New Construction Homes Vs Resale In Metro Detroit - So you’re thinking about potentially buying a home in the near future, but you’re on the fence about whether you should go the new construction route, or just buy a resale/used home. Well, in this video I’m laying it all out for you, so you can make the best decision possible.
I'll tell you what to expect when buying a new construction home VS a resale home in the Michigan real estate market. So If you're trying to decide between resale homes and new construction home in the Metro Detroit area, this video will help you make a decision. I'll also talk about all the pros and cons of both new construction and resale homes.
This blog is a direct transcript from the video below. This comes in 3 versions: You are able to watch the video, read the blog for your convenience or listen to the audio experience (which is linked under the video below).
New construction vs. resale, resale vs. new construction. What could possibly be the best route for your situation? And how has this recent “market shift” potentially affected that decision? I’ll cover the positives and negatives for doing new construction, then I'll circle back and do the same for resale homes to give you the full outlook.
Starting off with the positives for purchasing a new construction home, and before I hop into that, for those of you that want to know more about new construction homes in today’s housing market, I'll link a video I made recently so you can add that to your queue, as I touch on how this market shift has affected builders in a HUGE way. The first and most obvious point is the home is brand new. The roof, floors, appliances, heating and cooling systems are all brand new and take a little weight off your shoulders that you would have if you purchased a resale home, as you never know how anything was treated in the home over the home’s lifespan.
On top of that, builders are utilizing materials and appliances that are more energy efficient and will give you the opportunity to have lower utility bills each month. Whether that be energy efficient windows, better insulation, high efficiency furnace or green star appliances. You can feel at ease knowing your home is extremely efficient. Another factor that comes with that fresh new home smell is the complimentary one year home warranty that builders offer along with a 10 year structural warranty. These are fairly common offerings in a new construction home and it makes you feel at ease knowing that not only will you not have to worry about anything falling apart in the home for 15-20 years (statically speaking) you can have peace of mind with a few warranties to ensure no corners were cut and if they were, you can get that taken care of without full replacement cost.
Another positive about purchasing a new construction home is being “on trend” meaning you can get your hands on an open concept home and all the design features that you’d expect in a modern day home such as: smart home technology and sleek finishes. You’ll also have the ability to take advantage of several packages and design options depending on the builder and how far along they are in the build.
Since it’s getting later into the year and builders have more inventory on the market since it wawa overpriced during the pandemic and they are now sitting on that inventory, you have the ability to not wait so long to move in a home, since these homes are mostly all the way built and are waiting on the final touches. So instead of having to wait 8-14 months to move into your new construction home, you have the luxury of being able to move into in a shorter amount of time that is comparable to the timing of a resale home.
Another positive to keep in mind when purchasing a new construction home is the in-house lending capabilities. Many builders have a recommended or in house mortgage lender that can assist you with your home loan needs, and most times they don’t require as much, So it’s actually known to get approved a little easier with a new construction home than it is a resale home.
Switching gears to the negatives for buying a new construction home. As I mentioned in a few of my other new construction videos, they typically aren’t in the greatest locations. Premium lots are hard to come by for community builders, unless you’re willing to pay a top premium of course, so new construction neighborhoods and subdivisions you see are typically off the beaten path, which tacks on quite a bit of time to your commute, not only for work, but for any amenities at all. I have a client who got an amazing home built in a community that is 20-30 away from the city's amenities and adds roughly 10-15 minutes to the daily commute. Would that be a deal breaker for you at all? Drop your thoughts in the comments!
Another negative to keep in mind when purchasing a new construction home is the smaller lot sizes. As a builder, your goal is to obviously profit from all your builds, so their strategy to maximize profits is to fit as many homes on their vacant lots as possible, in which they will abide by the local municipalities requirement in terms of the distance between the septic and well, driveway requirements, frontage requirements, along with the smallest lot size possible for the size home being built on lot. Another negative that a lot of people don’t keep in mind is most builders will typically not put in a pool or a fence, so that task is 100% up to you, and I'll explain in my next point why that is.
Most new constructions homes have a homeowners association, and for those of you that are unfamiliar about what these are, they are essentially a board of directors for your neighborhood, where laws and regulations are implemented to keep the community pretty, and limit the amount of freedom you have with your property on the exterior, as they tend to want it fairly uniform. On top of that, these associations come with monthly, quarterly or annual fees that you need to pay that will typically cover maintenance of the roads, sidewalks, upkeep of a commons area, beaches if you’re on a lake, etc. With that being said, most HOA’s in Michigan don’t want you putting in fences, and it’s far to say the permit process to put one in, along with putting in a pool can be quite the process, so that’s typically why builders don’t go out of their way for these luxuries.
Another common negative about purchasing a new construction home is being in a cookie cutter neighborhood. This can be a difficult thing to accept, as most people like to show off their home and the uniqueness it offers, but with communities, builders tend to have 3-5 different floor plans you can choose from so when you’re strolling through your neighborhood, you’ll see the same home over and over again. Nothing but the paint or siding color differentiates them, and when you think “well, I could just add a tree, shrub, bush, garden gnome, etc. Make sure if you have a homeowners association, that you read the HOA bylaws to see if you can even do something that minimal to your home, as some associations are more strict than others.
One of the bigger negatives that most people don’t think about, is being in a construction zone for the next few months or years. Depending on if your home is the first or last being built in the community, you may find yourself in the middle of a construction zone for months and months, and I can tell you from my client’s experiences, it’s typically worse than what they thought it would be like, especially when most people are working remote from home these days. Another aspect people don’t think about is the landscaping. New construction communities tend to lack matured greenery, and oftentimes they will just throw in a 2-3 foot baby tree in the ground and it would take years and years before it developed into any kind of privacy between you and a neighbor. Of course this isn’t the end of the world, but it is something fair to think about.
The main difference between a new construction home and a resale home is the time period to get possession. As most people know, getting a new construction home built from scratch can take anywhere from 8-14 months, so taking the time to figure out what your living situation is going to be during that period is crucial. Are you staying with family or friends? If not, Are you renting an apartment or condo below your means? If that’s the case, make sure you consult with your mortgage lender to ensure the rent payment you have won’t get in the way of your ability to obtain financing for the new home you’re getting. The process can be extremely inconvenient, and timing your situation can be especially tough. A lot of people will say “It’s not that bad Andrew, I just switch to month to month on my lease instead of signing up for a year lease” and that’s all fine and dandy on the surface, but most landlords who agree to a month to month lease state that they can evict you with a 30 days notice, and at that point, you could find yourself in a little bit of a pickle. Be sure to look at that contract over real good if you’re in that situation.
A few more negatives to mention before I transition in resale homes have to do with the building process. Over the last few years building materials have been astronomically high, and labor has been expensive and scarce at the same time. Not only have builds become more expensive, there have been major concerns in the quality of the build as well, that’s why it’s very important to do your research and find a builder that truly fits your wants and needs without cutting corners. Granted, if there are issues that stand out prior to occupying the home, there is the luxury of having all that dealt with before you move in, but who knows how long that will delay your move in date.
Which is another topic altogether about builders not sticking to their timelines, so the plans and perfect timing you had in place for your living situations may fall through the cracks, and create a whole lot of stress, and as if you weren’t stressing enough already, builders tend to be very firm when it comes to the pricing of their homes. Since each home is similar, they become comparable sales to one another, so the last thing the builder would want to do is decrease the value of their homes, which would create a domino effect when they reach the appraisal for each property they complete.
So what would be the positives for purchasing a resale home? For starters, they are not as expensive as new homes, so your dollar can go a little further depending on location of course, and there tends to be more leeway not only when it comes to negotiating the prices, but the repairs as well. You’ll also have a larger catalog of homes to look through, as there would most likely be more inventory out there for resale homes compared to new construction communities. Homes would be in better locations, offering more amenities and even have the potential of a better commute from work and other day to day routines.
Another important factor is having the ability to get a home that is truly unique and not cut from the same cloth as your neighbors. This may not seem like an important positive about purchasing a resale home, but believe when I say it is. Looks are everything in real estate and with human beings so competitive, it’s refreshing to have a home that is truly unlike anyone else's inside and out.
Purchasing a resale home will also give you the option to be more selective about a home. When it comes to new construction homes, there’s a little bit of the process and design where you simply settle with what you get unless you invest into a one-off custom home builder, but for the most part, there’s something in the new construction process where you simply just take it for what it is. Maybe the layout isn’t perfect, maybe this room is too small, or you want a full bath and they only offered a half bath, whatever it may be, you have the freedom to find those wants and needs in resale homes because those floor plans aren’t just catered to 3-5 floorplans.
You can see ranches, colonials, bi-level, tri-level, quad, etc. there’s so many different layout options for you that it honestly gets people overwhelmed, and the same time there is some settling for what it is, but not as much as you would for a new construction home in a community. On top of that, you have the ability to get an older styled home, so if you’ve heard the phrase “they just don’t make them like they used to” and it’s true with real estate too. Not only do a lot of the hoes have “good bones” they have features that are truly unheard of in modern architecture.
Another huge positive is the ability to cater your search to yard size and what it offers. If you don’t want a baby lot like the builders offer for their new construction homes, no problem, an acre sounds good, or maybe you want 3 acres and a chicken coop. There’s so much opportunity and flexibility to this route of homeownership. You can cater your search to have a fence or have that in-ground pool you’ve always wanted, without having to worry about the permit process, assuming it was all taken care of correctly from the start.
The last positive for buying a resale home is the most obvious, you don’t have to wait around. As I mentioned, with a new construction home you could be figuring out your living situation for the next 8-14 months, but with a resale home, you could get possession of the home right after closing or within the next 30-60 days depending on the occupancy agreement you have in place with the seller. So of course, if you’re on a deadline, getting a new construction home may not be the option you want to take.
Switching gears to the negatives for buying a resale home. You don’t exactly know what you’re getting yourself into. Like I mentioned, you don’t know how the recent owners have cared for the home over the years, it may be obvious with a few things, but unless services were logged for let’s say the furnace, water softener or A/C unit, you really don’t know how those items were cared for, you simply just know the age of the unit. With that in mind, resale homes are most likely fixer uppers to a certain extent.
There’s always something to do to a used home, whether it be cosmetics to cater the home to your wants and needs or replacing one of home’s systems because it died on you right after you moved in. In that case, when you truly love a home you viewed, but are a little skeptical about the home's upkeep and whether or not a few of the items will make it a year, it wouldn’t hurt to invest in a one year home warranty. They are typically $500-$800 for a year depending on the package you invest in, and instead of having to cover the full replacement cost of an appliance, there would simply be a co-pay that would cover the repair or replacement, so it’s a nice perk in that sense, but I have heard of some instances where a full appliance was needing full replacement and there wasn’t a lot of say in what brand/type the next appliance was, so it’s important to clarify that with whatever home warranty company you go through.
With new construction homes you budget for all the additional items you’re tacking onto a base price such as: additional lighting, an island in the kitchen, marble instead of Formica countertops, etc. but with a resale home you need to make sure you budget for the worst. Let me explain, going into a resale home purchase can stressful, because again, you don’t know how the home was maintained, as much as we’d like to assume the homeowners did everything in their power during their ownership time to upkeep and maintain the home, it’s not always the case, so budgeting for the “what ifs” is very crucial. Not just the maintenance of something in the home, but an emergency fund in case it’s the dead of winter and your furnace decides it wants to take a nap and never wake back up.
The last negative I'll touch on is the old home style, Of course, as I mentioned before, it can be as easily a pro as it is a con, but in this situation, the home could have a floor plan that is hard to cater to your needs, and redesigning the space may come with hardships, one being several load bearing walls throughout the home that would cost an arm and leg to support.
If you’re someone like me who doesn’t enjoy working on things, maybe a used home isn’t for you. If you’re someone who favors location and great local amenities nearby, new construction may not be for. A lot of you may be wondering what’s the MOST ideal route? And to answer that would be to find a resale home that's 2-5 years old. Just like a car in some aspects, not so much the depreciation aspect, but the fact that it has much more longevity compared to the other resale homes (or used cars in this scenario), and you don’t have to worry about replacing and repairing right away, and you can just enjoy the home for what if offers for the time being. These situations may be hard to come by, but if you ever come across one that you could see yourself living in, do yourself a favor and hop on that opportunity!
If you have any other questions about purchasing a resale home vs. a new construction home, please don’t hesitate to reach out and I would be happy to help you through your thought process.
MENTIONED LINKS 🔗
→Home Builders PANIC: https://youtu.be/b6W70SELLHQ
→Home Warranty Video: https://youtu.be/6G22wxxW23Y
Andrew McManamon is a Michigan REALTOR® with Signature Sotheby’s International Realty and provides real estate services to Buyers, Sellers and Investors throughout SE Michigan including Livingston County, Oakland County, Washtenaw County, Genesee County & beyond. Andrew has become one of the rising stars of Michigan real estate agents. Prior to his real estate career Andrew was responsible for managing a senior living facility in Brighton, Michigan as a dining supervisor and an activities assistant. Andrew’s passion to help people is unlike any other, and he continues to strive to be best resource he can be. Andrew graduated from Cleary University in Howell, Michigan with a double major and currently resides in White Lake, Michigan.