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Buying A New Construction House In Us ( Cons)

Discussion in 'General Discussions - USA & Canada' started by sanjuruby3, May 2, 2017.

  1. sanjuruby3

    sanjuruby3 Platinum IL'ite

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    We are looking for homes and being on single salary our budget is not high so we were looking for simple small home. Also,
    we plan to live here 5 yrs and then move on to better school district. At present, better school district is unaffordable for us.

    So we started home searching and within our budget, we are not liking any home. Either no yard or hilly or too old or dark or community or they are sold before we actually see them from inside.

    Houses that stay and we like are always 50 -100K above our budget. Affordable and good houses ( even with minor issues) going fast. So many H is inclining towards new construction But I do not like the idea much for 5 yrs its pain.

    There is new construction going on quite far from town and convenience stores. Builder is building just 4-5 houses and no idea is school bus, trash pickup will be there.

    Builder basic model is within our budget but then we checked papers. All the mandatory upgrades (like all electric appliances - fridge, washer/dryer, dishwasher + garbage disposal in sink + fireplace + remote of fireplace+ island + AC many more) are again adding 50 K easily.
    H is telling we can skip many upgrades like island or fireplace and go with vinyl. But my point is- that when we sell it after 5 yrs, we will have to upgrade then for new owners so why not for us.

    Then builder is covering basic landscaping but we might to be go fencing + fertilization for planting etc.
    So our max budget is 400K (assuming) and furnishing + furniture of all sorts = 20 K ( assuming)

    With new construction, I think we will hit 450K easily (way above budget)= 380K basic+ mandatory upgrades (30 K) + hidden/unknown costs + furniture Thats my guess.
    With old home, if we buy older/cheaper , 380K (most appliances will get) + 20K (furnishing/furniture) = 400 K , we just in budget.

    So cons now I see are -
    1. Reaching the max budget (or may be much much more)
    2. New home is far from town. There is no community there. There are just 4-5 houses that builder is going to build and we do not know who will neighbors, will there be kids or not. So for my kid, it will be difficult to find playdates or for halloween. Whole point of home buying is kids needs home now. Being Indian, I want to know if community is safe.
    3. I think there might be many more hidden + non hidden costs that we will find out once we proceed towards purchase. Then landscape + yard maintenance + fertilizing the yard for planting etc
    4. After 5 yrs, at the time of selling, home appreciation ( based on location ) will not be that much ( 400K house will not sell at 450K) because there are much better houses nearby within same price range.
    5. Reason of not moving to better school district now is - we thought to start with small cheaper house then once life gets better will move.

    What do you say? Any one bought new construction and what are your estimates and experiences on all these additional or hidden costs.

    My H disagrees and keeps pressurizing me. He does not agree about costs. But I am not convinced into new construction. He is okay about commute and thinks costs will not be that much. Tomorrow if I start working, that location is far. So many issues.
    Please suggest.
     
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  2. Rihana

    Rihana Moderator Staff Member IL Hall of Fame

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    Overall, you are right. Commute and friends for kid are important criteria when choosing a community.

    The best case is that you will be the first movers to that new community, and have the advantage of lower price of house. But, if more than one builder is not already building there, then chances are less that it will become a bigger community.

    At the same time, going by your description you are not able to find old houses within your budget. So, your numbers comparison might not hold true if you end up paying more for an old house.
    There are two options - go for a really small old house that is ready to move in, and then do some upgrades.

    Go for a new house but in a place where commute for at least of you will be under 30 minutes. Friends for kid criteria can be relaxed. About the school bus and trash pickup - I don't think builder gets permission to build houses if these are not taken care of. Before they hand over keys, those things have to be finalized (I could be wrong).

    So, it boils down to how desperate you are to buy a house. Looks like your husband is more impatient than you.

    My suggestion would be keep looking for old house, and go for that. Commute is a big factor -- more so, when you also want to be working.
     
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  3. GoneGirl

    GoneGirl Gold IL'ite

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    Hi @sanjuruby3

    I agree with your view point, dont know where you are located, but based on your description, older home seems to be a better bet..
    We also looked at homes, both old and new, and decided that even though the new construction looked fancy, it just didnt have the charm of an older house/neighborhood and didnt have mature trees in the neighborhood.. hence seemed less appealing to us..

    Pros- With a newer
    home , you do have newer appliances, roof, cooling/heating systems that you dont have to worry about maintenance issues..

    Cons- majority of new contructions are not in the most sought after neighborhoods.. Look into the time it takes for them to sell a new construction, that may give you an idea of how hard it will be to sell later on.. also the expenses will add up significantly at the end, and you will end up with a figure much higher than quoted..dont know how the construction there works and if you are planning to custom build it from beginning, the place we checked out needed money early on to custom build the home, and it took anywhere from 6-8 months for the home to be ready.. mostly later than the said date by builder.. in that case you will be paying your mortgage even before you start living in that house..

    If it were me, i would compromise
    on the first home, and look for a smaller property in the better school district, and you have a better chance of appreciation and resale..because if you have a home that is harder to sell, buying another one is so difficult in such a hot market..I would find a good realtor who can find info on homes before they hit the market, so you get to see it early and make an offer..

    Goodluck with your home search..


     
    Last edited: May 2, 2017
  4. DDream

    DDream Finest Post Winner

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    If you want to sell the house after 5 years, it is better to have even an old(reasonably good one) house in the best neighborhood (it sells faster, time /weather tested, gain more value etc) than the best house in least favorable place. New house location will be always a construction zone, many people don't prefer that. Also it is better to have an old house as the first house because it gives you more idea on what do you want in a house (you will realize it only after living in a house) and give some hands on experience. It will be beneficial when you move to new house later.
     
    Last edited: May 2, 2017
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  5. chocolate

    chocolate Platinum IL'ite

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    Op, Cons of new house is plenty. If you are planning to sell the house in 5 yrs, I think a new house is a better option. Becoz it will assure the next buyer the house is good. Old houses come with lots of unknown problems. I remember my friend took a 30 yr old home a few yrs ago . The house is fantastic to look at and has a good flow. But 2-3 yrs down the line, they replaced everything from roof, floor to appliances. Not to mention plumbing problems.Unless you are handy or know the right set of people like handyman, plumber old house comes with lots of problems .Point is can you handle it.

    Mortgage only comes into picture when the construction of new house is completed and mortgage loan assumed by lender. Not before. You cant build a community without utilities like trash pickup , school zoned to homes. So remove that thought from your mind. Builder has to have all those assigned before construction.If you are looking for moderately priced home, look in good school district becoz when it comes to selling the house wont appraise to value if it is bad school district and basic necessities like grocery, medical, fire department and schools are very far.

    If houses in area you are targeting is too expensive, try looking into foreclosures, bank auctions,short sales. Those are good deals. One of our friends got an yr old house in a foreclosure which was cheaper than new construction in our community and double the size of houses. You never know, you might get lucky too. Good Luck.
     
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  6. sanjuruby3

    sanjuruby3 Platinum IL'ite

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    This house is in good school district for elementary. For middle ( 5 yrs later), we will have to move. Also, there are only couple houses by the builder so I do not think any new builder will come up to build near by and there is no space left. Then there are some very old house near by. That old community, we drove by, did not look kid friendly to me. May be 1-2 two houses seemed to have kids with kids stuff like trike etc outside. But most houses were very small like 2 bedroom, single story or they had campers parked in driveway so I assume that is either old people or typical american community. I would like to see some indian neighbours and living in trump america and seeing racism news everyday I fear for my children.
    Just trying to give safe env for me kid.

    For old home, we decided we won't worry much about selling price later. Even if it goes at same price we buy at, we will be okay.
    But for new home, it will be different scene.
    My H point is - We getting new home at same price of old home. I think he is not true. There will be lot of hidden costs. Plus commute, far from amenities, no community ( no desi community at all).
    Any one bought new home ever? How much costs exceed that builder asking?
    Also builder is asking some percent right now before construction starts and it will take 6 months easily. We have not gone much in discussion with builder. This was just first meeting so I know many things will come up later and 6 can become 8 easily once money is already gone into their deposit.

    Backyard is big thing for us. So even if we like the home itself, no backyard becomes deal breaker. Or house will be above our budget.
    My point is is we have to jump our budget, then why not live in indian community, where I will feel safe . Houses are good ( not very old) , more sellability , prime location, not commute issues.
     
    Last edited: May 2, 2017
  7. MalStrom

    MalStrom IL Hall of Fame

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    You can change everything about a house but location. If you are not staying long term plan for the house that will give you the best prospects for resale. It's hard to tell where the prices are headed and 5 years is relatively short in real estate. You don't want to be left under water if you decide to move.
     
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  8. chocolate

    chocolate Platinum IL'ite

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    Op,We bought a new house and we had a fantastic agent who worked her magic with numbers. We well paid well below what builder set as prices for upgrades. You need to find a great realtor who has history of assisting buyers. See sold prices.Great agent is the key.

    Builder asks for small amounts like 5k ,10k depending on lot ,construction and builder. We paid around 5k before our house was constructed.Its not wrong or shady practice.

    The key is look for communities which are almost finishing up. With a few lots left, builders give lots of discounts.The areas you are targeting do houses come with big yards. If the area itself has boxy homes with small yards then you have to look in a bigger radius.

    If you still want to go with already constructed house, look for ones which suit you. Like for ex when we were looking we looked at house which was constructed 2 yrs before in a community near our house. I felt it was boxy and too small. Turns out the entire community had boxy houses.Look for a house in community you like. If you look at one home you will know how the community is laid out. Meaning there is good flow and spacious rooms.Good Luck.
     
  9. blindpup10

    blindpup10 Platinum IL'ite

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    - New home constructions can have heavy mello roos in the form of HOA which can come up to somewhere between $70-$300 per month. Be aware of that. Especially if you are selling in next 5 years- this is not an ideal deal at all. Because the first owner would have paid so much mello roos and the next buyer will actually get a deduction.
    -Firstly make sure which school district will be under the new construction. I recently heard few mom's complaining that they were told by the builder during the purchase about kids in "good side of the town" school district, but when the kids time came to got to school- the kids were considered not to be in the "good school districts".

    - Is there an option to look into townhouse/ condo for your budget in a good school district? A good school district is the one thing that will have resale value, even in bad market. What if in next 5 years there is bad market and you are not able to move?

    You dont know how the market is going to be in 5 years. It's better to break even rather than make a loss. Don't buy a house with this attitude. Old or new it should be seen as an investment.
    - You wouldn't need 20k on furniture. If you get most of it from craigslist. You can use 20 k to upgrade an older house. If you hire a contractor even upgrades (cosmetic) won't be 20k- if you turn around and sell an old house with an upgrade in the good school district you will make a killing.

    - another misconception- your older house may or may not come with heavy appliances. be aware of this.
    - we are living in an older house, during the house inspection the house has to pass the safety test, appliance, plumbing, AC should be working. If you are ok with the workable house and save up to upgrade things a bit slowly or 2 items a year. Another point old house may have less HOA to No HOA fee.

    - Unfortunately, when you buy a house, monthly expense = homeowner insurance+HoA+ mortgage payment+ utilities + garden maintenance.
    Driving by once may not give a good idea of community or children. Maybe go out there at several times during the different time of the day. Talk to few people in the neighborhood to get a feel.

    I strongly suggest you to--look into a townhouse/condo in a good school district ( even if you dont have a backyard now) when you sell the place in 5 years you guys can make a profit and next house will have a backyard.
     
    Last edited: May 3, 2017
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  10. JustAnotherMom

    JustAnotherMom Platinum IL'ite

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    And if you are rich enough, you can rent this place and buy another house after 5 to 7 years and the mortgage of this house will be taken care of by itself. Since the house is small and in good school dist, it will be easy to rent and will convert in to a good source of income for your retirement.
     
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