How To Know Who The Market Is Favoring
A frequent question I am asked by my Buyer clients is, "Given that the local market is favoring Buyers at this time with more than 6 months of inventory* on the market in most price ranges, do you think it makes more sense to build, buy a new already constructed home, or buy a re-sale home and improve on it as needed?"
As is almost always the case there's no one answer that works best for everyone, but I do have some thoughts that I feel apply in most instances.
Opting To Build A New Home
Given the amount of existing homes currently on the market, I believe the least cost effective answer is to build new. While building new certainly gives you the utmost ability to customize your home, in today's environment it simply doesn't make the best economic sense. Yes many custom homebuilders are looking for work and are likely to be a little more flexible with their pricing, however, anytime I analysis quotes for buyers considering this option, I always find that there is a premium they are paying for having their home built. This premium varies widely but I'm comfortable saying that it runs between 20-50% more to have a home built to your specifications over buying a pre-existing new home already on the ground. In addition a Buyer needs to be willing to do some due diligence on their perspective builder/contractor to assure themselves that the builder has the funding in place to actually complete the home. Finally they need to consider what their options are should the builder fail to complete the home.
Opting To Buy A New Build
Buying a new home that's already been built on "spec" by a builder can significantly lower your costs as many of the larger regional and national builders in our area are offering tremendous incentives at this time. While the home may not be 100% perfect for you in terms of finishes or floor plan, if you want a new home and are willing to make some concessions, I would advise this over going the full custom route.
Opting To Buy A Fixxer-Upper
The best buying opportunity in my opinion exists in the resale market. You have a better chance of finding a good bargain on a fixer-upper and with sweat equity you have a good chance of making a nice profit when it comes time to resell the house when the market picks up again. Even if you prefer to hire someone else to handle the work, I still feel this offers a Buyer the best overall value. As a service to my clients I have a list of vetted trades people that I am more than willing to share. These are carpenters, plumbers, and electricians etc who have done work for me many times. I know their work to be good, and their prices exceedingly fair.
If you decide to go this route, concentrate your remodeling efforts on rooms such as the kitchen and bathrooms, stay neutral with your color choices, and also look at the curb appeal aspects of the landscaping and exterior. I believe in quality over quantity: do good work; use the best materials you can afford and always get the necessary building permits. The other thing to remember is you don't have to do it all at once; you can do it as your budget permits.
*Six months of inventory on the market is considered a balanced market. Less than 6 months favors the Seller and more than 6 months favors the Buyer.
Posted by Larry Tollen on
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