Advertiser Disclosure

advertising disclaimer
Skip to main content
kitchen in progress.jpg

4 Reasons to Avoid New-Construction Homes


[Updated: Jul 22, 2020 ] Mar 11, 2020 by Maurie Backman
Get our 43-Page Guide to Real Estate Investing Today!

Real estate has long been the go-to investment for those looking to build long-term wealth for generations. Let us help you navigate this asset class by signing up for our comprehensive real estate investing guide.

*By submitting your email you consent to us keeping you informed about updates to our website and about other products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms & Conditions.

If you're looking to buy a home, you may have your eyes on new construction. And there are plenty of good reasons to buy new. For one thing, you're guaranteed, to a certain degree, that things won't break down for a certain period of time, whereas when you buy an older home, you may not know exactly how much time the roof or heating system has left.

There's also the option to customize a home that draws many buyers to new construction. In many cases, you'll have the option to choose your flooring, countertops, and in some situations, even your home's layout.

But while new construction may hold its share of appeal, there are plenty of drawbacks to buying that type of home. In fact, you may be better off staying away from new construction for these key reasons.

1. Construction is often delayed

When you buy a home someone has already lived in, you don't need to worry about when it'll be inhabitable. But when you buy new construction that isn't complete, there's always the chance that the building process will get delayed, leaving you scrambling for temporary accommodations.

For example, you might give your landlord notice that you're moving out of your rental, thinking your new construction property will be ready for occupancy on July 1. But what if, come mid-June, your builders encounter a hiccup and your closing date is pushed back to August 1? If your existing home has already been rented out, you're out of luck.

2. Materials are often builder-grade

It's common practice for new-construction homes to feature builder-grade materials. And in real estate speak, builder-grade is basically just another name for cheap. As such, you may not end up getting as much value as you'd expect with new construction -- especially if you're forced to update your home in a few years when things start to wear down or break on you.

3. Upgrades can be costly

When you update a home on your own, you get the option to bring in contractors and gather quotes in an attempt to have renovations done as affordably as possible. When you want to upgrade the features in a new-construction home while it's being built -- namely, to avoid getting stuck with builder-grade materials throughout -- you're generally limited to the cost your builder is quoting you, which could get quite expensive.

Of course, there's always the option to stick with what's included in your home's purchase price and upgrade down the line. But when your kitchen is being built from scratch, it makes little sense to swap out your cabinets and countertops a year later.

4. Your property taxes could end up being higher than expected

It's easy for a tax assessor to determine what an existing home is worth. A new-construction home, not so much. When you buy new construction, you'll often get a property tax estimate based on what neighboring homes are charged. But ultimately, your town may not be able to provide an official assessment until your home is complete, and if your resulting property taxes are much higher than anticipated -- and, as such, unaffordable -- you're basically stuck.

Buying new construction isn't always a bad idea, but be sure to understand the pitfalls and risks involved ahead of time. Depending on your circumstances, you may decide that while having a brand-new home would be nice, it's ultimately not worth the many drawbacks involved.

Got $1,000? The 10 Top Investments We’d Make Right Now

Our team of analysts agrees. These 10 real estate plays are the best ways to invest in real estate right now. By signing up to be a member of Real Estate Winners, you’ll get access to our 10 best ideas and new investment ideas every month.

Find out how you can get started with Real Estate Winners by clicking here.

The Motley Fool has a disclosure policy.