Benefits of Buying New Construction Homes vs. Pre-owned Homes

As you weigh whether to buy shiny new construction or a charming pre-owned home, here are some factors to consider.

Today’s supply and demand housing market is way out of kilter. Due to historic low interest rates and the 2009 economic meltdown, supply is very low and demand is incredibly high. There are not enough resale homes on the market across the country to meet this demand and thus home values are increasing rapidly. Often, multiple buyers bid on the same home, thus driving the price up even further. This is not good for buyers.

appraisal problemAppraisal Problem

One major challenge in such a market is the bank appraisal. If prices are surging, it is difficult for appraisers to find adequate, comparable sales (similar houses in the neighborhood that closed recently) to defend the selling price when performing the appraisal for the bank. Deals fall apart when an appraisal falls short of what a buyer is willing to pay. Mortgage lenders won’t approve a loan for more than the appraised value– many times even if the Buyer has the extra cash to makeup the shortfall with more of a down payment. New home builders, by contrast, have their own in-house lenders who have already approved the home package prices. Problem averted.

builders deal in volumeNegotiation Power

In the current market, new homes may be a better deal than resale homes. New construction builders deal in volume. They build in phases, one parcel or batch of homes at a time, then they move on to a new patch of turf. They need to sell product before they get a new influx of funds from THEIR lender to build more homes. They can absorb a dip in profit on a house here and there in the bigger scheme of things. By contrast, private home owners have much more invested in their family hacienda and are usually much less motivated or able to drop their price by thousands of dollars.

Resale home owners may be willing to deal somewhat, but it is easier to consistently negotiate thousands (five figures) off of a new home purchase for my clients from a builder. Not to mention, negotiating home prices to include a 10-year, whole-house warranty, upgrades, a range of floor plans to choose from and the lot-of-your-choice price. These bonuses don’t happen with a resale home.

zero down paymentGreat deals can be found if you find the right buyer’s agent who specializes in new homes because their experience, relationships with builders and negotiating ability will help you save thousands.  Real estate agents know that builders often have mortgage subsidiaries or affiliates, and are able to custom-tailor financing — down payments, “points,” other loan fees and even interest rates — to your specific situation. It is also possible to get them to help defray your closing costs at settlement.  Sometimes even pay ALL closing costs.  Zero down,  zero total move in costs is possible!

The latest in layout, or just outdated?

With new construction homes, you can often participate in the design of interior spaces with the builder, in advance of actual construction. Rooms tend to be larger with more open flex space and brighter, with lots of natural light to begin with. Plus, many new homes come with “Smart” technology options allow you to automate internet, cable, speakers, HVAC and alarm systems. The sophisticated wiring that’s needed for high-speed electronics and communication equipment, entertainment centers and security systems is concealed inside the walls.

latest home designWhen you buy a resale house, you get what’s already there. That may include room layouts, low ceiling heights and lighting that may have made sense in yesteryear — formal dining rooms, small kitchens, fewer bathrooms and windows,  for example, that are expensive to remodel.  You must examine the priorities you put on functional arrangements of interior living spaces and whether moving walls around to create the types of open spaces that make sense today, is worth it.  Your desire, budget and aptitude when it comes to making repairs and capital improvements factors into most every resale home.


replacement costsWear & tear replacement costs

They are the unadvertised costs of used homes. Even if you contracted a professional inspector prior to purchase, things can blow shortly down the road.

By definition, with a new house everything is new, including costly components — such as the furnace, water heater, air conditioning unit, kitchen appliances, roof, doors, windows and more. In a new home, most of these components come with a warranty, often for up to 10 years. With a resale house, the equipment and structural features you buy have been in use for awhile, and may be close to needing replacement.

Consider some of these typical capital improvements that may be part of the true cost to you over the early years of a purchase of an existing house:

– Heating and Air Conditioning: The typical furnace has a 20 year life expectancy; the typical central air system 15 years. Replacing them could cost you $5K (AC unit) and $4K and up for the furnace, depending upon the system you choose.

– Flooring/Carpeting/Tile/Hardwood Floor refinish: You’re virtually guaranteed to replace some carpeting in a resale home and you may need to upgrade other flooring or finishes. Costs can run anywhere from a few thousand dollars to well over $15K, depending on your choices and square footage.

– Roof: the average shingled roof lasts about 25 years. Replacement costs can be anywhere from $5,000 up.

– Exterior Painting: With a new house, you get to select the color. With an existing house, there’s a good possibility you’ll want to repaint. Typical cost: $5,000 and up.

– Interior Painting: Again, with a new house, you choose the wall colors of the rooms as part of the package. With an existing house, you’re probably going to want to repaint some of the interior. Even if you DIY, it will cost time, money and disruption.

– Kitchen Remodel: think anywhere from $20,000 to $40,000.

– Master Bath Remodel: $15,000 and up.

homeownership costsMaintenance

A newly-built home requires less maintenance since everything is brand new. This means you can better predict monthly homeownership costs, since you’ll likely spend less to maintain your home.


green building techniquesThe latest in energy efficiency

If you care about “green” — whether that means the money you spend on energy bills every month or your concern about the environment — a newly constructed home is virtually always the better option for substantial savings. New homes save money with energy efficiency and green building techniques. More efficient wall and roof insulation, doors and windows create buttoned up homes that are less expensive to heat and cool than older houses. New appliances and home HVAC systems are also more energy efficient. All of that translates into lower utility bills.

Many new homes are taking advantage of the Energy Star standard which sets forth a number of requirements that products must adhere to in order to achieve an Energy Star rating. In addition to Energy Star, many builders are now offering green building like the installation of solar panels on the roof of a home to harness the sun’s energy and convert it to electricity. If you install enough solar panels you may just have the electric company paying you for the electricity you are producing! These features are often very costly to retrofit a resale home with if it wasn’t initially built to these standards.

An added bonus, those new HVAC systems offer better air filtration which increases indoor air quality, reducing symptoms for those who have asthma or allergies. New homes also often use low- and zero-VOC (volatile organic compound) paints and building materials, which also aid air quality.

basic-fire-safetySafety features

Newly-built homes come with modern fire retardants in materials such as carpeting and insulation, unlike most existing houses. Builders also hard-wire smoke and carbon monoxide detectors into their homes, making it unnecessary for new owners to install less-dependable battery-powered detectors. Many builders also back up their hard-wired detectors with battery power to handle electrical outages.

amenitiesAmenities & lower taxes

Buying new construction often means buying a lifestyle. Master or planned communities usually include amenities like parks and community spaces that are close to schools and shopping. Developments in outlying areas offer a feeling of a small hometown as well as lower property taxes than in the urban metro. Because planned communities are encapsulated and fenced, they are usually safer as well.

stress less movingMoving-time flexibility

Since the median time to complete new construction is five months for single-family homes and six months for condos, it allows you to feel less rushed when planning your move-in. If you currently rent, you can go month-to-month once your lease term is up to allow for more flex time on the packing-up and moving-out phase too. Schedule at your convenience.

With resale purchases, the seller wants you to close on your loan in thirty days. Then you are forced to scramble to pack and move before you’ll be paying on two residences!

new home warrantyResale value

You may plan to live in your next home many years, but at some point, most people sell a given home for any of a myriad of reasons, like moving to a bigger home to accommodate a growing family, moving down to smaller digs when children are gone, moving across town or across the country for another job, etc. While the home you sell will, by definition, no longer be new, a 5-year old home will often be more desirable — given all the features above — than a 25-year old home at resale.

You’ve already purchased all the appliances and upgrades for the home and many parts of the home are still under warranty making the home a great inclusive value. This will compare favorably to older resale homes that may require renovation or updating to make it livable for the modern home buyer.

Roll through to the rest of my series: “Why Should I Buy a Home vs. Rent?”;  “How Can I Afford to Buy a Home?!”;  “Show Me the Money to Buy a Home!”;  “All About Boosting Credit Scores” and “What is Debt-to-Income Ratio?” 

“So, who can help me with all of this?”, you may be asking. Someone who specializes in homeownership subsidies and mortgage assistance programs– certified in course training.

Not all Realtors are created equal, a la car mechanics or hair stylists. Many don’t have all the tools in their toolbox. They operate with the only the basic skills of their craft. Many cut corners. Like Realtors® who choose to easily line their pockets by dealing with only flush clientele and high-priced homes.

Keller Williams RealtyThink of me as, Gina, your New Home Guru. More Savings. More Living. I am more motivated and able to do a great job to help you affordably own your next home. If you want to own a home in the Austin area, reach out.

Pull the trigger, you’ll be glad you did. I will show you the money!

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