3150
0 votes
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