New homes have some very appealing advantages:
- Choosing a new home produced by a reputable builder of high-quality properties gives you the peace of mind of knowing that your home doesn't contain asbestos, lead-based paints or formaldehyde. Furthermore, you can rest assured that your new home complies with current federal, state, and local building, fire, safety, and environmental codes.
- A properly constructed new home should be cheaper than a used home to operate and maintain. Operating expenses are minimized because a new home should incorporate the latest technology in energy-efficient heating and cooling systems, modern plumbing and electrical service. And with a quality new home, your initial maintenance expenses are practically nonexistent because everything is new.
- New homes have enough wall and floor outlets to accommodate all your high-tech goodies. No unsightly, hazardous tangle of extension cords for you.
- New homes are only as good as the developers who build them. Visit several of the developer's older projects. Ask homeowners in older developments whether they'd buy another new home from the same developer. See what kinds of problems, if any, they've had with their home over the years. Inquire whether the builder closed the sale on time and honored all contractual commitments, including the completion of any unfinished construction work, on time.
New homes also have some disadvantages:
- What you see usually isn't what you get. You see a professionally decorated, exquisitely furnished, beautifully landscaped model home. When touring a model home, ask the salesperson to explain exactly what is and isn't included in the no-frills base price.
- Prices are less negotiable. Developers maintain price integrity to protect the value of their unsold inventory of homes and to sustain appraised values for loan purposes. Rather than reduce their asking prices, developers bargain with you by throwing in free extras or giving you upgrades in lieu of a price reduction.
- Some developers attract buyers by pricing bare bones houses very close to their actual cost, and then make substantial profits on extras and upgrades. If, upon doing some comparison shopping, you find that these items are outrageously overpriced, buy the bare-bones house and purchase extras from outside suppliers.
- New homes are usually more expensive than used ones on a price-per-square-foot basis. Land, labor, and material costs are higher today than they were years ago when the used homes were built. And don't forget that you're buying a home without any wear and tear.
- New homes may have hidden operating costs. Developments with extensive amenities usually charge the homeowners dues to cover operating and maintenance expenses of common areas such as swimming pools, tennis courts, exercise facilities, clubhouses, and the like. Some homeowners associations charge each owner the same annual fee. Others prorate dues based on the home's size or purchase price -- the larger or more expensive your home, the higher your dues. If the development has a homeowners association, find out how its dues are structured and what your dues would be.
- Sometimes homeowners-association dues are set artificially low to camouflage the true cost of living in the development. When that happens, sooner or later homeowners get slugged with a special assessment to repaint the clubhouse, resurface the tennis court, or whatever. Make sure that the homeowners association you are considering has adequate reserves and that its dues accurately reflect actual operating and maintenance costs.
- You may have to use the developer's real estate agent to represent you. Developers always have their own sales staff and their own purchase contracts. Some developers, however, will let you be represented by an outside real estate agent, which is called broker cooperation. Others insist that you use their agent.
- If you've fallen in love with a new home but the developer won't cooperate with outside agents, we recommend that you pay for an independent appraisal to get an unbiased opinion of the home's value. It's also wise to have your contract reviewed by a real estate lawyer of your own choosing.
- Just because a home is brand new doesn't mean that it's flawless. Moreover, builders work for profit and may be tempted to cut corners to maximize their short-term profits. Even a brand-new home should be thoroughly inspected from foundation to roof by a professional property inspector.