Often I get asked by my buyer clients (mostly first-time-buyers) whether they should go with a new construction or they a pre-owned (also called resale) home. I tell them that each option has its own set of benefits & challenges, pros & cons.
New homes are definitely appealing and I tell them that if a new home checks all the boxes for them, they should go ahead with it. However, since most homes on the market are pre-owned, they would have more option if they decide to go in that direction. I read a survey which was done by Zillow that when asked, 52% of the prospective buyers said that they prefer to buy new construction. Makes sense. Meanwhile, the research found that only 37% of those who actually bought a home (in the previous 12 months), said they purchased new construction.
For the purpose of helping you decide between new construction and existing homes, here are some factors you may consider.
The pros & cons of the new construction homes
Pros
A fresh start: Nobody can argue that it just feels so good to live in a house where you know that you’re the first ones living there. That’s especially comforting if you’re looking to start a new chapter in your life.
Customizable: Very often, if the unit is not completely finished, builder will give you options on kitchen cabinets & countertops, bathroom finishes, flooring, paint color, etc. Now, keep in mind that the list of customizable features, is limited. They’re only willing to do so much. They have a showroom, at a different location, where you can go and choose your preferred cabinets, countertops, etc. But that’s it.
Energy efficiency & smart technology: Smart appliances are more energy efficient and more efficient insulation and windows mean that home is less expensive to heat and cool than older models. All of that translates into lower utility bills.
Less fixing or repairs: Since everything is new, (A/C, roof, appliances) you can better predict monthly homeownership costs, since you’ll likely spend less to maintain your home outside of the normal maintenance required of any home.
Cons
Move in Delays: If you need to be in a house in say, 60 days, it’s possible that the exact model you like, might not be ready.
Lack of mature landscaping: For new construction homes, most of the times, you get “dirt” as your backyard and you have to hire a landscaper to finish it for you. For a typical house, you might be looking at an extra $50,000 to $100,000. Unless you don’t mind doing the work yourself. Also, builders might have just planted trees in the streets and it takes years for them to mature and provide shade for you.
Mello-Roos Tax: For new construction, you are looking at 30 years of mello-roos tax. Since before the builder breaks ground, that neighborhood was nothing but dirt and they had to build roads, parks, schools, etc, they need to get paid for that infrastructure they brought in. So each homeowner pays some mello-roos tax, on the top of their property tax, to pay for those costs.
Smaller lot sizes: One thing I’ve noticed in Sacramento area is that they are making new construction homes on smaller lots meaning you’ll most likely end up with a tiny backyard. Chances are for the same money, you will be able to get house with a larger backyard.
The pros & cons of the pre-owned homes
Pros
Move-in ready. In most cases, you could be moving in within 30 days (less if you’re paying cash)
Established backyard & neighborhood. If the previous owner has already done all the landscaping (and you like it) and neighborhood has older trees, you’re sitting at a table which is already set. (Think Landpark)
More bang for the buck: The price per square foot of older homes is less, keeping all the other factors the same.
More location choices: Buying an existing home typically gives you far more options when it comes to where to live. Say, you want to live in a specific city because of its great schools. Well, you might have a hard time finding new construction that you love but I’m sure there’ll be plenty of re-sale properties.
Mello-roos tax already paid: Check with your realtor but chances are “that’s an extra payment” you don’t have to worry about.
Cons
Outdated floor plans: People’s taste changes. For example, back in the day, kitchens were walled off. Nowadays, it’s all about “open floor-plan”, where you can cook in the kitchen while you’re keeping an eye on the rest of the pack in the family room.
Energy inefficient: Older homes that have not been updated can be poorly insulated, and may require new windows and other energy-saving measures to keep heating and cooling expenses down.
Bodies in the backyard: Just kidding. But you never know!!!! I’m sure somebody at some point, have found one (or ten) lol
Potential for more repairs & maintenance: Unexpected repairs to older appliances, roofing and heating systems can have you spending money where you didn’t expect to.
At the end of the day, it’s all about education: It’s best that you go out and look at both kind of homes and see for yourself which one fits your wants and needs. If you were thinking of buying a house in Sacramento area, I’d be more than glad to help you out.
