3 Reasons You Might Regret Buying New Construction
New construction isn't necessarily the great idea you think it is.
- There are benefits to buying new construction, like getting to customize your living space.
- But there's a downside to buying a newly built home, and it's that your costs may be higher than you bargained for.
There are plenty of good reasons to purchase a newly built home. For one thing, you may get a chance to customize different features to suit your taste. And when you buy new construction, you get to move right in. You don't need to worry about renovations or upgrades because you can take care of those during the construction process.
But new construction has its drawbacks, most of which are financial. Because a newly built home will generally cost more than a comparable existing home within the same neighborhood, you could get stuck taking on a larger mortgage. And that's just one downside. Here are a few more reasons you might regret your decision to buy a newly built home.
1. You'll be charged for every little upgrade
Getting to choose your flooring, kitchen appliances, wall colors, and countertops during the building process means your home will look and function the way you want it to from the moment you move in. But make no mistake about it -- you'll probably pay a premium for those upgrades.
When you renovate an existing home, you get the option to price out renovations and shop around for quotes from different contractors. When you make upgrades during the new construction process, you're forced to pay your builder's price if you want the work done up front. And usually, that will mean paying more.
2. You could face delays that cost you
When you buy an existing home, you get the reassurance that comes with that home already being built and ready for occupancy. When you buy new construction, there's always the potential for delays. And that could cost you in a few ways.
First, if you've locked in a competitive interest rate on your mortgage, after a period of time, that rate will expire. You can generally extend it, but at a cost. And if your new home is delayed, then you may have to keep paying to keep your favorable mortgage rate in place.
Also, delays in new construction could mean having to move twice -- and pay twice. Say you're giving up your apartment lease to move into your new home and there's no option to renew it. If your new home isn't complete by the time your lease expires, you may have to first move to temporary housing, and then move again once your home is finished.
3. You'll probably have higher property taxes
Newly built homes tend to get assessed at higher values than existing homes, even if those existing homes are loaded with upgrades. And a higher assessment means a higher property tax bill.
Property taxes are calculated by taking a home's assessed value and multiplying it by whatever local tax rate applies (local tax rates vary by city/town). If a newly built home is assessed at $600,000, and a comparable home around the corner is assessed at $500,000 because it's not brand new, the $600,000 home will have a higher property tax bill attached to it.
Should you buy new construction?
Buying a newly built home could work out well for you, especially if you have very specific tastes and don't have the patience to tackle renovations. But before you make an offer to buy new construction, be aware of the drawbacks involved, and make sure you're really ready to run the risk of taking on higher costs outside of a larger mortgage.
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