4 Reasons Why New Construction May Not Be a Great Idea

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Thinking of buying new construction? Beware these pitfalls.

When my husband and I decided to upgrade from a starter home to a larger one a little more than a decade ago, we didn't initially set out to purchase new construction. But when the opportunity to buy a newly built home -- one we could customize ourselves -- came upon us, we decided to go for it.

I can say from firsthand experience that buying new construction is a mixed bag. Sure, you get the benefit of having brand-new fixtures and appliances, and for the first few years, your repair costs may be minimal.

But new construction homes aren't perfect. Here are a few reasons why buying one may not be the best move.

1. You may spend a lot more than you want to

New construction almost always costs more than a comparably sized home within a given neighborhood. If you buy a newly built home, you're likely to have to take on a higher mortgage to swing it when instead, you may be able to buy a similar home that isn't brand new at a lower and more comfortable price point.

2. You may be lured by too many upgrades

When you purchase a newly built home, you'll often be given the option to upgrade certain features before construction begins. While that may seem like a good thing, it also means you might bust your budget to make those special customizations. When my husband and I built our home, we wound up adding almost $20,000 worth of upgrades, and in hindsight, some of them weren't necessary.

3. You may get stuck with sub-par building materials

The old saying "They don't build them like they used to" can easily apply to many of today's new construction homes. For example, we have polyethylene pipes in our basement that have, over the past decade, burst on us more times than I can count. But because that material can be cheaper than copper piping, a lot of builders use it today.

Now one thing you can do to protect yourself as a new construction buyer is ask for a list of materials that will be used in your build, and have that incorporated into your real estate contract. But some builders may not be willing to commit to that sort of thing up front.

4. Your property taxes could be a lot higher than expected

Just as newly built homes are generally more expensive to buy, their property tax bills tend to be higher than similar-sized homes in the same neighborhood -- even if those homes have all gone through updates since they were constructed. Plus, when you buy new construction, you may get an estimate of your property tax bill, but many towns won't finalize that number until the home is complete. As such, you may get a property tax estimate of $4,000 a year that becomes $4,600 by the time you're able to move in.

Buying new construction can certainly work to your benefit. Just be aware of these potential issues before taking that plunge.

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