Richmond Times-Dispatch Weekend
Cost Containment on New Construction
With demand high and supply low, buyers on a budget face increasing challenges finding the right home at an affordable price.
Those whose hearts are set on new construction face even greater challenges, with pricing also escalating from climbing costs for supplies like lumber, paint and flooring.
Indeed, in March, the National Association of Home Builders calculated that 60% of U.S. households wouldn’t qualify for a typical mortgage on the purchase of a median-priced home.
Pinning a price on an un-built home is always difficult, and now, buyers should be especially careful ascertaining the end costs. Here, some tips from experts on how:
Price tags are set
Unless there’s a market downturn or a particular community is distressed, the prices can’t be negotiated, says Jeff Benach, of Chicago-based builder Lexington Homes.
Add-ons add up
“Avoid getting starry-eyed about upgrades, and insist on line-item lists of what you’re ordering,” suggests author and attorney Ilona Bray.
Adding extra square footage, like opting for a finished basement, can carry sneaky future costs, notes Carla Gorman, of Baird & Warner, Chicago, since “those areas will be assessed as livable square footage.”
Looking now at future taxes
Unlike purchasing an existing home, where the property tax bill is known, an un-built home isn’t even assessed yet. Look for the builder to provide a tax estimate based on “replacement cost,” Westmont, NJ real estate attorney Renee Bergmann advises. That means the value is projected as the cost per square foot to replace the structure along with the price of the land. That replacement cost figure could be higher than someone is paying, especially if the builder is offering incentives to buy in a community.
For those worried about tax bills, an extra step is to talk to the local assessor’s office, asking if the estimate looks plausible, concludes Bergmann.