Pros and Cons of Buying a House That Is Still Under Construction
The home inventory shortage is making purchasing a home still under construction a normal financial decision. The National Association of Realtors (NAR) says that the country is facing a sharp decline in available housing to purchase. The NAR report includes housing such as condos, castles, and everything in between.
Once again, this shortage is stemmed from low-interest rates and high buyer demand. Soaring home prices and low listings mean this is a seller’s market. Professionals in the industry are seeing 20 to 30 offers on the same property. In fact, buyers are willing to put a contract on a homesite and wait up to six months to close and start construction.
A new construction home purchase is a lot different than purchasing a traditional resale. The biggest difference is that you are purchasing a home that does not exist yet. The seller is the builder or a company instead of the owner of the home. If you are closing on a home that is not yet built, you will not be able to obtain a traditional mortgage instead you would pay cash or finance the land purchase at the beginning and then take out a separate construction loan to build.
One of the biggest benefits of new construction is a buyer will get a brand new never lived-in home. A buyer will not have to battle the market and get outbid on an existing home. If you get in at the beginning you can have a say in your home design.
On the flip side, there is a chance that the construction of your new home is terrible and there are delays on materials and workers. “If you’re not buying from a really good builder, the odds of problems cropping up increase substantially,” Sheehan says. “It’s quite important who is doing the work,” says Realtor Joey Sheehan.
If you do decide to go this route, do your homework on the builder. Go to some of his existing projects and get testimonies. Remember open communication is the key, stay in communication with your builder and record both verbal and written conversations. New construction is an exciting way to go, especially in today’s housing market.
