Engle Realty: Louisiana Real Estate
Residential & Commercial Real Estate Sales and Rentals
Purchasing new construction can be risky for many reasons. There are benefits of owning a newly constructed home, but this article is about the risks that you may not think about. Please note, that this doesn't just go for brand new homes. Even homes that are five to seven years old can be just as risky in some instances. Your Engle Realty real estate agent can advise you on wehther or not the builder you are buying from is a reputable reputation for building quality homes.
Why are newly constructed homes riskier to purchase? New construction hasn't had time to be tested. The properties value is more of a guess, and hasn't been truly tested by the market. The most recent sales are really only reflective of the recent market economy, not a result of say 20 years of economic ups and downs that can establish real estate values. So, if you don't do your homework and need to sell in a down market you could be in trouble.
For example, in Baton Rouge, Louisiana there is an instance where some million dollar homes' foundations in a new development literally sunk down. Another example in Baton Rouge, Louisiana is where a development that simply never took off, due to poor construction and overshooting the market, where the purchasers in that development are faced with a great deal of troubles.
Also in Baton Rouge, there's been a development where the prices did not increase, or appreciate, as the developer continued for years building behind the initial phases of condos. With the developer building new units and selling them for the same price than the older units, buyers would purchase from the developer, and not previous purchasers using the logic, "Why would buyers buy the second-owner homes for sale when they could get a brand new condo for the same price? "
A suggestion, would be to do your homework and ask preventative questions when buying new, so as to cover your ground. Older established neighborhoods have a good track record of past sales that prove that value is substantiated where newer developments' prices are extremely variable.
Of course your Engle Realty real estate agent who has been in the field for a number of years will have studied the areas and know their track record. They will be able to guide you in your decision making. One of the benefits of having an Engle Realty real estate agent is for this very reason.
New construction does have its advantages. The obvious, is you get a home that has never been lived in. Additionally, today's codes are more complex than yesterday's code, so your home will likely be built with more requirements, such as GFCI outlets, insulation, etc. Newly constructed homes are generally built to a higher standard. In addition, you likely can find newly constructed homes outside of the flood zone, which will decrease your monthly expenses. New construction won't have the old-construction problems like: pet odors, smoking odors, and dirty appliances, bathrooms and systems. Also, new construction generally comes with warranties from the Builder on the foundation, systems, and building construction. All of these your agent can better explain to you.