New Home or Resale for You?

No matter what items a home buyer has on their wish list, they are typically constrained by the home price. As a result, the buyer is often limited in their choices. Accordingly, buyers prioritize home features and benefits when comparing homes. Deciding between a new home or resale becomes a part of the buying process.

Nonetheless, home buyers often have a choice between a new home or resale. Besides the allure of contemporary design and modern building materials, the benefit of new construction is the minimal maintenance during the first year of ownership. Although many home buyers desire to buy new construction, the combination of their budget and criteria lead them to a resale home.

A resale refers to a home that is being sold by a home owner, rather than the builder. The average age of a resale home can vary depending on the location. It’s not uncommon to find a resale in a new home development. However, when resale comes to mind, most think of homes where they grew up.

Although the home buying budget is a main consideration, there are other reasons why home buyers decide to purchase a resale rather than new construction. One of the main reasons, as stated above, is that the resale fits their criteria for price, location, size, etc. It’s typical to get more house and yard when purchasing an older home, when compared to a new home of similar price. Resale homes tend to be located in established neighborhoods, whereas new home developments’ amenities are often not yet completed.

Regardless, some home buyers are attracted to older homes. It seems as if there is a correlation between a home’s age and the charm it exudes. The older the home, the more likely a home buyer is captivated by its charm. When explaining a home’s “charm,” buyers usually describe a combination of style and craftsmanship. They often refer to the saying “they don’t build them the way they used to.”

Although most home buyers want a turn-key home, some buyers find opportunity in older homes that are in need of repair or updating. These buyers feel they can create a home that meets their needs and lifestyle without breaking their budget.

When buying a resale, don’t expect the home to be perfect, even if the home is relatively new or has been renovated. There is no getting around the fact that living in a home promotes wear-and-tear. Consider that a home is made of many components each having a limited life span. Regular maintenance can prolong a home’s life. However, you will eventually have to replace components and systems.

Resale homes are not maintenance free, and deferring maintenance creates costlier repairs. Experts recommend that you have a repair budget. You shouldn’t just budget for regular maintenance and repairs, you should also budget for future updating. Ask your agent about a home warranty that can help you with repairs on a fixed service-call fee. Get a thorough home inspection. Home building has changed dramatically over the last one-hundred years, so make sure you hire a licensed inspector that is knowledgeable with the engineering and materials in your home. (Keep in mind that home inspectors are not perfect, so there may be a chance of finding conditions that eluded the inspection.) Even if the home appears to be in good condition, the inspection is likely to find items in need of repair. You and your agent can decide on the best negotiating strategy of inspection repairs.

Original article is published at https://dankrell.com/blog/2019/12/15/new-home-or-resale-for-you/

By Dan Krell
Copyright© 2019

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

January 3, 2019December 13, 2022

New home diligence

It’s understandable that new homes are alluring. After all, newly built homes are modern and efficient. And there is the idea that new homes require minimal maintenance for the first year of ownership. But new homes are not flawless.

Last week’s Florida’s Attorney General home builder settlement is the latest reminder that new home buyers need to exercise due diligence. The multi-million-dollar settlement with PulteGroup, Inc came after a two-year investigation. A simultaneous complaint alleges that the home builder violated the Florida Deceptive and Unfair Trade Practices Act by: failing to disclose to certain home buyers in Florida that the homes were being constructed in violation of applicable building codes; unfairly denying certain homeowners’ repair claims for various reasons: unfairly denying certain Florida homeowners’ repair claims without performing an adequate inspection of the home; and unfairly withholding a customer’s deposit in certain instances. The details of the settlement can be found in the Florida AG’s December 28^th news release (myfloridalegal.com).

This settlement comes two years after the Florida AG entered into a settlement with KB Home in 2016 for similar alleged complaints.

Home builder complaints are more common than you think. In fact, Home builder complaints occur throughout the country alleging violations that may include (but not limited to): code violations, improper warranty denials, and improper handling of deposits.

Maryland’s Attorney General fined NVR Inc in 2012 because it was alleged that required warranty protections were omitted from their subsidiary new home contracts. A number of other home builders were fined that year for failing to register with the Consumer Protection Division’s Home Builder Registration Unit. And in 2016, the Maryland AG filed charges against a Rockville home builder for alleged violations of the Home Builder Registration Act, the Maryland Express and Implied Warranties Act, and the Consumer Protection Act. And more recently, the Maryland AG filed charges in September against a Baltimore County home builder for allegedly “failing to comply with Maryland’s Home Builder Registration Act, Consumer Protection Act, and the Custom Home Protection Act.”

Unfortunately, many home buyers let their diligence lapse when buying a new home. New home builder reps are friendly, helpful and often appear to be on your side, so it’s understandable how a home buyer may misconstrue the builder rep’s loyalties. However, when buying a new home, you should conduct your due diligence. You should also consider hiring a Realtor and a licensed home inspector to assist you through the new home buying process.

When buying a Maryland new home, you should know that the state regulates home builders. Before considering a home builder, make sure that the home builder is registered with the Consumer Protection Division’s Home Builder Registration Unit. Before entering into a contract with the home builder, review and understand the contract. You may want to consult an attorney to make sure that your Maryland new home contract complies with the state requirements.

You should also keep in mind that Maryland has established a Home Builder Guaranty Fund that is overseen by the Consumer Protection Division. The fund allows consumers to seek recourse “for losses resulting from an act or omission by a registered builder who constructs a new home for a consumer.” For additional information about due diligence when buying a new home and obtaining the handbook “Buying a New Home, Consumer Rights and Remedies Under Maryland Law,” contact the Maryland Office of Attorney General’s Consumer Protection Division (marylandattorneygeneral.gov/Pages/CPD).

By Dan Krell.
Copyright © 2019.

Original published at https://dankrell.com/blog/2019/01/03/new-home-diligence

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December 8, 2017January 26, 2020

New homes allure is neurological

Last week I mentioned that new home sales jumped 18.7 percent year-over-year, which is a ten-year high. It should come as no surprise that new homes are selling like hotcakes. After all, existing home inventory has been and remains historically low, which doesn’t give many options to home buyers. But there are other reasons for the allure of new construction. Some of the home buyers’ motives are apparent and some are not so obvious.

The idea of buying new construction goes beyond the “new home feel.” Buyers of new homes are attracted to modern designs and trends that are incorporated into new houses. New home construction takes advantage of modern building techniques and materials that allow for the open floor-plan concept that many home buyers prefer. Many of the materials used in new construction are “engineered” for efficiency and longevity.

Buyers of new homes like the feeling that there will be minimal maintenance for the first year. Everything is brand new and there is sense of confidence that the home’s systems won’t need major repairs or replacement. Being the first owner of a home also gives assurance that they won’t have to deal with the poor maintenance habits of the previous owner. This is a plus for home buyers who don’t have a lot of financial reserves to address home maintenance emergencies. Instead, they can begin to save and budget for future repairs and replacements that should be years down the road.

New home builders take advantage of current trends in green building practices. Many new home builders tout their LEED certification, demonstrating their commitment to energy efficiency and sustainable resources. Green building practices are not only used when the home is built, but is actually built into the design. Home owners seeking LEED certified builders believe they will have a smaller impact on the environment and save money on energy costs.

A new trend that buyers are pursuing is the “healthy home.” The healthy home concept emphasizes the quality of the air inside the home. Home buyers are becoming aware of the physical and environmental benefits of good indoor air quality, which can improve their emotional well-being and reduce the potential for respiratory distress.

But there is another reason why home buyers are attracted to new homes, and it lies within the brain. Research has demonstrated time and again that consumers respond to novelty. This means that home buyers have a tendency to want “new.” This can be interpreted into making an old home new by renovating a kitchen, bathroom, etc. Or it can mean buying a newly built home.

The novelty seeking behavior of the home buyer isn’t just a choice, as some may argue, it’s neurological. Basically, the desire for a new home lies within the brain. A study conducted by Nico Bunzeck and Emrah Düzel (Absolute Coding of Stimulus Novelty in the Human Substantia Nigra/VTA; 2006; Neuron 51, 369-379) demonstrated that the hippocampal region of the brain responds to novel (new) stimuli. The hippocampal region is part of the limbic system, which is noted for being responsible for memory and emotions. It has also been associated with motivation.

The study also discusses the idea that novelty seeking behavior isn’t just emotional, but it is also rewarding. This means that there is a behavioral loop for seeking new things, including buying a new home.

Home sellers need to take note of these findings. Translating this study to home buyers may mean that a home’s feeling of “newness” is important, regardless if it’s construction, renovation, or even how the home is decorated. Understanding what attracts and motivates home buyers can be the tipping point to get a home sold.

Original published at https://dankrell.com/blog/2017/12/08/new-homes-allure-neurological/

by Dan Krell
Copyright©2017

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December 29, 2016July 13, 2019

Lot premium value on new home

There is an ongoing debate about the lot premium. Essentially, is there a value of paying a “premium” for a home site when buying a new home? Certainly, the home builder is seeking to increase their profit margin. But for a home buyer, there is a question of future value at resale.

A home builder will typically sell certain home sites within a community at a higher price, effectively increasing the price of a new home. Some home sites are deemed to be more “valuable” because of the lot’s characteristics and/or location. A lot premium may be charged if a home site is larger, flatter, and/or more symmetrical than others in the community. Lots tucked away from the main road or close to common areas are typically premium priced as well.

Don’t hate the home builder for charging a lot premium on your new home. Home builders are trying to sustain a business by recouping the cost and financial risk of land development. Placing a premium on home sites has become a science, and research consultants typically provide data on developing home sites and pricing.

However, there is also an economic factor. When the housing market was still reeling from the Great Recession, charging a lot premium was not common. However, home builders added lot premiums when sales recovered.

John Burns, CEO of John Burns Consulting, wrote about the rising premiums on home sites as the new home market recovered in 2013 (Lot Premiums Are Back!; realestateconsulting.com; May 23,2013), stating “Our consulting team has noted a significant trend in the market: lot premiums are rising substantially!” Burns broke down lot premiums based on region. And, of course, lot premiums increased according to how the region’s housing market recovered. For example, lot premiums in Florida were about 10 percent at that time; While Southern California was trending to include the premium in the list price to help stabilize prices. Also, the DC region’s housing market was still recovering and home builders were only charging 1 to 2 percent for a lot premium.

Burns also noted that buyer demographics can also dictate lot premiums. At that time, it was reported that home builders in Southern California were charging a 5 percent premium based on feng shui and home site orientation. And a 20 percent premium was charged for home sites with “good feng shui” that were located on a cul-de-sac.

The availability of buildable home sites may also dictate lot premium charges in the near future. A recent National Association of Home Builders survey indicated a shortage of home building lots (Lot Shortages Worse Than Ever According to NAHB Survey; nahb.org; May 26, 2016). NAHB Chief Economist Robert Dietz stated, “We have monitored lot availability for the last two decades, and it is clear that the scarcity of building lots is growing… Whether due to land use policy, geographic constraints or other regulatory constraints, the lack of lots for residential construction will have negative impacts on housing affordability in many markets.”

To understand the relative numbers, NAHB stated “…this record shortage comes at a time when new homes are being started at a rate of under 1.2 million a year. In 2005, when total housing starts were over 2 million, the share of builders reporting a shortage of lots was 53 percent…”

If you pay a lot premium on a new home, however, it is not always clear that you would be able to pass on the premium when you re-sell. But a recent study conducted by Paul K. Asabere and Forrest E. Huffman (The Relative Impacts of Trails and Greenbelts on Home Price; Journal of Real Estate Finance and Economics; May 2009; vol 38, p408) provides some data on what you might expect: home sites close to trails, greenbelts, and greenways can demand a price premium of up to 5 percent. A similar effect can also be found in homes with a “view” or in a cul-de-sac; as well as homes that are adjacent to a golf course, playground, tennis court, neighborhood pool.

Original published at https://dankrell.com/blog/2016/12/29/lot-premium-value-on-new-home/

By Dan Krell
Copyright © 2016

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February 7, 2014December 13, 2022

Reclaiming the charm and appeal of old homes

“They don’t build’em like they used to…”

… is often heard by those who praise the virtues of an old home. Many home buyers might talk about the character and charm that exudes from an old home, while others might point to the quality of materials and workmanship that cannot be matched by new homes built today.

In some respects, it’s good they don’t build homes the way they used to because some materials used in the past that were thought to be beneficial have been found to be toxic and/or hazardous. Building materials have changed through the years and continue to evolve for safety, strength, durability, and environmental impact. Many home components are engineered and prefabricated to make installation straight forward, as well as make the home increasingly efficient and environmentally friendly. Floor joists and trusses are engineered to allow for larger and open home designs; while roof and siding components engineered to help reduce heating and cooling costs. Foundation and basement construction techniques and components are designed to be effective in preventing water penetration.

Workmanship has also changed over the years as well. Because engineered materials are typically prefabricated, onsite custom design and installation is not necessary; construction crews are basically required to know how to use and install the pre-manufactured components.

Hazardous materials aside, there is something about old homes that grabs our attention. Because the building materials and components were not mass produced or prefabricated, perhaps it’s the workmanship of the construction that demonstrates that the on-site craftsmen were not just masters of their trade – but artisans.

Although new homes incorporate modern fixtures and appliances designed for comfort, functionality, and efficiency; many are drawn to the antique quality of the old home. Old home parts are highly sought after items for modern homes too. Many are lured by the appeal and personality of vintage home parts, but I also sense there is also something about the durability of the parts that lets them continue in service. Vintage doorknobs, especially the crystal type, are collectible and sought after antique home parts.

Those who appreciate old homes talk about the hearty materials that were used in construction. Compared to the new engineered components manufactured to an exact specification, the craftsmen who built the old home onsite appeared to use ample materials that made the construction feel sturdy and robust. This “over-engineering” is typically frowned upon today; using too much raw materials is expensive and considered wasteful.

Another comparison between old vs. new homes is the lumber that is used in a home’s construction. Some are keen on old homes because they were built from first generation lumber, compared to engineered composites typically used in modern homes. Compared to the wood composites often comprised of glued wood pieces and fibers, first generation lumber is believed to be stronger and more durable. Also known as old growth lumber, first generation lumber refers to lumber that was milled from virgin forests where trees were hundreds of years old. Because of deforestation, old growth lumber is no longer harvested for construction materials.

To incorporate the virtues of vintage and old building materials in modern homes, many reclaim those resources from tear downs. From classic fixtures and hardware to first generation wood, the reclaiming industry has become popular not only to be environmentally friendly – but to reclaim the charm and character of a bygone age.

by Dan Krell ©

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. This article was originally published the week of February 3, 2014 (Montgomery County Sentinel). Using this article without permission is a violation of copyright laws. Copyright © Dan Krell.