Top 6 Reasons to Stay away from New Construction Right Now!

One other issue - developers have spec homes done and in inventory - they have stopped any new construction, and existing homeowners are upset that the developer have YET to put in the POOL or Tennis Courts for community amenities......that has happened here in my area.....kinda scary!

Wow - I'm not sure that I agree with this advise.  Builders need to move inventory to help the market absorb and correct itself.  When this happens it will help the resale market improve too.  Certainly I agree, be cautious of buying a home that is 6 months out but there is nothing wrong with buying standing inventory.

 Also, deposits are held in an escrow account.  They are not the property of the builder - the escrow company would be required to return it to the homebuyer in case the builder goes out of business.  I think that better advise would be to make sure that the homebuyer has an open escrow and a receipt showing that the deposit was made into the escrow account.

This is not a them against us situation - we are all in this together.

Kory, the market here in Brevard County is dead, builders have hundreds of spec homes they can't unload, they keep reducing the prices and still no takers, YET they still continue to start developing new communities.  I don't understand that mentality.  If they can't unload what they;ve already built, why are they still building?  Their excess inventory is the main reason private home sellers can't get their homes sold.  Who can compete with 2% financing and free granite countertops?

Here in Maryland the market is somewhat stable. Homes under $500k are still selling. The more expensive homes are very slow. Building communities of 350k or less are selling quickly. The incentive are incredible but I am not sure how many builders are holding true to their word on these incentives.

New home starts are slowing down some, but I haven't had any builders not wanting to return the deposits as yet here, but I will be keeping my eyes out.

Kory,

I agree! The problem I see in Seattle is construction flaws. There doesn't seem to be a project in town that makes it through the 1st 5 years intact. This place looks like Shrink Wrap City. When it comes to condos I advise my my clients to buy a unit in an older, solid building and the redo the surfaces with the money they saved.

 

 

Kory,  I work for a builder and we are looking at weeds!  We have a couple of model homes, but nothing is moving...typical right now for Michigan. A couple of builders have gone owt of business lately. I feel like I am spinning my wheels here, going nowhere soon.

I AGREE!!  Here is SW FLorida it has become scary for new homebuyers and builders.  A really bad time financially and too much money has been shuffled around trying to keep things afloat....egads! Regards-Kathleen G.

Thanks for the warning. Although I haven't personally experienced that here in NJ I will certainly watch out for it.

Hey Kory. You're bringing me down, dude. Why is this listed under AR Comedy Club group? Good info, otherwise.

Kory, I especially agree with #2 -- a community we both know well had nearly shut down operations for quite a while, and the home that I was once under contract for myself (at $275k) and schedule to close in Nov 2006 has just recently been started, should close this month finally, and was re-contracted to someone else for $220k.

Meanwhile, the neighborhood gets to look at an empty dirt patch across the street where the 'other' side of the road is supposed to be full of homes by now. 

...but I'm sure they're not charging HOA dues to these poor homeowners, right?   ...right?   (ahem)

---With that said, I'd be careful to not steer anyone away from new construction for a couple of reasons, so long as your buyer understands that it may take much longer for that community to fill out than they have once expected.  The quality of most big builders is the same as it was years ago (for better or worse!), and many of them are realizing that the fast market is gone, so many of them are taking more time on the homes than they were during the boom.  With prices dropping, you can take advantage and load up on incentives like you could never expect to do in resales, and then there's the huge commissions some of them offer to agents, too!  Keep those options in mind when searching for a home...

I love new home construction, I advise my customers not to build or do preconstruction in this market. Getting in one the last model or two in a community is key. Close usually in 15 days and get the losest price in the community. There is always a way to get the deposit back. I even received my $29,000 deposit on a deal with a builder that I personally had, some are harder then others and some require lawyers but it can be done. Also builders are allowed to hold the money where ever they want they are not part of the real estate board and do not have to abid by our rules so buyer beware with that aspect.

Property taxes are always low in the first year when new home construction is purchased until the property is reassesed so they enjoy a tax break at first.

We had the same "deposit" problem with some builders when prices were climbing, a few were looking for any reason to  kill the deal so they could sell to someone else at a higher price.  In Florida the builder can collect and hold the deposit we do not have the escrow system that some other states have. I would bet it's the same few builders now trying to force a buyer to stay in an over priced contract.  Take a sellers agent with you if you are buying from the developer to help write the contract or have an attorney. Most builders would not stoop to those types of practices.  

HI,

I WOULD LIKE TO AGREE YOU HAVE VALID CONCERNS TO NEW CONSTRUCTION PROBLEMS.

I THINK THERE IS NO BETTER TIME FOR CUSTOMER TO TAKE ADVANTAGE OF BUILDER CLOSE OUTS!  MANY OF THE CONCERNS RAISED IN YOUR COMMENTS CAN BE OVERCOME WITH FUNDS BEING ESCROWED AND/OR BOND BEING OBTAINED.

THIS TIME IS A RARE OPPORTUNITY FOR THE CUSTOMERS TO SCOUP UP THE SAVINGS AND FOR REALTORS TO LOOK TO A GREAT 2008! REMEMBER! WE ARE THE PROFESSIONALS WHO SET THE TONE FOR THE SALE! ATTITUDE TO OVER COME ANY ADVERSITY IS THE KEY TO SUCCESS. ATTITUDE IS EVERYTHING!

BEST TO ALL! MAUREEN

Clarksville, TN is still a good area to buy a home.... We are down alittle, but not like other areas......

in my marketplace new construction very often means homes built within the last 12 months which have yet to sell, but have never been occupied. they are sold at market or less and can be a very good buy.