Some thoughts on purchasing a brand-new home
Buying a brand-new home is a gratifying experience — from signing the papers, to the closing date, to moving in and waking up on that very first morning knowing that it is all yours! The pre-construction vs. resale debate is a typical one among many first time buyers who are just entering the real estate market. The choice you make depends upon several factors — from lifestyle choices to financial circumstances. Either way, pre-construction is often the best choice for first time home buyers for several reasons:
Let’s start with the end in mind
Few people stay in their homes forever. That means you should alway consider your end game — selling. It might be five years. It might be 25 years, either way, you will eventually sell.
With that as a given, it is possible that a brand new home will have much better resale value that a resale home.
Neighbourhood is always a huge factor to home values. You may be wise and fortunate and buy into a neighbourhood that appreciates at a faster rate than the city average.
PRO TIP: Buy into a new neighbourhood abutting a great neighbourhood and you may get this spill-over effect!
Furthermore, newer homes sometimes have a far better resale value because they have the modern stylings and features that appeal to most buyers, especially young buyers. Oftentimes, brand-new homes have the structural upgrades (such as open concept floor plans and nine-foot ceilings) that older houses simply don’t have and would be too expensive to upgrade to.
Finally, maintenance costs for a newer home are likely less than an older home as the home’s components are newer and less likely to break down. This appeals to most purchasers.
New homes come with warranties
Buying a home is a huge decision. Older homes are thought to be more risky – (you never know what you might find when you renovate), whereas with new homes you know what you are getting.
And, in Ontario they come with a warranty!
The Tarion Warranty is quite comprehensive. It includes a seven-year warranty for major structural defects as well as certain defects in work and material being covered under one and two year warranties.
There are drawbacks and benefits for both resale and pre-construction homes. As a whole, first time home buyers might benefit the most from pre-construction homes. In a sense, pre-construction homes have a set price. Simply put, when the home closes three months or three years later, the purchase price is often the market value of when the contracts were signed. This saves the purchasers money in a hot market where prices are rising rapidly.
When buying a pre-construction home, make certain that not only the location is good for the future you, but also always negotiate. Ask the salesperson for discounts, rewards and incentives. Incentives can range from a reduced purchase price, a cap on development levies, and/or design upgrades to name a few.
In most cases, time is on your side what purchasing pre-construction houses as throughout of the building and construction period, you have the opportunity to save additional money to go to your downpayment and/or closing costs.
You should budget 2-4% of purchase price for closing cost which include lawyer fees, utility hook ups and a host of other things.
The deposit amount and payment schedule depends on the developer, builder or project. Typically condos need 10 to 20 percent down and the balance at closing. New homes may need $40,000 to as much as $150,000 in the first 60 to 180 days.
Often, prices for pre-construction homes are lower than resale homes. Of course, in a hot market builders and developers will price homes at a future value, so beware.
What’s important is that the price is set. What you see is what you get. In a hot market where bidding wars are common, the benefit of buying a pre-construction home is that the price is the price. Builders do not often have offer night bidding for preconstruction homes. That takes the pressure off.
Newer homes will likely have lower utility bills compared to older homes. Pre-construction houses are outfitted with energy-saving appliances, doors and windows, as well as a more efficient insulation. Several new homes are Energy Star-certified.This helps minimize the carbon footprint and your your energy bills.
It is great to have the chance to customize and personalize your new home, from the size of the baseboards to the colour of the kitchen cupboards…it’s typical to spend hours with the design team! This is a perfect chance to pick the modern features and upgrades for your home.
In terms of upgrades, it’s always best to have the builder do the things that are hardest to do after the fact. Things like installing pot lights, having a 9-foot ceiling or hardwood staircases.
As you can see pre-construction is often the best choice for first time home buyers. It can be more rewarding to purchase, to live in and to eventually sell.