There is much to consider when looking at brand new housing developments. There are so many upsides - gorgeous, brand new homes with all the bells and whistles. And then there are the downsides that you might not be aware of. Take a peek at my "Seven Landmines" before you buy into that new development.
1. Empty Lots = Empty Promises
Yes, there are great deals out there right now, but today's market has brought forward a whole new list of caveat emptors, or "buyer-bewares." Brand-new homes in huge developments outside of downtown Las Vegas have sold at fire-sale prices.
There are lots of buildings and developments out there that have sat half empty. Many tract developments of homes remain half completed. Be warned, even though you may be getting a great deal you may be buying into a development or community that may never be fully completed-or that may take too long to come back to life. You'll be stuck with an unsellable house in the middle of an unfinished
Yes, the developers will promise to finish the development and say that all the lots are sold, but judging from their track record I use the phrase "empty lots = empty promises" as an adage to house shop by.
2. You Are Not Just Buying a House-You're Buying a Developer
Big new developments and newly-constructed gated communities can fail before they are completed and leave you holding a devalued home. For example, if you buy a new home that's not done yet, or hasn't even been started, you are also buying a developer. What if he runs out of money before he's done? This is why it's important to do your homework on any developer when you are considering a purchase. Better to go with well-known companies that have a history of successful developments than to say yes to a newbie who won't let you see his financials. Check with current homeowners in the development and see if their homes have retained their value and if they have any serious complaints.
3. Don't Be Fooled by Models-Know Their Tricks of the Trade!
When buying new construction generally you don't ever get to see your actual home or unit. You see a model or prototype that is similar in floor plan to the home or apartment you are purchasing. Those model homes are always decorated and dressed to look magnificent and perfectly showcase that fabulous lifestyle you will instantly have the moment you purchase this home. However, buyer beware! There are lots of tricks to the trade when it comes to dressing model homes.
The developers and designers employ all kinds of techniques to make the model appear bigger than it actually is. Oftentimes they are furnished and staged with slightly smaller-scale furnishings to make the rooms look bigger. Bedrooms generally have double-sized mattresses rather than traditional queens or kings.
So just as in real life, the same holds true for house shopping . . . don't be distracted by model looks.
4. Extras and Upgrades
What's extra? Find out exactly which upgrades are―and are not―included in the price you are being quoted. Wow, this place is a steal: it's only $300,000 for a four-bedroom house just outside of Philadelphia. What you didn't think to ask was if the finished basement and the gourmet kitchen package are included.
5. When's It Going to Be Finished?
What is the date of completion of the building? Does it coincide with your needs? And is there a cancellation clause or a refund of deposit clause if the builder does not complete the house, building, or development by a specified promise date?
6. The Multiple Phases of Buying in a New Development
Looking at the new homes in phase 2 of a development? Go back to phase 1. If you are buying in a community that is a phase 2 or higher, then hit up some neighbors in phase 1. How was this developer to deal with? Any suggestions? Advice?
Are you looking at an existing subdivision or tract home community where building is still taking place? Is the developer already working on the next phase? Here's some special advice:
- If you are looking at an existing home in phase 1, head over to phase 2 and check out the competition. You might be able to get a better deal from the seller if the market has softened and phase 2 is selling for less than the existing house in phase 1.
- If you are looking for new construction and you are previewing homes in phase 2, you may want to head back over to the phase 1 homes and see if there are any bargains on the market. In addition, the phase 1 neighborhood is already established, with grown-in landscaping and completed, lovely homes. You might just prefer that to a new phase surrounded by bulldozers, infant trees, and blowing dust.
Choosing the lot or picking the best spot? Can you see the neighborhood completed in your mind's eye? Buyer mistake: not investigating all surrounding properties and their development plans. What will they/could they be building next store or behind? Will it block your now clear view? Don't forget to take into consideration what the traffic patterns will be upon completion.
Learn from my experience - I've driven into many developments in which only twenty of the forty lots have houses already built. The other twenty lots are giant plots of dirt that kick up sand and dust the moment the wind picks up. This is not your ideal neighborhood. And though it may seem like a very good deal to you now, it will become very difficult to resell the house sitting next to twenty empty lots in a half-finished community. Follow my advice when eyeing a new community and do your due dilligence. It may save you tons of money down the road and you just might end up in your dream home!
Michael Corbett is Trulia's real estate and lifestyle expert. He is also the host of EXTRA's Mansions and Millionaires on NBC. In addition to his regular segments on ABC's The View and Fox News, he is a national bestselling author with three critically acclaimed real estate books: Find It, Fix It, FLIP IT!; Ready, Set, SOLD! and Before You BUY!
For more great tips: check out Michael's 3 Bestselling Books:
Before You Buy! Find It, Fix It Flip It! and Ready, Set, Sold!