Anyone looking for their next home has asked the question: Is there an advantage in buying a brand new home over one already existing?

The answer to the question is simple: Yes.

However, there’s also another answer to this question: No.

Purchasing a new-build instead of going the re-sell route has advantages…and disadvantages.  Let’s take a look at what those are, and you can decide what might be best for you…

The Case for Brand New

Quality:  Nothing beats brand new…right?   Whether its food, clothing, cars, or even ‘significant others’…we as Americans prefer our valuables fresh, with low mileage, and untouched…at least, if we have the choice.  So is this is true in home construction?  For the most part, yes.  Brand new is always better.  Brand new means no breaking down anytime soon.  Brand new usually implies the best type of warranty and protection.  Even in older homes we remodel, were replacing older appliances, flooring, counter tops, and other things with NEW replacements.   Additionally, new homes are built to meet the latest and greatest in building codes. New homes are often more energy-efficient than older homes, and they often incorporate up-to-date technology features like USB-enabled outlets and mobile-controlled AC and lighting.  For some, a brand new home creates a stronger sense of pride in ownership.  As an original owner, no one else can lay claim to memories or contributions of that particular property.

Higher Inventory:  The Phoenix real estate market has experienced an upward swing in recent years. Since there are more buyers than sellers, the natural effect is a rise in demand and prices. With homes flying off the market so quickly, competition to find an existing home can be tough. Alternatively, when you purchase a new-build home, the competition factor decreases in most cases. Most buyers do not want to wait or deal with the uncertainty that comes with purchasing new construction.  Customization to your home is another huge advantage.

Custom Features:  Buyers who go the new-build route will likely agree to a purchase contract before the home is finished, or in some cases, before construction even begins.The good thing about this is the opportunity for input on specific detail and construction of the house.  The Home builder will usually have 3-5 different pre-arranged floor-plans set for construction, and each model haas already been designated for each specific lot in the subdivision. However, as the future homeowner, you may be able to request enhancements or other changes in the basic floor plan and design.  This is always good information to gather beforehand, and something your local real estate agent can help you with.

Free-Equity’: It’s always ideal to agree on a new-build contract early in the development of a subdivision.  In a steadily climbing market, your property may increase in value between the time you sign a purchase agreement to the time it is finished.  For example, if your purchase contract is for $350,000 in March, and the home isn’t ready until July or August, that same exact model may be selling for $360-$365,000 by the time you’ve moved in.  Just like that, you’re living in instant equity before making your first payment. This is not always the case.  No one can predict the exact peak of the real estate market, and therefore no once can know when values will hit a plateau.  Nevertheless, in the real estate game, equity builds over time.  In the Phoenix market, if you purchase a new-build contract at the right time, it might pay off sooner than later.  If only we could all predict the future…like in 2006.

The Case Against Brand New Construction:

Timing:  A new build takes approximately 3-6 months to complete. If you need the funds from the sale of a previous home in order to pay for the new home, you may need to sell your home quickly.  This likely means finding a rental unit in the meantime as construction goes on. Maybe you have to shack up with the in-laws just to save a few bucks.  Either way, its an extra move, which is basically like an extra day in a labor prison.  Remember, this is assuming you sale your existing home in a reasonable amount of time.  In the current market, reselling a house might take only a few days, assuming the price makes sense (unfortunately, not all sellers understand this concept!). Another temporary nuisance depends on when and where you buy in a new subdivision.  If you’re one of the first homeowners in such a development,  expect a noisy construction environment for a year…or potentially longer.  This is more noticeable in the summer, as crews start as early as 5am.   Also–last but not least–if you happen to be a female, it’s not exactly the most comforting feeling  when a bunch of sweaty construction workers are staring as you come and go to the new house alone (no offense to construction workers, except the creepy ones).

New Subdivisions: Beware of dust, noise, and whistle-blowers…

Less Leverage: Often times, buyers go into a home purchase expecting to control negotiations on the price. While that can certainly be common in the re-sell market, new-builds are typically a different animal. Most times, there isn’t much leeway on closing costs or purchase price. In a seller’s market like we’re experiencing right now, the builder holds all the leverage.  This includes influence that may force you to use their preferred lender and title company.

Unexpected expenses: You can count on them. That’s because those dollar signs you see on the sticker are often just the base price. Upgrades cost money and may or may not be rolled into your contract price.  Home-builder upgrades are almost always marked up to full retail.  A common example is with a two story house: One of the little ‘tricks’ is to not include a guest bathroom downstairs.  Since this is a necessity, the home builder knows this, and will likely up-charge an expensive amount to convert a storage area or closet into that half bathroom.  The same strategy will often be employed with basic upgrades.

Other new construction questions you should ask your realtor :

  • How much does typical buyer actually spend on upgrades using their own contractor?
  • What’s included in the base price?
  • What will be an additional cost at closing?

Always consult your own real estate agent before visiting a new-build property office.  This will always give you the best protection as a buyer and help you become fully informed of the process from start to finish.