Building a home is a great way to get all the features you are looking for in a brand new “package,” and people are increasingly interested in purchasing new construction or even designing and building a home from the ground up. But there are some misconceptions about building a home, and it’s worth addressing these so that you can better understand what goes into purchasing new construction.
Misconception #1: New construction will depreciate right after purchasing it.
You’ve probably heard the old adage that as soon as you drive a new car off the lot, it’s depreciated by 25%. That may be true for cars, but it’s definitely not true for houses. In fact, newer houses that are built well often appreciate (i.e., increase) in value more quickly than older houses. Homebuyers love homes that are three-to-five years old. Why? Because they tend to be energy efficient, have new roofs, and are more likely to have new, popular features.
So if you’re concerned about depreciation, don’t assume that a newly constructed home is a bad choice. You need to consider all the factors that you normally would – location, how well-built the home is, what features it has, etc. Those factors will be much more reliable in telling you if the home will appreciate well or not.
Misconception #2: I should use the builder’s REALTOR®.
Let’s say you’re driving around a newly built community, and you decide you want to talk to someone about looking at one of the homes. Most likely the community will have a REALTOR® on site, ready to help you out. But guess what? That REALTOR® works for the community. Do you really want to be represented by someone who works for the person building and selling you your home? I wouldn’t.
Some people don’t realize this, but they can and should get their own REALTOR® to help them with new construction. Legally, a seller (in this case, the home-builder) cannot force you to use their agent, and it doesn’t cost you anything to hire your own agent (since the seller is paying the fees), but it gets you full representation. Having your own REALTOR® will benefit you in a lot of ways:
- S/he can help you list and sell your home, if you will need to do that as a contingency to buying the new construction. Most of the REALTORS® that are on site at new construction will not list your home for you.
- S/he can help you negotiate with the seller. Sometimes builders are willing to negotiate things like lower closing costs, upgraded appliances, or nicer fixtures, but you need full representation to ensure that you will get everything you can get.
- S/he can help you navigate the many decisions you will have to make. “Should I go with carpet or hardwoods? Granite or quartz? This layout or that layout?” There are a lot of decisions to be made, and the on-site REALTOR® at the community has set hours (like a normal employee) and will not be at your beckoning call like most people expect when they have an agent representing them. Bringing on your own REALTOR® can make a big difference in you making the right decisions for your new home.
Misconception #3: I don’t have enough money for new construction.
New construction isn’t always crazy expensive (location is always an important factor), and there are some tricks that can help you out if you have limited money to bring to closing. For instance, a lot of new construction in the Upstate is in areas that are eligible for USDA mortgages that don’t require any down payment. These areas tend to be more rural, but many of them have quick access to one or more major highways.
Additionally, some builders have preferred lenders that, if you use them, will cover your closing costs. So it’s not out of the question that you could buy a newly constructed home with no down payment and no closing costs – literally no money brought to the closing table!
And let’s not forget that mortgage rates are still extremely low. Your monthly payment on a $250,000 home right now may be the same as what you would be paying on a $225,000 home in six months, as the government raises interest rates. So there are a lot of interesting possibilities in the market for getting new construction for a good price.
Misconception #4: New construction is better than old construction.
When it comes to quality, new construction is no different than old construction. If it’s built well, it will have less and slower deterioration. If it’s built poorly, it will deteriorate more quickly and more often.
I’m going to put another shameless plug here for utilizing a REALTOR® because they can be up-front and honest about whether a builder has a good reputation or not. And trust me, there are plenty with less than positive reputations that you do not want to buy from. Make sure you’re well represented with a good REALTOR® so that you don’t purchase a new home that will start falling apart immediately after moving in.