Warning – read this before buying a new construction home!
5 Things No One Tells You About Buying a New Home
When shopping for a new home it is always tempting to buy new construction. They typically have model homes that are absolutely breathtaking. They are designed so that when you walk through them you fall in love while immediately thinking that for the price it seems like an incredible deal. Has this happened to you? I’ve fallen in this trap almost too many times to count. I’m definitely not saying don’t ever buy new construction, I’m just saying without knowing the proper questions to ask and really digging into the numbers your dream home could easily become a nightmare!
The agents at the model home are there to sell the house. Think of it like a first date, on a first date you always wear your best new outfit, make sure your makeup is just right, and stay away from talking about the subjects that may let a little bit of your crazy leak out. A model home is exactly the same – it is brand new, you only see the absolute best features available, the furniture is professionally staged, and the agent is going to shy away from conversation topics that would make you uncomfortable.
So why is it that you need to be so careful? The crux of it is that if you decide to build that home yours will not look like the model, or at a minimum it isn’t going to look like the model at the price listed on the price sheet in your hand.
Everything is an upgrade
Typically home builders will give you a list of standard features, but while it may seem like everything you could want is on that list, I guarantee it isn’t. One of the home we considered buying didn’t come with painted walls. Literally, paying for paint was an upgrade. House comes with granite countertops? Probably not the granite that you are looking at in the model home. The standard is often quite pitiful looking.
Cost of Upgrades
Most people look at the base price of the home and the feature list doing quick mental math of the cost to do some of the upgrades they would like. The problem with this is that cost up of upgrades is way more than you would pay doing them yourselves. The builder jacks up the price of just about everything! Carpet, windows, cabinets, etc. A faucet that you can get for $65 on Amazon will probably be $300 extra from the builder – also keep in mind that you are already paying for the price of the standard one before paying the upgrade charge.
Out of pocket costs
Say you don’t care about the overpriced upgrades and you decide to do them anyway, 50% of the upcharge of these upgrades typically has to be paid immediately. That means if you select $100,000 worth of upgrades (totally reasonable) you need an additional $50,000 cash to put down immediately, not including your original down payment on the home.
Construction delays
The possession date the builder gives you is almost always not as definitive as they make it seem. Almost all builders reserve the right to delay your move in date without recourse. Trying to plan the end of a sale or lease with a moving possession date can give you quite a headache. We considered building in a community but ultimately didn’t in part because they would wait to achieve a certain number of sales before even beginning construction on the units already sold. That 6 month possession target could easily become a year if the sales people weren’t good at their jobs. Also, even if you move into the house on time, the construction of the rest of the neighborhood could get delayed forcing you to live with dump trucks driving by for the next 3 years.
Lot premiums/views not guaranteed
We thought about buying a house with a gorgeous view at a $90,000 premium. Even though it was expensive, we were thrilled at the prospect of the view from our kitchen. Luckily before buying we found out the view wasn’t guaranteed, and that down the hill a new house was just about to start building that would have almost entirely obstructed the view. There is no problem with another builder building that house, but selling the lot at a premium with a vanishing view was sketchy! Also beware that if you take whatever the lot comes with no premium you are probably going to have the smallest lot in the neighborhood right next to a dumpster.
Still want to go forward with the new construction home? Any of you have a different experience with your builder?
