Buying a new construction home can be very exciting. Who doesn't love the idea of settling into a beautiful modern residence with all the conveniences you could ever need and maybe a breathtaking view?
Although, don't let the expensive price tag and promises of luxury fool you. Not all new builds are created equal, and some miss the mark when delivering what they advertise. So before buying a newly built home, it's important to do your due diligence to ensure you're getting what you're paying for.
If this is your first experience purchasing new construction, you may not know exactly what to look out for and what red flags to avoid. To help make it easier, here is the step-by-step process of buying a new construction home and a checklist that you can use to ensure you're making a wise investment.
1. Research the Developer
First, you'll want to do some research on the developer. Don't assume that just because they're a big name it means their work is quality. When you're buying a new house from a builder before the project is finished, you're taking an added risk compared to purchasing a resale home.
Doing a bit of upfront research can save you from buying a property that doesn't live up to your expectations or getting stuck in limbo with no completion date in sight.
Things to consider when researching the developer:
- What other projects have they done?
- Were the projects successful?
- Do they have any outstanding lawsuits?
- What do the online reviews say?
- Are there any disgruntled homeowners complaining about them?
Any developer worth their salt will have a proven track record and proof to back it up. So, if your research reveals anything concerning, it's best to keep looking.
Evaluate the Location
Next, you'll want to carefully consider the location. The neighborhood and what’s going on in the surrounding areas can have a major impact on the value of your home in the future
So when purchasing a new construction home, don't just focus on what the neighborhood is like today, consider how it may change in the coming years and whether it's on the rise or in decline.
According to Undivided's founder, Mukul Lalchandani, "You can tell when a neighborhood is up and coming by looking out your window or at the skyline. If you see cranes and a number of buildings under construction, it means that the area is likely going to see further development growth. This can have a long-term positive impact on resale value and an improvement on the quality of living experience locally."
So, in addition to finding a neighborhood that offers the kind of lifestyle you want to live, consider the community's potential growth and whether it's showing signs of a positive outlook for the future.
3. Think About the Layout
The layout is another critical factor when purchasing a new home from a builder. The floor plan is especially important in a city like NYC, where prices are very high and every square foot counts.
Avoid any floor plans with wasted hallway space or random columns in the middle of the living room. This creates unusable living space, which comes at a major financial cost. Also, stay away from basement units. Basement rooms can't be considered legal bedrooms, and they have a higher risk of flooding. So, it's an added liability without much benefit.
Another important factor to consider when buying new homes is the direction of the unit. In NYC, many people want a unit that faces south, but in our opinion, that isn't always ideal. South-facing units can get very hot and sunny, especially in the summertime, to the point that they can become blinding.
East-facing units are better if you're a morning person while west-facing units are best for night owls. So consider your preferences and lifestyle to find a space that best suits your needs.
4. Research The Air Rights
If you want to be sure your view is protected, you may also want to look into who owns the air rights to neighboring properties. You will often find large towers on the corners of NYC blocks because developers can buy the air rights of buildings next door to build up beyond their allotted limit.
Sometimes you’ll see a newer building cantilevered over a smaller brownstone walk-up. This is because the developer was able to get the air rights and build over the smaller building.
Purchasing the air rights can allow developers to expand the building beyond what would normally be allowed due to local zoning regulations, but it can also be detrimental to homeowners. If another developer buys the air rights above a nearby property, a new building could suddenly spring up and block your view.
Many savvy developers will purchase those air rights in advance to prevent this from happening and devalue their buildings. But it's worth investigating whether this is possible when buying a newly built home.
5. Choose the Right Amenities
Carefully consider the shared amenities in the building and check the appliances in your unit to be sure you're getting the best deal. Everyone wants a new build with state-of-the-art amenities, but depending on the size of the building, more isn't always better.
The cost of maintaining the amenities is split evenly amongst the homeowners and included in your monthly carrying costs. So, in larger buildings, you can get away with more amenities because there are plenty of other people to share the bill. But in smaller buildings, the burden on individual homeowners is much higher, and therefore, it might not make sense unless you plan to use those amenities frequently.
For instance, everyone wants a swimming pool. But they can be expensive to staff and maintain because you need cleaners, lifeguards, etc. So you probably don't want a pool in a smaller building unless you're an avid swimmer and plan to use it frequently. You want to buy in a building where the monthly carrying costs are reasonable for the size of the building, so there isn't an undue burden on individual homeowners.
6. Check the Appliances
Verifying the condition and quality of the appliances is also essential when buying a new construction home. If you're paying top dollar, you want to be sure that you're getting your money's worth.
Things to Know Before Closing on a New Construction Home:
- Do the appliances come with a 1-year warranty at the time of closing?
- Is the water pressure consistent and strong?
- Are the appliances full-sized or are they compact city models?
- Are the windows double-paned? (avoid homes that look onto a busy street even if they are)
The quality of the appliances can make or break your daily living experience, so be sure you're getting what you paid for.
7. Consider Taxes and Appreciation
When buying a newly built home, it's wise to consider how the property will appreciate to ensure your investment will pay off in the future. Certain types of homes tend to increase in value more than others. For instance, studios are great for cash flow if you're an investor, but they make a poor starter home and tend not to appreciate well. So, it's best to start with at least a one-bedroom if you have the budget.
It's also best to avoid homes with unique layouts, such as open-concept spaces, oversized layouts, duplexes, or units with a home office. Most people like standard layouts, so these unique floor plans often don't appreciate as well as your standard one or two-bedroom. There will always be exceptions to the rule, but in general, it's best to avoid any unconventional layouts unless they offer something really special to justify the uniqueness.
When you buy a house under construction, it's also important to remember that the taxes will likely go up after the first year. This is because the city doesn't assign the tax lots until after the closings have started. So be aware and make sure to budget accordingly.
Knowing what to look for in a new construction home is a great first step. But navigating the homebuying process with confidence is something else entirely. Luckily, Undivided can help…
