by Hank Miller
on Sunday, January 10th, 2021 at 3:45pm.
Some home buyers find themselves facing an interesting quandary; is a new home better than an existing home? Lately, many buyers just want to move into a home and live; they're either not interested in or able to update. It's hard to beat new for this segment. Others will consider homes in need of updates; existing homes tend to be more flexible on price and easier to negotiate. For those buyers, opportunity may be found. Many variables impact the final decision; however there are clearly identifiable differences that home buyers should consider. Both new and existing homes have advantages and disadvantages, the best educated buyers will examine both options.
New Homes are Better Than Existing Homes
What’s not to like with a new home? Most people want “new” if possible; there’s a reason that leasing a vehicle is so popular. Walk in, drive out; repeat in three years. The Atlanta is a transient market with many folks here and gone in a couple of years; like a lease, new is just easier. New homes are better than existing homes because:
They’re new. Move in and enjoy the house.
They’re financially stable. There is virtually no chance of a major repair expense sneaking up.
They’re current. A new home will have the latest designs, floor plans and features.
They’re smart. Wireless systems and other smart technology.
They’re energy efficient. Materials, design and systems will function more efficiently.
They’re easy to upgrade. Options can easily be added to the cost and rolled into the mortgage.
They're easier with mortgages. Affiliate lenders offer incentives and make great efforts to approve buyers.
They're New New New. Everyone is a “new” neighbor; the community grows from the ground up.
No doubt, it’s easy to walk through a model home and get hooked. The model home is upgraded to the max and the site agent is bubbling with encouragement while tossing hot dogs at you. It's a great community, great area and the builder is offering a $25K design center allowance, but you have to sign today….
Existing Homes are Better Than New Homes
New is appealing but there’s much to be said for an existing home. While not as customizable, the typical existing home has the “heavy lifting” competed and established communities can be better examined for market trends. Existing homes are better than new homes because:
They’re a better value. In most cases, there’s more bang for the buck with existing homes
They’re negotiable. Builders are profit driven; “discounts” are in name only. Owners ready to sell tend to be more flexible
They’re on larger lots. No postage stamp sized lots, more curb appeal and privacy.
They’re better quality. New homes are production line builds. Real hardwood, liberal use of brick, copper pipes and detailed trim won’t be seen. Profit margins and speed are the most important thing for builders.
They’re established. No construction traffic, no increased activity, mud slides, garbage and mess.
They’re upgraded. Many will have big ticket extras like finished basements, hardscapes, pools, etc.
They’re closer to things. Other than in-fill builds, the cost of land means new communities will be in areas farther from service and support assets.
They’re better landscaped. Mature trees, bushes, hardscapes and grass.
Existing homes are complete and standing. Buyers can complete a thorough due diligence on it, the community and the area. Updates and work desired can be researched and sent for bid. Negotiation is with one seller that may be more pliable than the typical builder organization.
Remember…Both New and Existing Homes
New homes are not a clean slate for buyer; options tend to be very limited as builders want to keep it simple. “Custom” is defined as pick either A or B. Builders want a production line set up to keep things moving. Existing homes tend to be much more of a “what you see is what you get” and that can be an advantage for many as the heavy lifting (fin basements, pool, hardscapes) may be already done.
New home builders have two main concerns; speed and cost. Buyers must understand all aspects of the process, it's not always an HGTV happy ending episode. Buyer and agent must be hands on from start to finish, assume nothing and check everything.
New home starting at $500,000 means expect to pay $600,000. Once discussion begins, “lot premiums” are added along with additional charges for everything. Prices for every option are inflated to allow “discounts”; this is just pushing around numbers. Negotiation is typically the site agent “checking” with the builder, waiting a day or more, then saying “this is the best possible price”. Add to this the challenge of picking everything before construction begins. Existing homes are “what you see”, the price is set and negotiation is with one party.
Builders are almost always affiliated with a “preferred” lender; some have their own mortgage divisions. Offers to pay “up to $X in closing costs” are designed to get buyers to use them. This does two things; controls the mortgage process and provides additional revenue to the builder. It’s easier for the buyer (and builder) but the “incentives” offered are not free; they are worked into the deal so what is given is taken right back. For existing homes, buyers shop the best rate and package and move forward.
Contracts are not the same, new construction contracts heavily favor the builder. New homes don’t typically provide a due diligence period, appraisal contingency, handle earnest money differently and require deposits on upgrades. Inspection issues are largely limited to code items and many builders are either ignoring radon issues or limiting remediation contribution to $500. Once that contract is signed, the buyer is locked. If it fails to appraise, the buyer must cover the difference. Contracts on existing homes are much more buyer friendly. Properly written contracts include ample due diligence time, an appraisal contingency and specific stipulations designed to protect the buyer.
New homes allow buyers to move in and not worry about much for several years. Existing homes may need updates but tend to be a bit more negotiable on price and feature materials and upgrades not generally available in new homes.
It cannot be repeated enough, always use a buyer’s agent experienced with new home construction. Any “incentives” offered for not having one are recaptured; the builder pays a set amount to the broker on site whether or not buyers use an agent. Nothing is being "given" to the buyer for not using a dedicated buyer's agent. The site agent is legally bound to represent the builder’s best interests at all times. Issues and problems will arise with every new build; complaints from unrepresented buyers will be ignored and dismissed. It’s important to have a buyer’s agent on existing homes as well. In addition to studying the market, an experienced agent will write a great contract and navigate the buyer through the many steps to closing. Remember, there is no cost to buyers to be represented by an expert.
Every home buyer has different requirements. While there's always a natural attraction to something new, all suitable options should be researched. A deep base of knowledge provides confidence to make the best decision. Treat the purchase of a home like the significant business decision that it is.
The Hank Miller Team puts 30+ years of full time sales & appraisal experience to work for you. Act with complete confidence & make sound, decisive real estate decisions.
678-428-8276 and firstname.lastname@example.org