Andy Sentgeorge

Have You Looked Around the Corner? (Part 2)

New Construction versus Established Neighborhood – Case Study
As a home buyer, you have many options. You might consider having your dream home built specifically for you, with your “exact specifications” and “desires customized to your tastes.” It certainly sounds good – where do i sign?!?! Home buyers today must be very careful to evaluate the marketing fine print associated with the offerings of many new home communities. You may find, as my clients have found, that you need to look past the “builder program” to determine true value.
Many newer developments are facing an uncomfortable adjustment of home values because of the higher prices some paid to be the first in, versus the lower priced and more cheaply built homes builders are forced to construct now.
This particular case involved a client trying to sell a home in a newer development (home was built for them about 4 years ago and this phase of the community was approximately 80% completed), the builder had experienced great success in the initial phases of build out, and was trying to complete this phase as well as one final phase of construction. My clients were willing to take a haircut on the sale and understood that they would be competing with the allure of the newly built “custom” home. As I was researching the comps and reviewing the new construction options, I was amazed at the shift in values, or really “what you get for the money.”
The following list shows the features contained in my clients home versus what you get from new construction:

Existing Home Features vs. New Construction Options:

Stamped concrete driveway – No longer offered (est value $2,500)
Corner fireplace – No longer offered (est value $2,000)
Ensuite guest bath – No longer offered (est value $8,500)
Interior half-walls and column details – No longer offered (est value $2,000)
9′ ceilings on first and second floors – $2,480 (8′ ceilings are standard both floors)
Solid surface counters – $4,000 and up for granite (laminate standard)
Gourmet Kitchen – $3,400
42″ Maple cabinets – $5,500
Stainless sink -$510
18″ Kitchen floor tile – $2,000
Bathroom tiling (floors & sower surrounds) – $1,000 per bath (vinyl and fiberglass standard)
Laundry room cabinets – $1,000
Attic access – $200
Hunter Douglas blinds – $5,100
Carpet & pad upgrade – $4,000
First floor hardwoods – $8,800
Open rail stair & loft rails – $1,500
Security system – $850
Master BR tray ceiling – $670
Master BA separate tub and shower – $3,500
Master BA double vanity – $1,350
Exterior facade stonework – $9,000 and up
Covered patio – $3,400
Patio french doors – $900 (plastic sliding door standard)
Additional concrete deck – $600
Irrigation system – $6,000 and up
Total upgrade options – $85,110
Lot premium – $6,500
Addl. homeowner upgrades (privacy fence, bathroom mirrors, light fixtures, slate walkway) – $8,500
Total upgrade and options upcharge – $100,110
Similar floor plan base price – $270,000

Total “value” of new construction – $370,110
Listing price of existing home – $335,000

You tell me which home is the better value! (see disclaimer below)
Disclaimer – There are obviously other potential issues involved with such a comparison. For instance, I haven’t discussed the cost of a home warranty and there is now a few years worth of age on the HVAC and other systems versus brand new and warranted units in new construction. On the flip side, there is no discussion of the common settling issues in our area (homes typically see foundation cracks develop within the first few years, but rarely after that), or the “move right in” option of my clients home versus waiting minimum 4 months for your home to be constructed. My next post will cover these additional types of comparison factors in a more comprehensive way.
So here’s our bottom line. My clients actually paid more than $370,110 for their home 3 years ago (as I said, my folks are MOTIVATED). Of course they thought they were getting a screaming deal back then…must have been the slick marketing materials. And now they are willing to set their price way below their new construction competition to ensure a quick sale.
The big picture (that is, as of today in my area) is this folks. The residential construction industry is hurting, and competition for sales is fiercer than ever. If you are currently looking to build a house, please dig into every detail of the base and option pricing offers from your builder. It might seem like a great money-saving idea to go directly to the builder (did you know that the builder has no feduciary responibility to protect your interests? topic for another day) and work it out yourself, but this very often can lead to a missed opportunity right around the corner.