The decision to buy a new home or an older one can be complicated because there are so many things to consider as you get closer to a buying decision. Things like your current needs and possible resale value are both critical parts of this decision. Everyone wants to get a great deal, but the home also has to fit into their lifestyle. Here are a few things to consider to help make that decision a little bit easier.
My builder says I’ll have equity in this home the minute I buy it. What does he mean?
What he means is that he’s selling you this home below the market value of the house, and the moment that you purchase it, you could turn around and sell the home for more than you paid. To be sure, these deals are rare, but they do show up. If a builder is trying to close out a community, or they have a spec home that has remained on the market for a long time due to something unusual in the home or homesite, they may offer the home below market value. Another case is if someone was going to purchase the house and they couldn’t close or get funding. These homes can come back on the market, and often, they are great deals. If this is the case, the builder will show you the sale prices for homes in the vicinity that have recently been purchase (these are called “comps”) and show you how much higher they are than the cost of your home. If you really want to know if a home has any instant equity, ask for the official appraisal for the home and compare it to the asking price. If the appraised value is higher, there is probably some equity in the house.
Should I put upgrades into my home that will make it more expensive than all my neighbors’ homes?
Putting upgrades in a home that will make the purchase price much higher than the comps in the neighborhood or place your purchase price beyond what a bank is willing to lend can create challenges. First, if the upgrades drive the price of the home above what the bank will lend on the home, and they may not add to the value of the home. If you put too many or too costly upgrades into a home and push the price of the home above what a bank will lend you for the home, you’ll have to bring the different between these two amounts, to the closing table to purchase the home. Second, have a home that you value much higher than the neighbors may make it difficult to sell your home for a price that covers all you paid for the upgrades. For many buyers, this doesn’t matter. They chose to outfit their homes with upgrades costing tens of thousands of dollars and gladly pay the cost because they feel that it’s well worth it. For others, they’ll want to pick an upgrade package that keeps their home value close to others in the neighborhood to make it easier to sell in the future.
When is the best time to buy a home?
There are so many factors that determine the best time to buy. The very best time to buy a new home is when you and your family need a new home or are ready for one. However, like many businesses, some times of the year are better for buyers, and some are better for sellers! About 60-70% of the homes a builder will sell homes are purchased in the spring and early summer. Builders know demand is high during these times, and they may be a little stingy on pricing or incentives during this time of the year. If you can wait until the end of summer or early fall, you may have a better chance of getting a better deal on your new home. For the very best deal on a new home, look at inventory homes that the builder has in September, October, and early November. This is when buyers are getting scarce, and builders are particularly motivated to sell their homes, so they don’t have to carry them (on their books) over the holidays.
Should I buy a home when the economy is weak?
A weak economy will affect home builders like it would any other large industry. Demand for new homes can decline, and sales will suffer. If you can afford a home and have a steady job, buying a home when the economy is weak will probably allow you to get a great deal on a new home. Before you do this, you may want to consider what it will take to sell the home you’re in. You’ll face the same challenges selling your home that builders are facing selling theirs.
What are the best things to put into my new home to make sure I can resell it later? Things like energy-efficient systems, windows, insulation, and materials will make it easier to sell your home with the time comes. Laundry rooms, exterior lighting, ceiling fans, a patio, hardwood floors, storage space, and granite are also attractive things in a home.
We wanted to buy a spec home, but we wanted to change the kitchen countertops and cabinets. Why was the price for these changes so high?
The reason that it is so expensive to pay for upgrades in a finished speculative or inventory home is that the builder has already paid for the items. A builder can remove things like faucets, light fixtures, countertops, or cabinets, but the probably won’t be able to reuse these items in another home. The builder will charge you to cover cost they had to pay for and install the items originally, the cost to remove them and the cost or the new items and the installation!, the cost for the item s themselves and the cost to remove or demolish these items. If you don’t like the cabinets or materials in a spec home it may be easier to look for another one that matches your taste!
New homes offer many advantages to home buyers. Gather as much information as possible to help you make the choice that best suits your needs – current and future!