The Pedigree of a New Home

Real Estate Agent with Kaminsky Real Estate Group/Shorewood Realtors

All builders are the same.

Wait a minute . . . that would be like saying children are all the same. They have the same parents, same upbringing, same household yet two kids from the same family and parents can often be completely opposite in personality and interests.  New homes throughout the South Bay also can be as diverse, even though they have similar beginnings. In our unique South Bay Real Estate market, values can vary dramatically, lot to lot, street to street, and builder to builder. It’s important to know where your new home came from!

Having built 2 homes personally for my family, as well as partnering in numerous building projects throughout the beach cities and selling thousands of homes over the past 24 years, I am often asked what the significant difference amongst the builders is locally and what does this mean when considering a home for purchase?

For the purpose of this post we are mainly referring to builders and developers in the South Bay, the area just South of Los Angeles, along the coast.  First and foremost it is important to understand the difference between a builder and a developer/general contractor.  What most commonly refer to as a “builder” is a licensed general contractor who hires subcontractors to build a home. They supervise the subcontractors; manage the entire building process from planning, foundation, framing and interior finishes. They are the ones you call when things go wrong with your home and you need them fixed. A builder is often paid, based on the cost of the project, either a flat fee or a specific percentage of the total cost of construction.

On the other hand, there are developers.  A developer is typically the owner of a particular building project. They are the dreamers behind the project. They raise the funds for the project, hire the builder and jointly supervise the project with the builder. The developer earns their income though profit in the project after paying the builder and subcontractors.  There are many cases when a builder who is a licensed general contractor will also be the developer, however not all developers are licensed contractors.

Developers are often risk takers who, quite often, have done well in another career and have ventured into the business of home development. They have seen others profit in construction and feel they can do as well or better than those they know. Having been through two Real Estate downturns, one in the early 90’s and again 2007, I have witnessed many developers turn their risk and reward to doom and gloom.  Many developers get on a roll and profit handsomely and then take all of their profit to buy more projects. They don’t see an end in sight and continue the process, leveraging along the way. If they are caught with a sharp decline in pricing when a project is complete it is easy to lose ten years of profit in just one short year. The years that have passed since 2007 to now have certainly wiped out quite a list of these developers.

However, not all faltered and fell by the wayside. There are also quite a few that pulled some of their chips off of the table and slowed their buying and construction projects in time to save the profits they worked so long and hard for.  Telltale signs of smart developers and quality builders pepper the streets & neighborhoods from El Segundo to Palos Verdes. With a little knowledge, you can learn to recognize the work of the developers and builders that invested in quality projects vs. those that pursued base line “spec” projects.

Whether you support or oppose new construction in the community, knowing who you are buying from is very important. When looking for a newer home in the area you will often note that the realtors will commonly state who the builder is/was. Once you become alert to this trend, you will also notice that sometimes there is no mention at all of the builder. Certain builders and developers have earned a local reputation for being premium, quality builders while others have earned a less prestigious reputation. Buyers often ask what makes one builder better than the next. The key differences are finish quality and overall design. There are builders that have a keen sense for design, much like a professional design firm, while other builders have somehow overlook the fine nuances of design altogether.  In a rapidly appreciating Real Estate market almost any builder can build a home that meets city guidelines, sell it, and turn a profit. The question is: will the home stand the test of time?

Photo of a new home under construction in East Manhattan Beach New construction in East Manhattan Beach

Sometimes the quality of finishes can be difficult to detect for a novice buyer. The biggest challenge is the installation process that is used for many items, including but not limited to, flooring, tile, and granite. For example if the proper installation of tile is not used, normal settling can occur, however the cracks that normally form in slab work can make its way to the finish tile. Although the installation may meet city code it may not withstand normal settling issues. 

There are also numerous, completely undetectable materials in homes that can vary in quality, such as; the thickness of drywall used (which is either ½ inch or the higher quality thickness of 5/8 inch drywall). Thicker drywall will withstand the normal movement in a home much better than ½ inch will. With insulation there are many walls where it is not required by standard building codes, but some builders will go the extra mile to insulate those areas that are not required by simple code in order to help with sound control, as well as to promote future energy savings.

The lists of these types of upgrades are endless. The important thing is to ask questions of your agent and builder. Be sure to ask for references about the builder that built the home you are about to buy. Are they still in business? Are there warranty items that are still within their responsibility? If there are warranty items, how has that builder responded to the requests in the past? How does the general Real Estate community feel about the builder that built the home? Do they speak positively about them or negatively?

It has been proven that certain builders can demand a higher price for what appears to be the exact same home that another builder has built.  It is certainly OK to buy the more inexpensive home, especially when budget is a large factor in your decision. My recommendation when considering a newer construction home and examining future equity reserves is to just be very aware that your 3,253 square foot Mediterranean home built in 2006 by builder B may realistically sell for less than your neighbor’s 3,253 Mediterranean home built in 2006 by that was built by builder A.

Armed with that knowledge, you will be able to make a more sound decision when either buying or selling a home in the area. The South Bay is very unique as the newer homes are not built in tracts like many new home communities throughout the nation. New home communities are much easier to analyze as they are typically built by the same builder, with the same quality and are much more clearly compared side-by-side.

When considering any purchase, whether it be a newer construction home or an older, historic one, be sure to ask questions and demand logical answers! It makes home ownership and planning for the future a much more positive experience.

View all new construction currently for sale in the South Bay by visiting our custom home search.

Comments (2)

Eileen Hsu
Douglas Elliman Real Estate - Manhattan, NY

I found this post very insightful.  If I was a buyer looking for a new construction home, I would definitely want to know who the builder of the house is, for exactly the reasons you mentioned.  Getting a name brand home can certainly help for resale because of the name and the reputation behind it.  Who cuts corners, who puts in those higher end materials that will increase my quality of life over time.  I find that if you look at enough product you will eventually be able to tell the subtle differences between a real quality product and the alternative.

Aug 11, 2011 03:10 AM
Ed Kaminsky
Kaminsky Real Estate Group/Shorewood Realtors - Manhattan Beach, CA
Ed Kaminsky

Yes, depending on your market this can sometimes be very obvious and sometimes very difficult to decipher. Our market doesn't have a lot of new home tracts and PUDs. We have more "spec" homes with 4,000 sf mini-mansions right next door to 900 sf turn of the century beach cottages. I could only imagine that in more recently developed markets that house to house, upgrade to upgrade, comp-ing those properties based on builder repuation can be a similar challenge on a whole different scale.

Aug 12, 2011 01:08 PM