When Jason Choulochas signed a contract to buy a new condominium on Chicago’s Near South Side, he was unconcerned that the community consisted of little more than an empty field and a sales office. He has bought on the basis of blueprints before.
It’s the way to go, he says. His unit at Burnham Station, a mid-rise community of condominiums and townhomes now under construction, will be ready in about a year.
Buying an existing home means “you’re living in someone else’s house,” he says. “You’re living with their mistakes.”
While Choulochas is comfortable buying a home he has yet to see, not every buyer is.
The experience can be scary, particularly for first-time buyers, says real estate broker Marla Nyberg, of Sudler and Co., a property-management firm in Chicago.
“It’s not a hands-on experience,” she says. “You can’t go through with a yardstick and measure and say, `I can put my sofa here.’ That’s frightening to many people. I have clients who do it but most of them can’t. Many people can’t visualize what they’re buying.”
Are you a candidate for buying a home from plans? Before making the decision, consider the following pros and cons:
– Con: You’re buying an unknown. Despite the promises and pretty pictures, you cannot know what your new home will look like or how it will function.
“What you think you’re getting and what you actually get are two different things,” says Nyberg. “It’s not always the fault of the developer but (plans) rarely turn out to be accurate. Especially when he has a pre-existing building and goes into rehab and finds things he thought he could change and can’t. He may promise to leave exposed brick but the quality isn’t there and he has to drywall over it.”
Another problem with an existing building is “no two units are necessarily identical because they have to fit into the nature of the building,” says John Tilkemeier, executive vice president of Sundance Homes Inc. in Chicago.
The builder or developer could be another unknown entity. It doesn’t happen often, but they do occasionally go bust.
“The danger of buying pre-construction depends upon the builder,” says Richard J. Brown, chairman and chief executive officer of Cambridge Cos. in Libertyville. “It’s pretty difficult to check out a small builder who is building out of the backseat of his car but you should check out the company.”
He recommends calling area home builders’ associations and the Better Business Bureau; touring communities the builder has completed; and talking to past buyers.
Once you’ve investigated your builder, take comfort, says Drew Ferris, president of Ferris Homes in Northfield.
“You know who is building your house,” unlike most instances when buying an existing one, he says.
– Pro: Early shoppers get the price break. Developers traditionally offer financial incentives to those who are willing to take the risk of buying sight unseen. These incentives, which usually last until models are built, may be in the form of lower prices or free amenities, such as a basement or laundry appliances.
“The people who buy from just blueprints are the risk-takers,” says Tilkemeier. “They understand they will save a little money or get some promotional incentive, and they should. It’s the old economic principle–the bigger the risk, the bigger the reward should be.”
Early in the game, you’ll also have time to change your mind. Many builders allow you to make a refundable deposit to reserve a certain unit or lot for anywhere from 10 to 30 days. If you decide to go ahead, they’ll ask you to sign a contract and put down earnest money of 5 to 10 percent. The contract is binding, subject to financing and an attorney’s approval. The selling price is rarely negotiable.
Buying at the beginning of a project means a faster buildup of equity because the developer will raise prices as the project gets closer to completion, says Millie Rosenbloom, president and chief executive officer of the brokerage division for The Habitat Co. in Chicago.
“You have your earnest money tied up but by the time the project is finished, prices increase. You also have the ability to save the balance of the down payment while the building is being built. That helps a lot of younger buyers.”
Penny and Phil Priebe feel their money has stretched further by being among the first buyers at Cambridge Chase, now being built by Cambridge Cos., in Aurora earlier this year. They plan to stay in their home a few years before upgrading to a larger one.
“Because of pre-construction prices, we couldn’t go wrong,” Penny Priebe says. “By the time our neighborhood is completed, these homes will probably see a $20,000 increase on the base price.”
Another plus: Builders usually offer some type of warranty on their work.
– Pro: The home you get will be your very own. The fact that your new home doesn’t yet exist can be a plus, says Jim Letchinger, president of JDL Development Corp. in Chicago.
“It gives you the ability to manipulate your own unit,” says Letchinger, whose firm is developing Burnham Station. “You can pick your finishes and tile and countertops and the day you move in, you move into a new product. Buying fixer-uppers, people never know what it will cost them and typically they are surprised.”
“We’re able to shift and move things a bit,” says Ferris. “If you want this room bigger or smaller or a bay window, those are things we can change as opposed to a pre-built house. There’s no settling for, `Well, it’s close and it kind of fits.’ “
“Everything is brand new,” says Rosenbloom. “There’s something to say about a brand-new tub and a brand-new toilet.”
Another advantage, she says, is that newer designs are more likely to meet buyers’ needs and wants than older ones.
“In the new floor plans, you see a lot of walk-in closets, linen closets, outdoor space, higher ceilings and gas fireplaces,” she says.
So that you can envision your new home, developers have myriad ways to help.
“Normally when we open a new community, we will be building a product design we’ve built in another community,” says Brown. “People can go out to those other communities and see what they look like.”
Some builders have adopted computer technology that will take you on a virtual walk-through of the floor plans they offer. These electronic tours enable you to check out the skyline from the living room window or change the color of carpeting.
Many builders employ design staffers who guide buyers through each step and make suggestions at the time decisions must be made.
– Con: You’ll have to wait. If you need to be settled by Aug. 15 so you can get your kids enrolled in school, an unbuilt home is probably not a good choice. Builders try to meet certain dates but circumstances change along the way.
“You always have the anxiety of whether a deadline is going to be met,” says Rosenbloom. “Even though a delivery date is planned, sometimes things happen they can’t foresee. They might run short on materials, or you might pick a certain tile and there’s a delay or a strike.”
Delays can cost you money in the form of a higher interest rate by the time you get to closing, she adds.
Depending upon the community, new construction can be completed in as little as a few months up to a year and a half. Choulochas expects to move into his new condominium sometime late 1998 or early 1999.
“This house is all mine,” he says. “I just have to wait a little bit for it.”
– Con: The decision-making process could make you crazy. Some people enjoy the minutiae of selecting every color, finish and design that goes into their homes. Others find the process tedious, particularly when it involves multiple visits to multiple suppliers. You could spend weeks, even months, before you’re done.
“You could pick a marble and they run out of the pattern or they can switch knobs on you,” says Nyberg. “It’s frustrating. It’s not as easy as it looks.”
“The decisions can be difficult but they don’t have to be hard and they don’t have to be painful,” says Letchinger. “The bottom line is, you’re not living with them for the rest of your life.”
“If you don’t want to make decisions on every little issue, we have pre-set packages,” says Ferris. “But if you really don’t want to spend time thinking about it, go for an existing house.”
– Con: The early years can be rough ones. Forget the pictures. For a while, your environment will consist of noise, big trucks and dust.
“People who move in first are going to live through the construction,” says Letchinger. “That’s one reason early buyers get a premium discount.”
– Pro: You’re all in this together. When buying a house, you’re also buying into a neighborhood that has established customs and traditions. Being the new kid on the block can be difficult. Not so in a new community, says Brown.
“Everyone is moving in about the same time,” he says. “You make friends and establish a camaraderie that can last for years.”
