First-time homebuyers on a house hunt today quickly learn that they’ve got plenty of competition. Thanks to the COVID-19 pandemic, people are moving more than ever, sending home prices soaring and sparking bidding wars galore.
But some buyers have found a smart solution to sidestep this madness: by buying a home that hasn’t even been built yet.
In this latest installment of our new series, “First-Time Homebuyer Confessions,” we spoke with Nicole Krouse (who happens to be director of marketing at Realtor.com). In June 2020, near the height of the coronavirus pandemic, she and her husband, Pat, purchased their first house in one of the hottest markets in the country: Austin, TX. High demand has driven up Austin’s median home price to $600,000.
Nicole and Pat, however, were able to buy their house for just over half that sum by choosing new construction. Here’s what their homebuying journey was like, and lessons they learned along the way that might convince you to consider buying a newly built home, too.
Location: South Austin, TX
House specs: 4 bedrooms, 3 baths, 2,140 square feet
Price paid: $319,000
What convinced you to buy a house in the middle of a pandemic?
Truth is, we weren’t really in the market for a home at all. We were visiting some friends who had just moved into a new build in a part of South Austin that’s underdeveloped right now. There’s not even a grocery store around. But within days of our visit, Tesla announced that they intended to purchase land next to the community and build a factory. We saw an opportunity to invest.
Where were you living when you decided to buy?
We were renting a two-bedroom, split-level apartment south of downtown Austin with a small yard. The place had enough space for us before COVID-19, but when my husband and I both started working from home, it was difficult.
So how did house hunting work for a house that hasn’t been built yet?
We made an appointment with the development’s sales consultant, then went to see several model homes. However, our future home was just an empty lot!
We ended up touring three or four other new constructions in different areas of town, just to do some due diligence. But after that, we decided the original property was the right one. We ended up signing our intent to purchase that next weekend. It was very fast, almost an impulse decision.
Were you nervous about buying a house as an impulse purchase?
We only had to put down $1,500 in earnest money when we locked in the home. That’s the way new construction was working at the time. So we thought, “Why not?” If we backed out, we would have been out just $1,500.
Was there a negotiation process to buy this property?
When we originally talked to the builder, there were “sticker prices” for the houses, and that’s what you paid. Since we purchased last June, before the housing market took off, it wasn’t as competitive as it is now, since people weren’t sure how the economics of COVID-19 was going to play out.
So there was no negotiation, no bidding wars, no dealing with difficult sellers. It was great. However, now, at least in Austin, builders have caught up to the market and are now implementing an auction system between potential buyers that will maximize their sales price.
What were your main challenges of buying a newly built house?
Reviewing the initial contract was difficult without a real estate agent or lawyer to ask questions. We put a lot of faith in the builder at that point.
It was also challenging to weigh the pros and cons of using their in-house title company and lender versus finding our own. In the end, we used the in-house services, but we did a lot of number crunching and research before coming to that decision. We ultimately didn’t find anything that came close to what the builder’s in-house folks were offering—namely about a $10,000 discount.
How long did your house take to build?
The construction process was completed within six months with no major delays. However, inspections took longer than usual due to COVID-19 protocols, which pushed our estimated closing date to eight months.
What attracted you to new construction?
I’m not the person to buy a house from the ’70s and fix it up. I’m not a DIYer, know what I mean? Plus, with new construction, we got to customize the house and make it exactly what we wanted.
The home we chose was a bit of a standard template, but we got to pick the open railings, which is something that we love; it makes the house feel open. We also chose our countertops, the carpet, and the bathroom fixtures. The design process was more of a leap of faith, since we didn’t know how our design choices would work together. It was nerve-wracking, but it worked out.
What advice would you give to someone buying new construction?
Have a plan going in. There are usually three to five standard options that you can choose from at no extra cost. Or you can upgrade. We planned our budget before going into the design center and knew what our priorities were. Because once you get in there, you can feel like you want to upgrade everything!
Ask your design consultants to itemize everything for you, so if it’s too much, you can take an upgrade off.
Got any other advice for aspiring homebuyers?
We were being very practical and logical about this purchase. It was an investment for us. We thought we would live in it for a year and then use it as a rental property.
We had planned on going bare bones with the furniture and not spending a lot. That totally went out the window. I went crazy in the house and decorated everything exactly how I want, from my wallpaper to the patio furniture. So yeah, it’s our home now!
The post ‘We Bought a House That Hadn’t Been Built Yet’: New Construction May Be the Key To Succeed in Today’s Hot Market appeared first on Real Estate News & Insights | realtor.com®.