It’s commonly presumed that the decision of whether to purchase new construction or a resale home boils down to personal preferences.
“Vintage” and its attendant frills may be one buyer’s architectural heaven, while clean-lined, vaulted, family-room ceilings may be the ticket for another.
Certainly, resale housing differs from new construction in many ways, in terms of aesthetics and overall “feel.” That’s the karma issue.
But before a buyer gets to sign on the dotted line for either variety, he or she might find that a substantial difference lurks in the process of finding and purchasing it.
In simplest terms, the road to resale usually takes fewer turns than the road to new. The former might call for the traveler to wear jogging shoes while the latter might require sturdy boots.
Most of the tradeoffs fall into two categories: perfection and time. New construction holds the allure of being suited perfectly to the buyer’s taste and promised to be perfect. Resale, among other things, promises to be within your grasp a lot sooner than if you waited for a home to be built.
Here are some of the ways that one process zigs and the other zags.
The hunt
Let’s cast aside the stylistic concerns of new vs. old. Truth be told, some builders are making houses that abound in turn-of-the-century styling, so if you want a vintage look, you can get it, with 1995 amenities.
But one must also consider what’s around it. Homes are not on Mars, they’re in neighborhoods. For Lon and Donna Fanning of west suburban Geneva, that was a terribly important criterion.
The Fannings had built two homes in subdivisions in Geneva and were getting ready to build a third when they decided instead to buy an 18-year-old house that had the yard they yearned for.
“We really wanted to have more privacy and a more mature yard. We wanted bigger trees and landscaping,” Donna says, explaining that their new, half-acre yard was about twice as large as their old one.
“We were in new subdivisions in the last nine years, and you would go on your back deck, and 50 houses in each direction could see what you were doing,” she says. “There wasn’t a stick of greenery between our house and the house behind us.”
However, some builders have succeeded in preserving and augmenting the surroundings of their developments, so it pays to ask what “wooded lot” means before you drive out to look. And generally, if you’re willing to go farther off the beaten path, you can get that larger lot if it’s that important.
One helpful tool in narrowing down areas with either kind of housing is the MLS, but it’s a mixed bag with builders, partly depending on how willing the builders are to pay commissions to brokers.
“We are willing to sell to the broker community,” explains Therese Schaefer, sales manager at Landmark Homes of Providence Oaks, a 92-home community in Gurnee. “It brings us a broader base of customers.
“A lot of builders try to cut Realtors out of the deal, and it just ends up marking the builder as bad news” to agents, says Schaefer, who previously worked as an agent specializing in resale.
Many builders eschew the MLS in favor of advertising through newspapers and specialty publications. Others barely advertise at all, opting for signage at and around their developments to do the work–and reduce their overhead. This may mean that the buyer who is determined to get a broad view of what’s out there among newly constructed houses will have to pound a fair amount of pavement and traipse through a lot of models.
Models are another difference between new and resale: Models can help resolve potential buyers’ doubts or offset their inabilities to visualize what’s in the blueprints.
The latter concern may be what separates a happy new-construction client from someone who might have been better off buying an existing home. “I ask people if they are good at visualizing,” says Joanne Nemerovski, an agent with Koenig & Strey in Lincoln Park, who says that some new-construction buyers end up disappointed because of misperceptions from floor plans.
Browsers should be forewarned that some of the features that seem most tantalizing in the models may be “upgrades”–that is, they cost extra.
Again, it pays to ask. Some builders say that in order to be competitive, the scope of what they are including as “standard” is widening every day.
The purchase
When you reach the purchase-contract stage, you may find that negotiating the price of a new house might be a much different price from negotiating an old one.
“We don’t really haggle,” explains Schaefer of Landmark Homes, echoing a sentiment generally expressed by builders. “We have to say, `This is our price, this is our margin, this is where we stand.’ “
Nonetheless, some builders will conduct “sales.” Sometimes these are in the form of pre-construction financing–lower prices for those first buyers, in order to get the development rolling.
Or builders might offer incentives–for example, inclusion of a basement in a house that otherwise would be built on a slab. Sometimes they will offer an allowance in upgrades–perhaps $5,000 toward better-quality carpet and padding.
Builders who don’t offer such incentives say that buyers must realize that the $5,000 is going to have to be made up somewhere, and buyers may end up paying for it in the base price, to begin with.
No matter which end of the deal these charges are attached to, their very existence is much of the attraction of new construction vs. old. You get the house just the way you want it (within financial limits) and every inch of it is brand-new. Pristine. No mud in the mud room.
Lois and Phil Sheridan’s circa 1928 home in Northbrook suited them well enough, flaws and all. “It was on a cute street, with lots of trees. The neighborhood was great,” Lois explains.
“But there was seepage in the basement, cracks in the foundation, the windows were pretty much rotten, the dishwasher was probably 25 years old.
“But we just loved it anyway. And I loved it until the day I moved out.
“Now I just can’t believe I lived that way,” she explains. The Sheridans moved into a brand-new, larger home in Providence Oaks in Gurnee about three months ago.
“And everything is new. We pretty much stuck to the model but picked out upgrades,” she says. “When you buy an old house, you don’t have those upgrades.”
The Sheridans say that although their old house was on the market longer than they expected (three months), they didn’t have to offer buyers any incentives to close the deal.
“It was in Northbrook,” she says, her verbal shrug implying an obvious reason.
Nonetheless, if you’re hoping to buy a resale home, the experience can vary widely. Eager sellers might agree to make significant repairs–a new furnace, perhaps–or to resurface the driveway or whatever it takes to get the deal closed.
In addition, the resale price usually will be dickered, though not as much as many buyers might believe.
“When I got into the business (in the 1970s), the rule of thumb was that the selling price might be 10 percent below the listing,” says Catherine Caravette of BBC Realty in Chicago’s Wicker Park neighborhood. “Now it may be 3, 4, 5 percent. People are very educated in the market these days” both in pricing and bidding.
The wait
After the stalking, after choosing the options or getting the seller to sweeten the pot, after the price is agreed upon, comes the home. Eventually.
The mortgage process can take from a few days to a few weeks for approval. New-construction buyers will have to submit home plans to their lenders in order for the property to be appraised. Additionally they might face the prospect of obtaining a construction (or interim) loan if their current residence is unsold, thus tying up the applicant’s cash.
“A construction loan is more like a line of credit than a mortgage,” explains Ron Fleckman, president of Cyrus Homes, the custom-construction arm of the Evanston firm that also owns a real estate agency. “It will be in the amount that’s necessary to build a house.”
New construction also means acquiring a building permit, which can take a couple of weeks or longer, depending on the design of the house, the clarity of the application and the efficiency of a given muncipality’s permit office.
Another difference between buying new construction and an existing home: inspections. Although resale inspections have become routine in the Chicago area, they are infrequent to rare in new construction. Builders say they are unnecessary for reasons that range from their own warranties (offered by some builders, not all) covering defects to their craftsmanship standing on its own to the insurance liabilities that might result from having an inspector being injured on the property.
But before any inspection–or closing, for that matter–can come a generous amount of just plain waiting.
With resale, the period between contract and closing lately averages 45 to 60 days, though it varies by time of year, according to Pamela Ball, an agent with Prudential Preferred Properties in Lincoln Park. “Lately I’ve been seeing more shorter terms than longer ones.”
Overall, builders say that their clients should expect to wait five to six months before they move in, longer for custom construction that may include the design process and land acquisition, according to Fleckman of Cyrus Homes.
“That’s the down side to new construction,” says Caravette. “A buyer needs to have patience because contractors are human beings and you have weather conditions.
“When a developer tells you occupancy will be May 1, usually it’s July 1. There are a lot of unknowns that can trip a developer up.”
Such delays could mean a double move–selling the old residence and moving into an apartment or with relatives for a few months until the new one is ready, an experience that the Fannings of Geneva endured and say they didn’t relish one more time.
Although the delay factor was cited widely by home-building sales people, it isn’t a guaranteed hazard.
“We closed a week early,” says Lois Sheridan of her new Gurnee home. “It was 156 days from the day we signed our contract. And I called a lot of people who had built here for references. I don’t know anyone whose house was delayed.”
