Should I Buy a New Home, or a Previously Owned Home?

This question's an easy one to answer:  It depends!  See!  Pretty easy!

Ok, all kidding aside, I'm a huge advocate for new construction.  My wife and I have owned 3 homes over the past 12 years. Two of those were new construction.  That shows my personal taste. However, there's always two sides to the story. You can't buy a new, 1907 Victorian home in Pleasanton.  You'd be hard pressed to find a brand new home in a neighborhood with 90 year old, beautiful oak trees. You probably aren't going to find a new home in Brentwood on a half acre lot.  So, who benefits from new home construction?  Who is buying them all...and why?


Here is a list of reasons that might compel you to buy a brand new home as opposed to one that is pre-owned.

• With little to no change in sales price, new home builders often offer choices as to color and styles of the features of your home. No, these aren't upgrades, but they're still choices. Carpet color, tile, vinyl, counters, cabinets, etc.  You'll often have 3 or 4 choices in each category to choose from at no extra cost.  
• Builders often use their own lenders, which gives me, as your agent, several opportunities to negotiate: 
• 1) The price of the home. 
• 2) The terms of the loan.
• 3) Closing Cost Credits
• 4) Design Center Credits
• In my family, we had little-ones crawling and rolling around on the floors. It brought us peace of mind knowing that not just the carpet was new (and in a color we loved)...but the carpet pads and sub-flooring was new as well.  No smokers, no pets, no allergies, and no spills that are going to resurface 4 months down the road.
• Competition: Typically you're not going to compete with several other buyers for the same house. You'll likely have the choice of many new homes and models, or even the same floor plan on different lots.
• When you buy a 35 year old home, you've got 35 year old...everything else...attached.  Infrastructure: In new home communities, you've typically get new sewers, streets, lights, and more.   
• Ahhh...the dreaded home inspection!  Everything is new!  What's to inspect?  With pre-owned homes, you've got those anxious days between the time you write an offer and the time you receive your pest and home inspections.  New home construction likely allows you to skip this step altogether.
• Appraisals?  Yes, your new home must appraise in order for a lender to fund, even on new construction.  That said, it behooves the builder to price their homes accordingly.  Have I seen a new home NOT appraise?  Yes...once.  In that case, the builder simply reduced the price to the appraised value.  
• Virtually all home builders will sell to FHA and VA buyers!  These buyers are typically well qualified and committed to the process.  
• Home warranty? It comes with one!  Wait...it comes with several: Foundation, Roof, Finish, Appliances...everything!
• You've got a builder's reputation at stake, and they'll stand behind you.  With pre-owned homes...the seller's likely moved on, and you'll never see or hear from them again.

I could easily create a list that's just as long and just as compelling advocating the purchase of pre-owned homes.  In fact, I'm sure I will.  However, at this point in my personal life, and with a young family in tow, I feel very peaceful living in a newly constructed home and I'm always at peace when I help a client negotiate a deal with a home builder.

Wait!  You mean...I help people negotiate deals with home builders?
Absolutely!  Countless times! Really, at this point I couldn't guess how many times. Often enough, in fact, that periodically simply accompanying my clients on their first visit to a builder's model homes pays huge dividends to the buyers. If I accompany a buyer to a builder's sales office, it often allows me the ability to negotiate on their behalf. I've negotiated upgrades, closing cost credits, appliances...even fully landscaped backyards...at no extra cost to the buyer.  But wait, do I get paid a commission?  Yes!  Well technically no. It's customary that the seller of a home pays both sides commissions.  In the case of virtually all new home communities, they aren't going to pay a commission.  They pay a marketing expense; a referral fee.  This is not a line item on your closing statement.  It doesn't come from the sale of the home.  It's paid by a different department all together.  Often the same one that pays for TV commercials, web presence, and print advertisements.  This mean that a) you do pay me, and b) I'm absolutely committed to giving you the very best service possible and negotiating aggressively and effectively on your behalf.

7 mistakes many new and veteran investors make when looking to secure income properties.

Are you looking at buying rental properties this year?

Here are 6 mistakes most landlords make…and you don’t have to.

I could sum up these six short but important points with two words: “Don’t wonder!”

1: Don’t “Wonder” what you should be purchasing: KNOW!

Do the research.  Don’t wonder what is best for you.  KNOW what you want.  Better than that, know what you should be buying in order to put you in the financial position that you are building toward. This is a huge step and must be the 1^st step.  It requires substantial research.  You have to be honest with yourself.  That said, when it comes to market research, ‘substantial’ doesn’t mean difficult. It doesn’t even mean that you have to do any of it yourself.  Call a Realtor or two.  Not only do they do it…but they do it all the time…for free!  Use this research to bring certainty into the process. Be sure to know what you should purchase, create a plan, and then stick to it.

• ·         Only spend the amount that makes financial sense.
• ·         Determine how much cash flow you need to make.
• ·         Never let emotion override the numbers. 

Be thorough in your internal ‘research’ as well as your market research.  Do you need your property to be local, or can it be in an area where lease prices are higher and home prices are lower?  Are you going to manage your rental(s) yourself or will you be using a property management company? Should you buy a condo?  A duplex? An older home? Is there new construction, with loan programs that provide easy AND responsible entry into the rental market? All of these questions, and dozens more, are vital to decide on BEFORE you get in your Realtor’s car to go house shopping. 

2: Don’t wonder how much should you spend: 

First, determine how much can you spend. Then determine how much you SHOULD spend. Do you have funds in reserves to update/upgrade/repair your prospective property? Do you have funds to cover months where you may have vacant properties? Find a lender near you that will sit down and discuss special loan programs?  Do you need to request a credit to cover closing costs when you write an offer? etc.

3: Don’t wonder what your prospective property will rent for:

Ask a Realtor, or a team of Realtors to draw up a lease/rental survey for the area(s) you’re looking to purchase in.  Also, and this is key, do a simple ‘rental survey’ of your own!  Often, Realtors use MLS exclusively to find rental properties for their clients.  At the time of writing this post, Oakley and Brentwood showed a combined 51 homes active on MLS.  Compare that to 181 homes for rent in the same areas on Craigslist.  Use ALL of the data you can.  It’s all relevant, and it should all be considered.

4: Don’t “Wonder” if the information you have on prospective homes is accurate

The internet is full of sites posting real estate listings online, but is that information accurate? Virtually all of the information you’ll find online is fantastic.  Very little of it is inaccurate, however, I have seen, and continue to see gross miss information on several internet real estates.  Beyond the miss information is the fact that the asking price of a property is based on countless variables.  If you don’t know those variables intimately you may end up heart-broken or worse….broke!

Each of these sites pulls data from the regional Multiple Listing Service; MLS, which all real estate agents have direct, live access to. However these online sites do not always pull the best, most accurate, most up to date information. For this reason, it’s important to get in touch with a local real estate agent that you can trust to get you the facts.  What is the rate of property tax rate on the property that you’re writing on? 1%? 3%?  Is the Home Owners Association really $485 annually, or is it actuall $485 monthly?

5: Don’t wonder what the seller is looking for:

Even the smallest part of an offer can land you the deal you’d been looking for. See, "How to get your real estate offer accepted."  proceeds, timing, a possible rent back, a quick close, a long close, inspections, etc. You/we may not know (although there are strategies to find it) the real motivating factor behind the sale of a property you may have interest in.  So addressing ALL possible terms of an offer will leave you with the best odds of having your offer accepted.

6: Don’t wonder what you’re getting: Due Diligence

If you’re not an absolute expert, or you’re not buying new construction, I strongly advise that you hire an inspector to perform a home inspection and a pest inspection.  Don’t let the market push you into buying without inspections unless you have sufficient funds to literally demolish your new home and replace it.  These inspections run in the range of $400 & $200 respectively.  You maybe be buying a 100, 200, $600,000 investment.  Don’t let a few hundred dollars stand between you and your security.

7: Don’t wonder if your new property is being cared for:

Use a property manager. Include Landscaping and/or housekeeping if you must, but don’t let your property go.  I personally know dozens of landlords with wonderful and respectful tenants.  That, however, isn't a guarantee.  Realize the the behaviors and actions of your tenant can help or hinder the value of your home, up to and including behaviors that may need to be disclosed to prospective buyers, in the event you choose to sell some day.

Now there are many, many more influences, considerations, and concerns to keep in mind.  I hope that this post has at least given you more tools than you had prior to reading it.  

Until next time, and thank you in advance for remembering me when the topic of real estate arises.

Andy Blasquez ~ The last Realtor you'll ever need to look for.
DRE# 01826135

www.andyblasquez.com

Email me at andy.blasquez@gmail.com
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Thank you always for your support.