- The Washington Times - Friday, April 16, 2010

Many car buyers, if they can afford it, will almost always purchase a new auto. Not only do they know that cars begin to depreciate the minute they are driven, but they also love that “new-car smell.”

Homebuyers are not quite as particular about buying a new home versus a resale, although there are some buyers who will absolutely refuse to buy a “used” home. While the age of the home may not matter to most buyers, the majority of buyers want a home to look as new as possible and to have been updated.

“Most of the buyers I work with do not want the hassles of fixing up a home, so they are interested in a brand-new home or one which is relatively new,” says Pat Derwinski, a Realtor with Weichert Realtors in McLean, Va. “Most homebuyers in this area are two-income families who simply do not have the time to wait on contractors or do the work themselves.”

Mary Ann Zaruba, a Realtor with Coldwell Banker Residential Brokerage in Severna Park, Md., says many buyers think a new home will require less maintenance, which may or may not be true.

“The value of a new home depends on the builders, and in these tough times, builders have had a difficult time getting financing,” Mrs. Zaruba says. “Some of them have had to cut corners and use lower-quality materials. The craftsmanship of older homes and the quality of their construction may be impossible to re-create today.”

As with any home purchase, each buyer must weigh the choices to determine whether the advantages of any particular property are worth the price and any disadvantages. Generally, the main disadvantage of a new home is the waiting period until the home is complete, which can take from six to nine months, unless the residence is already under construction. New homes tend to be somewhat more expensive than resale homes, although builder incentives can sometimes make them more affordable.

Advantages of new homes

Aside from personal preferences for a new home, there are some additional advantages for new-home buyers.

“Buyers of new homes can pick their location within a subdivision, especially if they are buying at an early stage of development,” says Dawn Pace, a Realtor with Weichert Realtors in Potomac, Md. “They can choose to back to woods, be close to the main street or on a cul-de-sac.”

Rob Allen, a Realtor with Long & Foster Real Estate in Arlington, Va., says new-home buyers will have the advantage of owning a home with fewer electrical or plumbing problems, along with a more modern design.

“New condo buildings in Arlington have a more modern look and modern finishes, but the trade-off is that they are often smaller in square feet than older condo buildings from the 1960s,” Mr. Allen says. “In older single-family homes, the floor plans tend to have smaller closets and bedrooms, which cannot always be redesigned. Newer single-family homes have a more open floor plan.”

New homes, whether they are condominiums or single-family homes or town homes, are typically designed for greater energy efficiency than older homes.

“The extra energy efficiency and other modernizations of a new home will likely add some premium to its value over time, compared with a home that is 10 years old right now,” says Bob Lucido, an associate broker with the Bob Lucido Team at RE/MAX Advantage in Fulton, Md.

New-home buyers can sometimes find a completed or nearly completed home available from builders, but most builders today are not building spec homes. Instead, they prefer to begin building only after a contract has been signed.

“The best values in new homes are for quicker-delivery homes that the builders want to get off their books,” Mr. Lucido says. “While customizing a new home is usually what people want, it can be harder to get a good deal on a home that hasn’t been built, and it takes a long time.”

Mrs. Pace says that this customizing process, which can even sometimes include the floor plan of the home, is a big incentive for new-home buyers.

“While spec homes typically already have the optional features in place, builders are usually willing to offer more incentives on those homes,” Mrs. Pace says. “Even if you opt for a to-be-built home, though, builders often offer closing-cost assistance or free options if you work with their preferred lender and settlement company. If you work with their recommended people, you can also be certain that you will get to settlement on time.”

Other reasons to buy new include the peace-of-mind of a builder’s warranty and the fact that new homes must be built to current building standards.

Advantages of resales

Whether buying a new home or a resale, today’s homebuyers expect to purchase a home in good condition that looks as much like a model home as possible.

“Older homes often have the advantage of being built entirely of brick, instead of just having a brick front,” Ms. Derwinski says. “These homes have mature plantings, too. If the home has good bones and a workable floor plan and has been redecorated to modern tastes, then it can be a great buy.”

Gwen Pangle, principal broker of 1757 Real Estate in Leesburg, Va., says the main advantage of resale homes for most buyers is simply that they are available immediately.

“Unlike new homes, resale homes have all the window treatments, curtain rods, closet rods and appliances in place,” Mrs. Pangle says. “The main question is the age of the home and whether it has been well-maintained. A 10-year-old home may be on the verge of needing new appliances, a new furnace and even a new roof. It may be better to choose a 30-year-old home if all the systems have been replaced.”

Mrs. Pangle points out that the features of a resale home, such as granite counters or hardwood flooring, are included in the price, unlike a new home, which typically requires extra money for these optional features.

Outdoor amenities such as a swimming pool, sports court, a deck, landscaping and even fencing typically are already in place on a resale home, Mr. Lucido says.

“Not only are those optional items included in the price of a resale, but you can also usually get better deals from sellers than from builders in terms of concessions,” he says.

Mrs. Zaruba says a new home typically costs about 20 percent more than a comparable resale home, so she suggests that even an existing home requiring some improvements could be a better value than a new home.

“The ‘most dangerous house’ is one about eight to 12 years old, because at that time owners will need to replace the water heater, appliances, heating and air-conditioning system and maybe even deal with some structural issues,” she says. “It can be better to buy an older home that has been updated or even a historic home that has been well-maintained.”

Mrs. Zaruba recommends that buyers consider purchasing an affordable, “plain Jane” home with an FHA 203(k) loan, which allows buyers to wrap remodeling costs into the purchase loan.

“Besides building value through home improvements, buyers should consider existing homes in stable neighborhoods that have held their value,” Mrs. Zaruba says. “Homes in neighborhoods with a good location, easy access to commuter routes and good schools will always hold their value.”

Disadvantages of new

In addition to their sometimes higher cost, new homes do have a few other drawbacks.

“New homes are often farther away from the city since land costs are so high and land is limited in close-in locations,” Mrs. Pace says. “The few new homes available near the city are usually very expensive.”

Mr. Lucido points out that new-home buyers sometimes need to move twice, if they have a home to sell and their new home is still under construction. Moving to temporary housing and storing furniture can be costly.

Another concern about new homes and their cost is that buyers preview a model home that has been professionally decorated and includes many optional features.

“Once buyers get into the design center, they realize that the home they thought was a great deal at $400,000 may really cost them closer to $480,000 by the time they add the optional features they want,” Mrs. Pangle says. “Buyers think mostly about the big-ticket items, such as a finished basement, but they need to pay extra for blinds, curtains, closet rods, trim and special paint colors, either through the builder or after they buy the house.”

Another drawback for some new-home buyers depends on the level of completion of the community.

“Some buyers will not want to live with the dirt and noise of being in the middle of a construction site while nearby homes are built,” Mrs. Pangle says. “Also, many developers will not build amenities, such as the swimming pool, playgrounds or a clubhouse, until the community is at least 50 percent sold. Some families may not want to wait for those amenities.”

Financially, most Realtors agree that sellers and builders are about equally willing to give concessions and incentives to buyers, depending on the price range and local market conditions. Sometimes builders with an already-built home will be more flexible.

“While the negotiating can be similar with builders and sellers, builders do usually require a larger deposit upfront compared to the earnest-money deposit required by sellers,” Mrs. Pace says. “Builders will keep your deposit longer, too, since it can take 6 to 12 months to build a home versus going to settlement in 30 days.”

Mrs. Pace recommends that new-home buyers check the builder’s policy on price fluctuations that may occur between the contract signing and the closing date; if prices drop, the buyers will have already lost value in their home before going to settlement.

New-home buyers sometimes skip a home inspection because the residence is newly constructed, but Mrs. Zaruba says she often sees a shorter list of problems on inspections of 30-year-old homes versus new homes.

Disadvantages of resales

While a well-maintained older home can hold its value well, there are some features of older homes that cannot be easily fixed.

“One problem with older homes is that they are built to the standards of the year they were built, not to today’s standards,” Ms. Derwinski says. “You can’t always bring a 1950s house to 2010 requirements, especially when it comes to electrical issues.”

Resale homes can have more problems if they have not been well-maintained or if they have been vacant for some time. They also can cost more money than a new home if they need significant work or updating.

“One real disadvantage financially with a resale purchase is that the negotiating circumstances are personal,” Mrs. Pace says. “The sellers have an emotional tie, while builders are negotiating purely on a financial basis.”

While most Realtors agree that a new home purchased today would have a slight advantage in terms of resale value in a decade or so, the value depends on the location of the home and the quality of construction, two features that are well-established in a resale property.

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