New Construction vs. Existing Homes

Due to the national housing shortage, many buyers are choosing new construction over existing homes. In this hot market, many buyers find themselves in multiple offer situations. These “bidding wars” usually require buyers to offer and pay well over asking price for an existing home that often needs updating and/or repairs. With a new construction home you can often choose your paint colors, countertops, flooring, cabinets, brick, appliances etc. Buying a brand new home with modern finishes, current energy efficiency standards, new appliances, and a builder’s warranty can be worth waiting for if the home is in the process of being built but not complete.

How do you proceed with purchasing a new construction home? First, you need to get pre-approved with a lender to see just how much home you can afford. Second, you need to choose a builder and a lot. Many builders will build on one of their available lots that you can choose from, or a lot you purchase to build on. Often there are no extra out-of-pocket costs to purchase new construction vs. buying a pre-existing home, but it depends on the type of new construction you plan to buy. There are several differences between a custom builder and a tract builder.

Tract builders often have their own “preferred lenders” that will help you get pre-approved to purchase. They also give buyers the ability to choose from a few pre-selected options such as paint colors, light fixtures, appliances, flooring, countertops, etc., but only during the early stages of construction. Once a tract home is finished, the builder usually will not make modifications to the home. During or before construction begins, requests for modifications such as changing a bathroom layout by removing the tub for a walk-in shower may require a higher, non-refundable earnest money deposit. Many tract builders now have a policy not to make any significant changes to the floor-plan at all.

On the other hand, a custom builder will build whatever design you want on one of their lots or a lot you purchase. With a custom builder, if you pay with a loan, your builder will be given payment draws from your bank as construction progresses. You and your contractor will develop a plan of action and agree on materials, and a timeline. Afterwards, if you make significant modifications to the floorplan, materials, etc. the construction costs could significantly increase. A custom design is often more expensive than a tract builders pre-designed new construction home, but there’s more flexibility with design changes.

Whichever type of new construction home you purchase, your builder should offer a final walkthrough to address any imperfections, touch ups, etc. that need to be addressed before closing. This “punch list” that you and your builder create will ensure the construction is exactly what you expected and that you are satisfied with the final product. In the state of Mississippi, a builder is also required to include a 12-month builder’s warranty which will cover any issues that may arise with the home during your first year of homeownership.

If you are looking to purchase new construction, or an existing home, I can walk you through the buying process and answer all your questions. Give me a call or text anytime.

Paul Williams, Realtor

Cell: 228.861.2928

Office: 228.357.5888

PaulNextHome@Gmail.com