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Building a new home, Do the pros outweigh the cons?

Whether you are buying a home someone previously owned, or building a home; fun and stress come with the territory.  Trying to decide which option to go with can be confusing and complicated.  Obviously most of it depends on your situation.  But hopefully I can help you decide if building a new home is for you.  I have some things to think about listed here, both pros and cons.  Like any other major money decision, it’s good to list the pros and cons and come to an informed decision.  So let’s demystify building a home.

When it comes to building a new home, do the pros outweigh the cons?

Pros of a New Build

  • Price
  • Appreciation
  • Energy Efficiency
  • Health
  • Personalization

Cons of a New Build

  • Price
  • Location
  • Floor Plans
  • Waiting Game
  • Landscaping
  • Warranty Departments

Let’s start with the pros of new construction:

Price

This is actually a dual edged sword, and I’ll cover the cons later.  But one of the pros is that builders expect they will pay commission to a buyer’s agent.  This means that you don’t have to expect to pay more by having a real estate agent on your side.  The builder isn’t going to lower the sales price just because you show up without an agent.  So go ahead and get yourself a pro to represent you.  Plus, just like with a regular purchase or sell, a good agent will make sure that things that can be negotiated will be, keeping you from leaving money on the table in the end.

Building a new home

Appreciation

This is mostly applicable to early phase development. Typically a builder is going to build out a community in phases. The first phase pricing is going to be based on how much it costs to build that house at that time. But the next phase is going to adjust based on increases in materials, labor cost, taxes, and market conditions. I’ve seen 50% or more appreciation going from a Phase 1 build to a Phase 3 or 4 build. Not bad in just a few years!

Energy Efficiency

Newly built homes will come with new systems and appliances. Newer appliances and codes mean you will have better energy efficiency and better temperature retention inside the home.  In my area (Nashville), most new builds are also using tankless water heaters, which means MUCH better water efficiency.  The key savings here is in your energy bills.

Health

Many homes built prior to 1978 still used lead paint. New homes tend to use low or no VOC (volatile organic compound) paints and materials for building. Low VOC materials help to improve indoor air quality. Another plus is that most new homes come pre-wired for alarm systems, so you set up what security you want (like glass break sensors, door sensors, etc) and then start a subscription to monitor it.  Just remember that with a new build, there’s probably plenty of construction going on around you.  So make sure you spray for bugs.  You’ll also want to change out your air filters every month until all dust and construction intrusions are gone.  Also make sure you opt for cheap filters to start with and upgrade to the better ones later.

Less Competition

If you have ever been in a bidding war for a home you have your heart set on, you’ll understand how stressful it gets. New homes have less competition in this department. Once you pick your lot, it’s just a matter of options and plans. You don’t have to worry about competing with someone to get exactly what you are looking for.

New home Design CenterPersonalization

Most builders don’t really do true “custom” homes. They may have options, they may even be willing to move a wall or door, but typically they are set on the major structure components. But the nice thing is that you can pick your flooring, counter-tops, cabinets, paints, fixtures, and pre-wire multimedia and smart home functions.  And take it from someone who built his house, going through the design center picking our features is a lot of fun.  Just keep in mind your budget, because this is where it’s too easy to spend a lot of extra money!

So for the cons of new construction:

Price

I never pay sticker price for anything, and I mean anything. But when it comes to a new build, it is VERY unlikely they will negotiate price with you. They know what it’s going to take to build the home, pay for work to be done, possible future costs of warranty work, etc. So they have a margin in mind, don’t think they will give it up. However, make sure you get a real estate agent, because you CAN negotiate closing costs, upgrades, and literally ANYTHING that’s not going into county records to affect sales price.  And as I mentioned before, keep your eye on your budget when you go to the design center, additional upgrades added along the way can add up quickly.

Location

New subdivisions require land. You won’t find a lot of it set together in the city. So there’s a good chance you will be looking on the outskirts of the city, or in suburbia. Looking at the above map, we have all the completed subdivisions in the last few years.  Keep in mind that I’m not showing all of Davidson county here.  Within the 24/40 loop downtown, there are 13 completed, within 440 there are another 18.  BUT, outside of the downtown area, there are a total of 132.  That means 81% of the completed subdivisions are away from the city.  So if you are wanting to build in the urban sprawl, a subdivision probably isn’t for you.

Floor plans

You’ll notice this is in both categories. You do get some personalization in building a new home, but you are probably going to be stuck to a floor plan. These homes have to be designed and signed off on by engineers. ANY structural changes have to be signed and approved. So this means most of those floor plans are set in stone. (aside from the pre-designed options many builders have).

Waiting on the build

The less competition aspect is nice, but the downside is that a new home takes time to build. Many areas can complete residential builds in as little as 120 days. But you still have to wait on things such as a certificate of occupancy. This means you are going to be held to the schedule of water, sewer, electrical, etc.

Grading Land

Landscaping

Trees take time to grow. New builds mean new plants. There’s a chance you may have some mature trees around the area, but most likely everything will be newly planted. So expect to wait a few years before you have a shade tree over your back porch.

Warranty Departments

This is hit or miss. Some companies have amazing warranty departments to handle issues that arise with new home builds. But then you will have some that are borderline criminal. I’ve seen foundations mis-poured, plumbing reversed, gas lines attached to a water source, even neighbors who ended up with each other’s brick. If you are looking for a builder, this is probably one of the most overlooked things, so make sure you check how it handles warranty work! This can literally make or break if you will enjoy living in your new home.

Some final thoughts:

The last house I purchased was a new build, and with a kid on the way I’m looking to upgrade.  I’m actually going to be doing a new build with that too.  So I love new builds, I love that I get what I want and that when I move in I know that I’m the only one who will have ever lived in that house.  And while there are some downsides, it’s a pretty rewarding and exciting experience.  Since there are literally zero reasons to not have an agent, and it has zero effect on pricing, I’d highly recommend you have one.

There are a couple VERY important considerations I want to keep in mind.  I know this is a new build, but that does not mean things can’t go wrong.

  1. YOU NEED A HOME INSPECTION!  Just because it gets cleared for occupancy doesn’t mean there are no issues.  Get a home inspection BEFORE you close.
  2. Take your time on final walk-thru.  Don’t wait until the day of to do your final walk-thru.  Do it a week ahead of closing.  And bring your agent, and if you know someone who’s built with that builder before, bring them too.
  3. If there is anything wrong that needs to be fixed, don’t close until it’s fixed.  Most warranty departments are a pain in the butt, get it fixed before you close.
  4. You will have warranty work that needs to be done, I’ve never seen a new build that didn’t need it.  So be meticulous, take pictures, and be VERY specific when something is wrong.  That’s what the warranty department is there for, don’t be afraid to be a bit of bully in making sure they take care of things.
  5. ENJOY!  You’re the only person who’s ever lived in this home, it’s a pretty awesome feeling!
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