• Sue Bentley

New Builds: Pros & Cons


The housing market is closely entwined with the home construction industry, of course, which means if the former sneezes, the latter catches a cold (as the old saying goes). But this is not to say that homebuilders are totally at the market’s mercy. In fact, a city’s buying/selling pressure is often significantly influenced by new housing inventory, particularly as large-scale community developments continue to materialize. And with developers always looking to snag their slice of the buyer pie, new builds are now a common sight from one metropolitan area to the next.

Here are a few pros and cons associated with new builds.

Pros

1. A new build allows you to select finishes and various cosmetic features in advance which would otherwise be costly to achieve once the home is constructed.

2. Because the home is new, your maintenance and various upkeep expenses will be far lower than what is necessary for an older property.

3. Master-planned communities typically feature numerous amenities, entertainment venues, athletic facilities, and well-kept grounds, walking trails, et cetera.

Cons

1. Buyers are commonly upsold on the “shiny object” quality of their new home. In fact, new builds are most profitable to the investor during the Design Center Phase, the period in which soon-to-be completed properties are showcased in the best possible light via clever and aggressive marketing efforts.

2. Very little contractual leverage on the buyer side. Builders hold all the cards.

3. Lot premiums tend to drive up already exorbitant prices. With rare exception, you are unlikely to recoup your investment on this expense.

In closing, it is difficult to go wrong with a new build property, at least from a quality and appearance perspective. But there are a handful of pitfalls to be avoided if possible, especially when it comes to upsell pressure and imbalanced contract negotiations. Keep all of this in mind when considering a purchase in a managed community.


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