From lower upfront maintenance costs to design flexibility, new construction can provide opportunities for homebuyers navigating a low inventory market.
While some homebuyers are holding out for the right house to become available – one with historic charm, outdoor space, square footage or whatever they’re seeking – others are skipping the search (and bidding wars) and going straight to new construction.
According to Nimesh Patel, Broker/Owner of RE/MAX Fine Properties in Sugar Land, Texas, there are many benefits to building a home from the ground up. Not only can buyers customize the home to meet most or all of their needs as well as their wants, negotiating the contract can be less complicated.
“In my opinion, new construction is an easier process compared to resale because there isn’t a listing agent to negotiate with,” Patel says. “The builder, the salesperson, and myself, as a buyer’s agent, all share a common goal of helping my client get to the finish line. We all work together for the buyer’s interest.”
For buyers struggling to find their dream home in the current low inventory market, RE/MAX real estate agents share the top benefits of a new construction home.
1. You’re less likely to encounter a bidding war (or an appraisal gap) when purchasing a new build
One of the biggest advantages of new construction is that homes are sold on a first come, first served basis. Whereas Patel says homes in his market can receive upwards of 100 offers in a single day, new build homes are sold at a set price. That means no bidding wars – and no need to waive an inspection, appraisal, or other contingencies to make an offer stand out.
According to Jody Kelley, a real estate agent with RE/MAX Exceptional Properties in the Nashville suburb of Mt. Juliet, some lenders are also offering incentives that may provide buyers assistance with closing costs (something they’re not likely to find if purchasing an existing home).
Kelley adds that purchasing a new construction home also eliminates concerns over an appraisal gap, where buyers cover any difference between offer price and appraised value in cash.
“Resale properties on the market right now are sometimes going for $20,000-$30,000 over asking, which could make it really difficult for the buyer to secure financing if the home doesn’t appraise for that price,” Kelley says. “Some clients have to bring extra money to closing, on top of their down payment.”
Appraisers often look at what similar homes in the area have sold for in recent months to help determine a home’s value. That means if it’s been awhile since another home has sold in a particular neighborhood, an appraiser may be using outdated information to price a listing in the resale market.
Because multiple units are often sold in a new build development’s section at once, appraisers typically have several recent comparable properties to consider when setting a price for a new construction home.
“I haven’t had one issue with a new construction property appraising for the sales price all year,” Patel says, “But I’ve had several issues with resale homes.”
2. New constructions homes may require less maintenance (and offer more energy efficiency)
An important consideration in any home purchase is how much maintenance the buyer is interested in taking on. DIY-enthusiasts may enjoy making an older home their own, while some buyers would prefer something more turnkey. Although all homes will require maintenance at some point, new construction usually requires less upfront work when it comes to upkeep. A new construction home may also come with an annual home warranty.
“Most builders have a wall-to-wall warranty for one year, and some may extend longer,” Patel says. “For example, air conditioning can come with a five-year warranty, for the roof it may be 15 years. You have the luxury of knowing that you don’t have to be Mr. Fix-It or address every issue. You can call the warranty company to get items fixed.”
New construction can also offer the advantage of new technology and energy efficiency. Some enhancements can be added to older homes, but it may take more time for the homeowner to recoup the cost of the updates, according to Patel.
“A house from even four years ago is often not as efficient as one from today,” Patel says. “If you’re looking at a 15- to 20-year-old home, your electric bill will likely be higher than a new-build home. Newer windows, tankless water heaters and other advancements can help you save money month-to-month.”
3. Your new home will check all the boxes
“What I love about new construction is that for the most part, a client gets exactly what they want,” Patel says. “They don’t have to settle for the resale home that didn’t have that extra room or the countertop the way they wanted.”
Many builders offer a base model with several options for customizations and enhancements. Sometimes buyers may be able to change a layout of a room by moving a wall or adding windows for more daylight.
Although most builders don’t negotiate the price of design elements, an agent can advise which features are worth paying for upfront, and which ones can be upgraded (potentially for a lower price) at a later date. Builders will rarely allow buyers to bring in their own contractors during the construction process, but it still may be less expensive to update features – such as flooring – after closing.
“The design center will almost always cost more than hiring your own contractor,” Patel says. “I like to walk through the design center with my contacts and advise what may be able to be completed at a lower price.”
4. You can still leverage the guidance and expertise of an agent
A new construction project can differ from purchasing a home on the resale market in several ways – but the value an agent can bring to the transaction remains the same, according to both Kelley and Patel.
“The benefit of having an agent in new construction is having someone to fight on your side when construction isn’t going like it should,” Kelley says. “I check our properties that I’m involved with every week. If I see something that looks out of place and wrong, I can push to get those fixed. For example, when the builder starts to install a fireplace that isn’t what the buyer originally chose, I can make sure it’s fixed before it’s too late.”
A new build purchase has many of the same milestones as an existing home purchase – such as the appraisal, inspection and, of course, closing date. Kelley says an agent is an asset in helping buyers navigate the process.
“After years of working with new construction projects, I have the experience to know the right questions to ask builders every step of the way and can help make the process easier for my clients,” Kelley says.
Patel adds: “These are all man-made homes, and things go wrong all the time. If you don’t have somebody in your corner to help you navigate it – from inspections to walkthroughs to getting things done on time – you’re really just at the mercy of the builder.”
The most important thing to keep in mind when purchasing new construction? Patience. Although some builders have completed properties ready for move-in, buyers looking for a custom new build home should plan on at least 6 to 8 months for construction.
But while a buyer is waiting, their home could be already growing in value. Once a new development sells out one section of homes, they often sell the next group for a higher price.
“We have clients that bought a home a year or even six months ago that already have instant equity because the builder’s prices keep going up as they close out sections of homes,” Patel says. “If you bought a home for $400,000, to buy the same house six months later, it’s $50,000 more. So, you already have equity in the home when you move in.”
Article originally appeared on RE/MAX.com.
