RISMEDIA, August 9, 2007–Many of us wrestle with the desire to have a brand new home, one that has exactly the features we want, the colors and finishes we prefer. We love the idea that every component will work flawlessly and won’t require repair or updating for many years.
Still, for the vast majority of us, the next home we buy will be one that is previously owned and lived in, with the all the flaws and compromises, big and small, that implies. In 2006, 6.47 million existing homes changed hands in the United States, while only 1.06 million new homes were sold.
“It isn’t a simple decision,” notes Jim Merrion, regional director of RE/MAX Northern Illinois. “New construction offers buyers the chance to customize their entire home in a way that no existing home can match, and there is just something exciting about a new house or condo, a kind of ‘new car’ smell and feel. But there also are limitations to new construction, starting with the fact that your choice is usually more limited than when buying an existing property. After all, while there is an existing home for sale almost every block or two in many communities, new construction is much less common and tends to be concentrated on the outskirts of the metro area.”
There are other potential risks to consider when looking at purchasing a new home, notes David Cobb, an agent with RE/MAX All Properties in Frankfort, Ill.
“You are going to end up spending more per square foot for new construction than for a comparable home that is a few years old, and new homes don’t necessarily offer the same high quality of construction that an older home can,” says Cobb.
He also warns buyers of new homes to avoid the temptation to over improve.
“I’ve seen it happen dozens of times. A couple has the resources to put almost everything on their wish list into a new home. Then their situation changes, and they need to sell, but they have a hard time recouping their investment because the price they want is considerably higher than the price being asked for other homes in their immediate area,” says Cobb.
For that reason, Cobb urges new-home buyers to consult with a real estate agent, who can provide good advice about eventual resale and how to avoid over improving a new residence.
An added risk posed by new construction relates to situations where a buyer purchases a home that has yet to be built. In those instances, the completion date could be postponed by many factors, including weather problems, material shortages or even labor disputes.
“If you’re the type who expects the builder to deliver your home on a strict schedule, then building a house may not be the right choice for you,” explains Mary Gedmin, broker/owner of RE/MAX Classic Real Estate in Genoa, Ill.
“When you build a house, you need to be flexible because you are in a process in which the quality of the results are more important than the timing. If the timeline is crucial to you, then you are better off buying a new home that is essentially complete or choosing an existing home.”
Another potential issue unique to the purchase of a newly built home involves the character of the new community the buyer will be joining.
“When buying new construction, it can be difficult to get an accurate feel for who your neighbors might be, yet they can have a major impact on your long-term satisfaction. That is especially true in new condominium buildings or townhouse communities where you live in close proximity to neighbors,” says Paul Fasold of RE/MAX Signature in Chicago’s Lake View/North Center area.
“A quieter couple might not want to be in a building where many residents want to party until 3 a.m. on weekends, or those with children might like to have other kids around as potential playmates. However, it’s difficult to get a handle on those factors when you buy in a building that is under construction.
While new single-family homes usually are located in uniformly family oriented neighborhoods, building a new house from scratch can take a long time and requires a lot of short-term attention and effort, according to Haya Miller, an agent with RE/MAX Suburban in Glen Ellyn who also holds a degree in architecture.
For those without a lot of available time, she recommends looking for a custom home that is already well along in the construction process.
“Your ability to alter the basic plan of the home is limited, but you still get to make all the choices in terms of finishes,” she says.
However, Miller believes that those buying their first new home may be happier if they avoid a custom house altogether and work, instead, with a production builder.
“The process is a lot easier that way,” says Miller. “There are fewer choices to make, and you usually can walk through a model home, which will help you determine if the layout meets your needs and your tastes.”
One other hurdle that many new-home buyers confront in today’s market is the temptation to sign a purchase contract for a new home before they assess the sales prospects of their current residence.
“Often these folks don’t talk to a Realtor® until they’ve signed that contract. They figure because the new home won’t be ready for 10 months, there is no rush,” says Dana Cook of RE/MAX Unlimited Northwest in Algonquin.
When those buyers finally do call in a Realtor® to discuss selling their current home, they may find out the home isn’t worth as much as they’d hoped or that it may take longer to sell than they anticipated, reports Cook. These situations can cause a lot of stress.
Recently, for example, Cook talked to a couple who agreed to purchase a new home and had one to sell. When Cook looked at the market in which their current home would be selling, she saw that 13 similar homes in same price range had sold in the previous six months but that 70 comparable homes were currently available.
“We’re working to sell their home quickly, but the owners may end up paying two mortgages or being forced to walk away from the earnest money they put down on the new home,” says Cook. “Especially in the current market where selling times can be lengthy, it is important to consult your Realtor® before making a commitment.”
Given all the risks, why do buyers decide to select a new home, rather than taking the simpler choice of purchasing an existing residence?
Aside from the pleasure of owning something new and getting to select all the colors and finishes, one factor stands out, says Haya Miller of Glen Ellyn.
“New homes can incorporate the latest ideas in home design, from an open kitchen and expansive family room to large luxurious baths or the convenience of laundry rooms on two levels. For those who feel strongly about incorporating the most current concepts in home design, new construction may be the only practical alternative, especially in older communities like Glen Ellyn where the vast majority of homes are several decades old,” she says.
And what about real estate agents themselves? Will the next home they buy be new or used? We asked the agents interviewed for this article to tell us. Here are their responses.
David Cobb – “My current home was new when I bought it, and my next one will also be new. I see a lot of houses and know what I like. A new home is the best way to get it.”
Dana Cook – “I just bought an existing townhouse. I chose it because I thought it had more character, and an older community just felt cozier to me.”
Paul Fasold – “My next home will be an existing home. With an existing home, you get more for your money and fewer surprises.”
Mary Gedmin – “I’ll buy an existing home. I’ve built new homes before, and it is a lot of work. Next time, I’m going to take the easier alternative.”
Haya Miller – “My next home will be new. I bought my current house 18 years ago when it was 1 ½ years old, and I’ve had to do a lot of updating since then. With a new home, I won’t have to go through that updating process again any time soon.”
For more information, visit www.illinoisproperty.com.
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