We found a house online the other day and went to tour it. When we arrived at the site we found that it was under construction and so we visited the model home. It was beautiful and modern inside, and in the price range we are looking for. The realtor on site showed us a catalog and said that if we wanted a home, we just pick the lot we want and choose the home that is to be built there from a list of 3. We can also choose from the list what cupboards, flooring, and countertops we want and there is even another list for upgrades. Is this a good idea or is there a pitfall I am missing? It even sounds like closing costs would be cheaper because it is a new construction.
Model homes in subdivisions are called model because their houses are made in that mold. Their architecture is patterned after that model so I don't see any problem unless the contractor is bogus. But for legit subdivision developers, they earn from the internal financing, that is the mortgage you get from them like that one in the bank. The come on with that internal financing is the faster and easy approval unlike in the bank where you experience all the hassles of documentation. But the downside is the higher interest rate on your mortgage.
Go for it. Have your lawyer review the contract, and check out the builder re quality, business practices, et al. The stick built house worked out very well for us 35 years ago. We had access to contractor pricing at builder supply places, and I was able to prewire the place for an alarm system and cabling for telephone, speakers and TV before the interior walls and ceilings were hung.
I am not going for that no. I would only buy a home that is already built or else there is the risk they take your money and disappear, it has happened before.
Buying a pre-constructed house is cheaper by at least 20% on the price. That is the unwritten standard here but most of the brokers would tell you that (rate of discount). A completely built house costs more because of the maintenance. Since the house is already built, it cannot be left just like that. What if there is no buyer for a month? Besides, the invested money in that completed house is more than what they would spend when sold before completion of the construction.
The only problem with new construction homes as I see it, is that they often seem like they take longer to construct then what the customers are told. What with getting permits, and ordering materials, and getting the workers...they end up being a hassle for buyers. I would make certain that you are working with a really good builder that has references and can stick to a time frame. They should tell you about any delays that could happen in advance for proper planning purposes.
@kgord, you are right with the time duration. Sometimes the building permit takes time in the city engineer's office. But then again, the discount you get for buying a pre-constructed house is worth the wait. On the other hand, when there are problems, the only recourse is to complain. I have this actress friend who is complaining that there is a terrible leak in the roof of their house and the developer is not doing something about it. She has been complaining for a year already.
This is a home in a community of homes that are being built, so I don't think there is really the risk of the contractors taking off with the money. There is even a real estate agent on site who is showing off the model home and is working with the builders.
Just remember the selling real estate agent is not your friend. The agent works for the agency and the builder. I would listen, but I would not trust them. I wouldn't do any deal with MY lawyer working for me, modifying language in contracts, adding protection and penalty language and removing the nickel-and-dime nuisance language and charges that invariably sneak into a contract. My lawyer would be with me when any paperwork at the start, during or the end of the deal is signed. Absolutely I would have MY lawyer do due diligence on the real estate agent, builder, title searches, liens, property surveys, flood plains, mortgage terms, escrows and anything else that moves, squeaks or bites. It's my money, and it doesn't leave my hands easily. But that's me. For us, one of the language changes simply removed the mortgage's property tax escrow language to let us pay property taxes separately. No hassles on endless mortgage payment adjustments with the mortgage holder's poor estimates and claiming insufficient funds. At the end of our buying, building, and final paperwork life was simpler and MY lawyer saved us 3-to-4 times what he charged.
Buying a property that's is still under construction is becoming more and more popular these days, as like you point out, its a lot cheaper. While the only problems I can see are that it will take longer to move in, after all its not been built yet, and two, you have to make sure that it's a reputable firm handling the build.