Forget the bidding war — can we just build a house?
I’m not going to lie, it’s tough out there for buyers. That’s no longer a secret at this point. It seems anything with four walls and a roof is selling with multiple offers in a matter of hours, not days. (this actually isn’t the reality, but I can talk about that another
time).
Buyers right now are masking up, seeing the home for a few minutes and placing offers with waived contingencies and escalation clauses (Ask me more about this if you don’t know what these are).
But what if I told you there is a much less hectic process? One where you get to select where your home is built, what amenities it contains, the layout, the finishes, etc. Welcome to the world of new construction.
The fact is that builders are unable to keep up with demand right now and the reason is many buyers are ditching the resale market (non-new homes) and deciding to just build their own house instead. There are pros and cons to this approach, but most of my clients enjoy a pretty smooth process when deciding to build their dream home.
Pros:
1. No bidding wars. This is a huge one. There are certain buyers who just refuse to engage in them. Either they are averse to the drama of a bidding war (most aren’t dramatic, by the way, if your agent knows what they’re doing); have a principled objection to paying top dollar; or some other reason.
The fact is that building your home is a pretty calm process and if a buyer is looking for a more controlled environment, it’s something that can be ideal.
2. Build it to suit you. There are many buyers who buy their dream home and STILL have to make modifications after settlement. This is more out of pocket cost and disruptive once you’ve moved in. New construction allows for the buyer to select layout, finishes and even the lot in the community and it’s basically done when you move in. This also allows them to align their home’s look and construction with the latest trends in real estate. HGTV anyone?
3. Resale value usually holds. Since it is new(er) for many years to come. Buyers do like new and even if the house is 4-years-old and you have to sell it, it should retain value and appeal to the marketplace. Keep in mind, builders don’t typically construct homes in areas that are overly speculative (although they can in certain areas of the country) which means they’re in desirable locations in terms of highways and schools.
Cons:
1. The waiting. The fact is that new construction has to keep up with demand, so that means you can’t visit a site, pick a house, write a check and move in right away. They can’t build them fast enough right now. Depending on the builder and the particular house you’re looking to build, it can be anywhere from 3 to 12 months before the moving truck pulls up.
2. Builder limitations. These home builders are trying to build houses as fast as they can and so that means their ability to customize every little thing in a house is either not possible or will cost you more cash during the construction process.
Every time a buyer wants to change this or that, the most common refrain is, “Sure, we can do that, but there will be a custom charge for that.” For some buyers that is OK if their budget allows, but too many custom changes to a house can make that affordable new house a money pit. Thankfully, the builder is usually transparent with these costs.
3. Paying a premium. New construction is much like a new car in that depending on what phase the builder is in (Phases describe whether the builder has just starting building homes or on their last few), you can pay a premium. You can get a discount if the builder has just a lonely sales trailer and nothing built yet because they are trying to get homes sold. Another time is at the end when builders are trying to sell those last few homes so they can move on entirely from the job after several years. But don’t forget you’re building a house. Everything is new, so be prepared to generally pay a premium for that.
At the time of this writing, I currently have three clients under contract for new construction with Toll Brothers, Rockwell
& Deluca. All of them initially thought they’d buy existing homes and were pleasantly surprised by the offering of some of these companies.
Warning: If you choose the route of new construction, BE SURE TO CALL YOUR REALTOR TO MAKE THE INITIAL CONTACT. (This includes not registering on the builder’s website) Otherwise, the sales representative can claim what’s called “procuring cause” and have a right to represent both you and the builder which is not ideal. It is important that you have your own representative to guide you through the process and be your advocate.
Seth Lejeune has always been a real estate junkie. In addition, he has a love for helping people with their problems. While some problems are worse than others, every transaction at its core is a client needing something resolved. A sold home, finding the perfect home or something as simple as a contractor referral, it is this process that gets Seth out of bed every morning. Seth is a partner/team leader at REMAX HOMEPOINT in Royersford and can be reached at asksethanything@ gmail.com or 610-804-2104.