BUYER BEWARE: When “New” Homes Attack

As I work with a buyer to help them find the best home for them, I try to help them look at the big picture and long-term ramifications of their purchase. Statistics show that families move every 5 years or so and so I try to help my clients look at their home’s value if/when they decide to sell it. I hope that all my clients become clients for life and that I will be the agent helping them sell their home when that time comes.

I was looking in a certain community in Northwest Austin with a client of mine and we were looking at both new construction and resale homes. With the ever increasing demand in Austin, builders can repeatedly raise the prices on their homes because the limited supply of resale homes means that buyers have few options but to purchase a new home. That imbalance can drive a buyer to pay more for a new home that it is really worth. Unless homes appreciate at a much higher rate than historical averages, they will unlikely be able to sell it in the future without selling it for less than they owe on their mortgage (a short sale). New Construction Sale

For example, in the neighborhood we were looking in, new homes were selling on average for over 15% ($51,000) more than resale homes and 13% ($14) more per square foot. Also noteworthy is that resale homes sold 98% of list price while new homes sold for 96% of list price. That would indicated that you can often get a more significant concession from a builder than you can from a home owner who is selling their primary residence. There is a certain dynamic in communities where resale homes are being sold alongside new homes that builders are building brand new – new homes effectively set a “price ceiling” on all homes available for purchase. To illustrate – if a buyer is considering two very similar homes, one is resale and one is new construction, they will almost assuredly be willing to pay a premium for the home that no one has lived in previously. That premium puts a cap on what a homeowner can sell their home for in the same neighborhood.

What does this mean for a buyer who is considering a new home versus a resale home? In our example neighborhood, the new home premium can be as high as $51,000. The average price per square foot for resale homes is $105 with new homes selling for $118 and some now being priced as high as $150! While we can’t exactly forecast what prices will be in 5 years, if the new home premium remains that same, the neighborhood would have to appreciate 15% over that time for our buyer to be able to sell the home for the same price he paid for it. I would hate to come back to my client when he is asking me to sell the home I helped him purchase 5 years ago and tell him that his home is worth less than what he paid.

What I am NOT saying, it that new homes will automatically lose value when you purchase them (like buying a new car) or that your new home is not worth what you just paid for it. What I AM saying is that you should be aware of the dynamic I described in neighborhoods where there are new homes and resale homes being sold side by side and make sure that your REALTOR is helping you properly evaluate the true value of any home you are potentially purchasing. Also, understand that values can be very different in different neighborhoods and this dynamic can be different in each.

If you have questions about any certain neighborhoods or have questions about buying a home, new construction or resale, drop me a note and I would be happy to help however I can.

by Kyle Pfaffe, REALTOR®      e:      m: 512-636-9707      w:

Top Ten Defects of New Construction

The Top 10 Defects of New Construction

Did you know that according to a Realty Times article, many county building inspectors are seeing over 30 homes a day? That’s less than 15 minutes at each site. That’s just one of the reasons why home inspections on new properties can be so important.

With over two million inspections performed to date, U.S. Inspect has compiled a list of the most common defects found in new construction:

1 No insulation installed in the attic: A well-insulated attic will make your home warm in the winter and cool in the summer, saving you money and keeping you comfortable.

2 Missing proper roof vents, or vent holes cut, but roofed over: Good attic ventilation reduces heat build-up in the summer, cutting cooling costs and prolonging shingle life. In the winter, proper ventilation allows the heat and moisture to escape, keeping your attic dry and reducing ice dams.

3 Windows installed improperly: Improperly installed windows can result in moisture and leakage problems as well as reduced energy efficiency.

4 Hot and cold water reversed at faucets, tubs, and showers: This defect is not only a nuisance, but a safety hazard for individuals expecting one thing, and getting another!

5 Other plumbing issues: Toilets that overflow, run constantly, or leak due to incorrect installation, or tubs that don’t drain properly due to drains clogged with debris during the construction process.

6 Inoperable or missing GFCIs in required areas: GFCIs are designed to protect people from severe or fatal electrical shocks, missing or inoperable GFCIs are a safety concern.

7 Heat vents missing, not connected: The home will certainly not heat efficiently if heat vents are missing or disconnected.

8 Cut trusses in roof or floor trusses: Cut trusses can compromise the integrity of the structure.

9 Tempered glass missing in required areas: Safety glass is installed in certain areas to protect those in and around your home from injury.

10 Improperly installed roofing, flashing, or roof jacks: Correctly installed roofing materials avoids moisture penetration into the home or siding materials. Following the manufacturers recommended installation instructions is crucial to ensure that these materials perform as intended and that their lifespan is prolonged.

Kyle Pfaffe, REALTOR


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