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Why Investing in a Brand New House May Not Be Ideal

Tsveta van Son
  • September 27th, 15:57
  • Last Updated: April 10th, 12:54

There’s something very appealing about a brand new home. You get to determine the flooring, paint colors, cabinet style and just about anything else you can imagine. After all, it’s yours to build to your specifications.

While all of this can look amazing on paper, there are, unfortunately, some drawbacks to think about if you’re thinking about buying a brand new home.

1. The Uncertain Future

Most of your newer home developments will be partially occupied and will be far from being finished. Even though the economy may be in full swing today, it doesn’t mean it will be a few months from now. During the recent recession, many builders went bankrupt, turning developments into ghost towns. Unlike buying a home in an already developed subdivision, there’s no certainty your new subdivision will be built to completion.

Even if the development eventually completes, it will be hard to envision what your surroundings will be like. For example, if you were one of the first homes in the development, it will be hard to know how large your backyard neighbor’s home will be and how close your neighbors will be to your property line. With a new development community, an HOA will be formed to establish rules for the community. This adds uncertainty to what your yard and home will be allowed to look like as well.

Unless you’re one of the last to build, which is pretty uncommon, you may be miserable with your surroundings, even though your home is your dream come true.

2. Don’t Be Tempted by the Model Home

Drive by a new development and the first thing you will notice is the elegant model home right at the entrance that’s welcoming to the public.

When buying brand new, you can walk through this superb model home and fall in love just like everyone else. Look at it from a builder’s standpoint. This model home has to have the top of the line everything in order to persuade you to buy in the community. Once you factor in all the upgrades, you will soon find out the base price will swell by more than 40 percent or more. If you do decide to purchase new, remember that most builders will make most of their profits from the premium upgrades they sell.

3. Iffy Timelines

When you purchase new, you’re bound to the builder’s timeline. Even though they will say they will be done by a certain date, this isn’t always the case, even if it’s in writing. Buying new means you’re at the mercy of the builder, making it hard to move from your current living situation. With the average new home taking more than six months to build, some view it as a very stressful situation.

4. There Are Hidden Defects

Even though the home may be new, it doesn’t mean everything is going to work according to plan. Known as latent defects, repairs inside a new home can often be costly. For instance, a weak slab could break, or the home could leak during a heavy rainfall due to inadequate waterproofing. Even though the builder will often throw in their own warranty, it doesn’t mean you will always be covered since it can be riddled with exclusions or could be deemed void if the builder were to declare bankruptcy. A home warranty for an existing home, on the other hand, may be worthwhile since you’re not bound to the builder.

5. It’s Costly

New homes will almost always be more than a resale home on the market. While the price can be worthwhile to some, you may be able to find a lot more in a home inside a mature community. Though the specific design elements of the home may not be exactly what you want, buying an old home and renovating a few areas of the home will likely still be cheaper than buying a new home.

While it may seem like buying a new home is the right choice, this always isn’t the case. Since purchasing a home is based on your personal preferences, closely examine your options to see if buying used or new is right for you and your budget.

About the author

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Tsveta van Son
Tsveta van Son is part of Invezz’s journalist team. She has a BA degree in European Studies and a MA degree in Nordic Studies from Sofia University and has also attended the University of Iceland. While she covers a variety of investment news, she is particularly interested in developments in the field of renewable energy.

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