If you’re in the market for a new home, you may be wondering if a flipped or newly constructed property is a worthwhile option. While each has the potential for significant advantages, it’s important to understand exactly what you’re getting into.
In this article, we’ll explain why new or fixer-upper homes are worth it, what some common mistakes are, and how you can get started.
Why Are New Construction Homes Worth Buying?
Before we cover the common mistakes of investing in new and fixer-upper homes, let’s discuss why they’re worth buying in the first place. The short answer? Inventory and availability.
In today’s high-demand market, homeowners usually aren’t selling their properties unless they need to – and the properties that are listed often sell quickly and above their asking price. This results in less availability for existing, pre-owned homes.
Because of this lack of inventory, new construction and fixer-upper homes are naturally more appealing to the right consumers. And unlike pre-existing homes, these options both offer flexibility for specific upgrades and changes. Renovators and new construction owners have the benefit of total customization to meet their specific needs – an option that isn’t possible with other homes.
Get in touch with a loan expert near you to learn more about your renovation and new construction options.
Buying New Construction and Renovated Properties
Building your new home from the ground up or renovating an existing one can be an exciting experience. A brand-new property can be built to your exact specifications while a renovation offers customization options that can change the face of an older home.
However, each comes with obstacles and challenges that often result in mistakes among new buyers. Let’s cover some of the potential pitfalls and common mistakes that you should be aware of.
Common Mistakes When Buying New Construction and Renovations
1. Not Hiring a Home Inspector
Always, always hire a home inspector! Even if you’re building a new home, it’s always a good idea to get it inspected by a licensed professional – even more so if you plan on renovating the property. Despite being optional, home inspections offer countless benefits to both buyers and sellers. Let’s break down exactly how this could work with new and fixer-upper homes:
- Even if it’s new, your construction home could still have underlying issues. As unlikely as this may be (depending on your builder), it’s never a bad idea to give your home a final walkthrough by an impartial inspector.
- If you’re renovating a property, it’s even more important to order an official inspection. Properties in need of fixing will likely have more issues that an inspector will help reveal (and potentially improve the terms of your transaction).
Contact a loan expert to get started. From start to finish, Total Mortgage will assess your needs, offer advice, and ensure that your financing experience is as easy as possible.
2. Underbudgeting
Depending on your area and other factors, new construction or fixer-upper homes could come at a premium and cause you to stretch your budget. In 2021, the median price of a new construction home was $416,900 – about $178 per square foot.
Alternatively, the cost of renovating or flipping an existing property will ultimately depend on your location and the extent of your upgrades. While you can properly set expectations for the purchase price of a fixer-upper home, the changes you make will be unpredictable. In other words, your renovations (and budget) will depend on the condition of the home – and every home is different.
With these things in mind, it’s important to stay prepared with a sufficient budget when purchasing flip or new construction properties. Overbudgeting will almost always be better than underbudgeting.
3. Not checking the builder’s reputation
Whether you’re buying a new home, a fixer-upper, or a previously renovated home, it’s always important to check the reputation of any builders involved. In many cases, their results and reputation will be good indicators of a home’s quality – so always do your research.
Not researching your builder and moving forward with new construction could result in cut corners or cheaper materials. Similarly, a builder or contractor with a less-than-ideal reputation could put less effort into renovations, potentially causing extra expenses and physical labor on your part.
To avoid this, be sure to do your homework and research the best builders in your area. Making the right choice the first time could save you time, money, or both.
4. Not negotiating on a price
Even with new construction or fixer-upper homes, your final price may still be negotiable. Similar to point #3, it’s important to do your research and understand a property’s history as well as the seller’s intentions. Let’s dive deeper:
- Let’s say you’re buying a home that is in need of renovations (or has been recently renovated). If the property has been on the market for a long time, it may have decreased in price. In other words, the seller may be growing more desperate to have someone take the home off of their hands.
- As with all real estate transactions, it’s also important to gauge the intentions of sellers. Are they willing to negotiate? Working with a dedicated loan expert and agent will always make this easier; in many cases, your home-buying team will offer insight that could give you a leg up during negotiations.
5. Not getting a home warranty
After all is said and done with your new or renovated home purchase, opting for a home warranty is usually a good next step. At a high level, home warranties cover the repair or replacement costs of covered items. The items that are covered, however, will ultimately depend on your specific contract.
With a home warranty, you’ll be protected from unexpected expenses if something goes wrong with your new or renovated home. For example, your warranty could cover the cooling and heating systems of your newly constructed home; similarly, you could get coverage for plumbing or other questionable appliances in your fixer-upper or previously renovated home.
For full details, work with a Total Mortgage loan expert near you. Professionals are available 24/7 and would be happy to assist.
Your Next Steps with Total Mortgage
Newly built homes, fixer-uppers, and recently renovated properties can all be great opportunities – but like every home purchase, it’s important to be aware of the potential pitfalls. If you’re moving forward with one of these three options, be sure to:
- Hire a home inspector
- Budget properly
- Research your local builders
- Negotiate when possible, and
- Get a home warranty
Total Mortgage is here to help every step of the way – and we have a variety of non-commital resources to get you started. Try our free mortgage calculator to set your budgeting expectations or find out exactly what you qualify for in minutes.
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