If newly constructed homes aren’t in your toolbox, it’s time to take another look. Newly constructed homes weren’t a consideration when Florida attorney Jeff Kasky began looking for a move-up home.
However, it didn’t take too long before he realized that a newly constructed home was just what he was looking for.
“It was just not that easy to find resale homes that had the space we needed in our price range,” he says. “My challenge was I needed a certain type of house. We have four kids in a blended family and wanted a place that would accommodate everyone.”
Although new communities are blossoming in South Florida, Kasky says his agent never suggested new construction as an option. Instead, he just happened to come across a new community in a desirable Delray/Boca Raton location and a home that was a perfect match.
If, like Kasky’s agent, you haven’t added new construction to your tool box, you might be like a lot of consumers who still believe new homes cost more and are in less desirable locations. And, rather than bringing fewer commission dollars, many agents say new construction today has a much higher return than in the past.
“Twenty-five years ago new construction was cheaper and cookie cutter, but it’s evolved,” says Janice Leis, a broker with Prudential Fox & Roach in Philadelphia, Pa., and Prudential Florida Realty.
Recently Leis sold a home to a couple looking for a move-up property on Philadelphia’s Main Line. With the recent upswing in prices, a resale would have easily been $1.5 million, out of their price range. Instead, Leis took them to a new community where she says they found “the home of their dreams” in a location easily commutable for both, with excellent schools and their desired Main Line address for $850,000.
Signs, Signs, Everywhere a Sign
Not every buyer is a candidate for new construction, so it’s important to pay attention to clues your clients give so you can identify early on when new construction will be a better match over resale. From the beginning, experts spend time with prospective buyers discovering both their wish list and “must have” home features. Budget is only one consideration.
“If they are looking for something spacious, we know immediately that they are going to new construction,” says Cynthia Rhodes with the Rhodes-Porter Realty Group in Augusta, Ga. “New construction has doubled in size here. By 2008, the largest home was around 2,700 square feet. Now they are building 4,000 square feet as a norm.”
Also, Rhodes adds, if potential buyers want granite countertops and other amenities, new construction will appeal to them.
In areas such as New York City, simply wanting a washer and dryer in an apartment might require new construction. Classic prewar apartments, often dating from the 1890s, are what buyers often envision, but once they shop around they quickly discover many prewar buildings don’t match their desired lifestyle.
“Go figure,” says John McGuinness, owner of Harlem Properties in New York City. “You buy a $1 million-plus apartment and it doesn’t have a washer and dryer. The pipes can’t handle the soap. Garbage disposal — can’t have it. Certainly you do get tall ceilings, big windows and lots of space, but no parking or central air conditioning. Potential buyers may start out in love with the mystique of the prewar apartment, but when reality sets in, they want a new building with central air, iPod docks and a washer and dryer.”
Layout is another tipoff. A master suite on the first floor or two master suites — one on each floor — are more likely to be found in new construction, as are open floor plans. More than aging baby boomers are driving this trend. Culture also plays into which home plans might be more desirable, says Sonal Basu, a Redfin agent in the Bay Area. “In Silicon Valley, we have a lot of different cultures and many like to do their socializing in an open living-dining area.”
One result of the economic downturn is that new homes today are more aligned with consumer priorities. “The builders have gone through a large shift driven by factors like demand, funding, land cost fluctuations and skyrocketing material costs,” observes Charlie Laurens, managing broker for the Holland Road office of Rose and Womble Realty in Virginia Beach, Va. As much as prices, these factors, according to Laurens, “drive the need for builders to be smarter and more intuitive to what today’s homebuyer values and wants.”
Whether or not buyers are handy is also an important clue, says Basu. “A lot of our buyers are tech savvy, but they may not be handy.” Also, she finds many are not aware of the advantages of new construction, such as compliance with new building codes or with new energy ratings.
Basu considers educating consumers on these aspects of new construction an important part of an agent’s job. In her market, bidding wars for resale homes are not uncommon, which means that potential buyers are never sure what they will pay. With new construction “you’re getting the listed price. You know exactly what you are getting.”
Getting What You Want For Less
Buyers themselves often assume new construction is going to cost more. However, as in the instance of Leis’ buyers, once the price of a top location is added on to the cost of renovations, such as knocking out walls and upgrades, the resale value equation shifts.
Crystal Stemberger and her husband keep a close eye on their finances and spend accordingly — in just six years, they paid off the mortgage on their first home. An existing home seemed the most cost-efficient move-up home. However, during their search, they came across an open house for new construction. At $330,000, the home, while “amazing,” was way over their target price, Stemberger says. This is not an unusual scenario, says Leis, since prospective owners will often look at a model home and will assume the home or community is not for them if they don’t see exactly what they want.
However, Stemberger’s agent also viewed the model home with them. She called the builder to see if there was something else they could look at. In the end, says Stemberger, they ended up with a “more affordable floor plan that was just perfect for them.” During construction, the Stembergers were able to add custom features, including opening a study to the foyer. They also added spaces on their wish list, including a game room and a media room. The eventual cost was $261,000, well under the price of the model.
In the end, “it’s all about catering to the client (and understanding that) not every client is into resale,” says Basu. “I am appreciative that a lot of the contractors decided to build in my area, because it’s an alternative that I can turn my clients on to.”