Things We Considered Before Buying New Contruction

When we started looking at houses our priority was a decent location, price, and a list of must have's that we were really, really hoping we could get. We tried to keep that list as short as possible. The part that stressed me out the most is that we had a home we would have to sell, before we could buy something else. I wasn't hopeful that the stars would align so that we would find a buyer for our house, and get an offer accepted on a home we wanted to buy at the same time. Between house hunting, making your own house available for showings, negotiations, inspections, and funding there are a lot of variables that need to pan out in a timeline that works for the buyer of our home, the seller of the home we want, and us. People do it, but I don't know how, without selling your house, renting, then doing the home search from there. We definitely wanted a newer or updated home. We didn't have our mind set on buying new construction, but doing so did streamline the buying/selling process. We didn't have to worry about competing with other offers, or trying to time out multiple closings. Sometimes the builder negotiates with discounts or credits, but the price is the price, and it's first come first served. Once you pre-qualify, sign the contract and hand over earnest money the house is yours pending funding, and any contingencies, such as selling your current home are taken care of. We ended up moving twice anyway, but we had a closing date, and could plan for it.  Having everything new is nice, but there are a lot of things we had to consider.

One of the beautifully staged model homes
The model homes have $100,000 dollars of upgrades we can't afford. They will provide a comprehensive list of all the upgrades, but it's still really hard to picture what your house will actually look like without all the add ins. They also may or may not be able to tell you how much the upgrades cost until after you've already signed a contract. On our first house, they nickel and dimed us to death on upgrades. Oh, you want a door that leads outside from your garage? Upgrade! You want a medicine cabinet? Upgrade! And, they couldn't even tell us how much each upgrade was in the sales office. They add up quick and if you can only add on so much before you've priced yourself out of the house. A home we were considering in a different community had a lot of  things included, and they were also able to give us details on how much the upgrades would be.

We didn't get to choose all the finishes and upgrades. Everything was chosen for us by the builder, because by the time we showed up the build had already gone past a certain point without a contract. If there is no buyer to select options and upgrades the builder does, and that's that. There were also "quick move in" homes available that fell out of contract with whatever upgrades the original buyer selected. We could have waited until the next phase release for a lot that would allow us to choose everything, but typically the prices go up with each phase release, and they couldn't tell us how much. MJ fell in love with that one particular lot, and I really didn't care that much about picking everything since we got to do it the first time. It was fun, but I actually found it a bit stressful to have to make these decisions and watch the price go up. Initially, all that was left for us to chose was flooring, until they decided that the kitchen backsplash wasn't working. They called us in later, to select that. We really like everything chosen for us. MJ was fine with it, but I would have wanted to cut a lot if I'd had the chance. We would have had quite the battle in the design studio.

The builder has money to offer incentives, but whether they do or not is another story. One of the first things we wanted to know is if there were any builder incentives for using their preferred lender. They will usually make you pre-qualify with their lender, but you don't have to use them. On house #1 they offered a $6,700 closing cost credit up front, but were not willing to give us anything towards design upgrades. This was in 2010 when the housing market was in a major slump, riddled with foreclosures. On the other house we considered they were willing to offer $8,000 towards closing costs, but they didn't offer it up front. I had to ask. The house we purchased, initially offered us $7,500 towards closing costs if we used their lender, and $10,000 towards our flooring right off the bat. MJ finagled an extra $5,000 towards closing costs after casually mentioning that his wife wanted to buy in a different community, which was true! When I watch house hunters it seems like the buyers get all kinds of free upgrades and huge builder credits, but that hasn't been our experience for the most part, and I felt lucky to get anything. I think it depends on what's going in the housing market at the time.

Our flooring selections
Last year, California became the first state that requires solar panels on new construction homes. I was already feeling the stress of home buying and then I found out that if we wanted the house, we would be required to either lease or purchase solar panels. California strikes again! The upside is that we will save on energy costs, but it was just another "upgrade" I didn't have a choice in the matter. It was one more argument for moving to the other new home we were considering, because the solar panels would have been included, but MJ wasn't satisfied with that house. The savings on electric costs kick in as soon as the solar is turned on. We paid the first bill, but haven't owed anything since. Solar panels aside the whole house is designed to be water and energy efficient.

The builder decides the closing date, and it's totally dependent on the building schedule. This was an upside for us, because we could plan for it. Our first home was built and closed according to schedule so that's what we expected. This time, the closing date was changed from December to October. That is a huge change to spring on a buyer with no notice. I was not happy at all, because we were stuck in a short term lease. They tried to make up for it by giving us a price concession on the purchase price. I don't think it's typical to be that far off on estimated closing. They didn't admit to it, but we think they made a mistake, by putting the date of the last closing of our phase on the contract, and then never letting us know that our particular home was closing sooner.

We have to be part of a Home Owner's Association, whether we like it or not. I don't know how it is in other states, but you would be hard pressed to find a new construction home or even a newer community that does not also come with a dreaded HOA and the costs associated with it. If we were dead set against an HOA that would eliminate a lot of housing options, resale or new build. Having an HOA can be a positive thing, but I don't like the idea of owning a home and then having to follow rules about what I can and can't do. We didn't go to HOA meetings in our old neighborhood, but we've been to two so far. People are so annoying. That's all I'm going to say about that. 

Our neighborhood in progress
Buying new construction means you live in a construction zone. This wasn't a deterrent at all for us, but it is something to think about. They build in chunks as they release phases so the heavy construction is concentrated in one area, becoming less and less and farther and farther away as the homes are finished. Our last neighborhood was super tiny so construction went on for a shorter amount of time, but I think there will be construction going on in our new neighborhood for a while. Moving in was tight because there were multiple moving trucks trying to get in and out in the same area, and front yards are in various stages of landscaping. We can't hear much of anything from inside our house, so there isn't a lot of noise. Most of the home building work happens during the week when we're at work, and it's moved down the street some, but there are definitely a lot of construction vehicles and construction workers coming in and out all day. It's actually been pretty fun to roam around the neighborhood checking out the progress. They don't lock the doors until after the appliances start to go in, and sometimes I sneak inside really quickly (because I'm afraid I'll be arrested) while I'm out taking walks.

Just because it's brand new doesn't mean it's perfect. I didn't really trust our first builder, so we hired an independent inspection before we closed. Everything was fine. The house was solid and we didn't have any major problems during the 10 years we lived there, but we did have an issue with our carpet that never got resolved. We had the builder come out twice to try to stretch our carpet during that first year warranty period and it wrinkled back up. Since moving into this house, we've had an electrical issue, one of the bathroom faucets was loose, and we found some weird filmy stuff in a different bathroom, just to name a few. This builder offers a warranty to take care of workmanship issues that were identified, but not resolved during the walk through, or discovered after move in for 1 year also, and 10 for structural. They will also take care of minor dents and dings that occur during move in. It's kind of like having a landlord, because if anything goes wrong, we can put in a ticket with the builder and they will schedule someone to come out and take care of it.

This is one of the extra bedrooms
New homes seem to have a lot of windows. Unless you don't mind your neighbors seeing you naked, window coverings is something that you'll have to spend money on pretty quickly. We spent about $90 dollars just for temporary tape ups from Home Depot, while we were in the process of deciding what we wanted and getting estimates. The natural light is wonderful, but 29 windows is a lot to cover! Home #1 had 18. Then when you move, you leave it all behind.

The house only comes with dirt, and landscaping is expensive. I knew this, but didn't realize how much because house #1 had a very tiny backyard and the front yard was covered by the HOA. We were able to do all pavers, a planter, and a fire pit there, without totally breaking the bank, but there is no way in hell, we could do anything close to that on house #2. The HOA on the other house we considered takes care of the front yard, but in the house we bought the backyard is a pretty good size and we are also responsible for the front yard. Sigh. Another thing to think about is elevation. Some of the front yards in our neighborhood are really flat, but others are slightly sloped, which means you might also need to consider a retaining wall. Wanna guess what kind of front yard we have? Sloped. I may never recover from the amount of money we spent on landscaping. This is also something that can't wait too long because the HOA is surely breathing down your neck with deadlines for when it needs to be finished.

The house will only ever be new to us. Are the extra expenses worth it? According to my interwebs research a new home is about 20% more expensive than a resale, which makes sense because you would probably pay more for a newer resale than an older resale. Newer costs more, but we'll likely get that 20% back on resale. We got way more than that back from our first home. New construction homes are bound by comps just like resale homes. Brand new or not, the price has to be comparable to similarly sized and updated homes in the area.  My husband watched listings like a hawk while he was overseas and came across very few homes he would have wanted to put in an offer on. It's possible that we could have spent less on a resale and still gotten a lot of what we wanted, but we'll never know how much money we might have spent on changes or repairs on the "hypothetical" resale home we never bought. I was willing to give up a few things I wanted to spend less, but MJ was dead set on what he wanted and where he wanted it to be. He settled on our first house, and wasn't willing to do it again. Can you tell that I'm the cheapskate in the relationship? Well, somebody needs to be!

I think the bigger question is if living in Southern California is worth it, because that's really the problem here! I'm frugal to the core, so the cost of living here is totally at odds with my nature. I accept it, because I want to live here, but I will never really and truly be okay with it. It's just how I'm wired. The frugal side of me wants to live in a tiny home or move to a cheaper state, but here we stay. Well, we got everything we wanted in a house and we love San Diego. I think I'll always feel some level of ambivalence about the whole thing, but together we decided that it's worth it.


Ashley @ A Cute Angle said...

This was very informative. I've enjoyed watching the progress of your new place on Instagram. Everything is so gorgeous! Overall, are you happy with how everything turned out? PS, your top in that pic is so cute!!!

Catherine Gacad said...

congratulations...i'm so excited for your new home! yes...i read that about solar. it's a great win for the environment, but can understand how everything just starts to add up! gotta love those property taxes. ha!

Faith said...

I don't know if we'll ever purchase new construction but if we ever do I'll def. reference this post for tips. This post is so detailed!

P.S. I want more home posts/pictures/whatever!

Kate at Green Fashionista said...

YAY new construction! We did new construction as well, and it was so nice not to worry about bidding wars or renovations. But you're not kidding about all the costly upgrades, so we tried to negotiate as much as we could. I'm shocked that the solar panels are an upgrade if they're required. It would be like charging extra for hurricane safe windows or roof clips here in Florida!
Green Fashionista

Emily said...

I want to see pictures of your new house when you two are all set up and moved in! HOA's is a big deal out here too if you live in a subdivision with a newer homes.

My house is a small 2 bedroom that was built in 1950 ... LOL Needless to say a new construction would be out of my limit money wise. However, I would consider it in the future if things got better financially!