7 Year Real Estate Itch – New Construction

My wife and I are celebrating our 30^th Wedding Anniversary this year. We are off to Portugal and Spain (presently touring Gaudi in Barcelona) to celebrate. These days we are taking a bow as 30 years is quite an accomplishment. Lots of work, love, patience, and biting of the lip!

I’ve only handled a handful of real estate home sale divorces in my career. I think that was because by the time many of my clients got down to South Florida, a divorce had already occurred, or it was, “we are too old for that crap anymore”. My goal in a divorce house sale is always to treat each side equally. I normally treat each client as a separate client and give double the communications. And never take sides. Sometimes, I’ve passed on a listing if there is too much hostility which becomes abusive if directed at the agent. The worst one I ever had was a couple who literally would not move their stuff out…the wife locked the husband and the movers out of the house with all their paraphernalia in it. The threat of refusal to close by the Buyer finally got them to move but their nuttiness cost them extra in rushed moving expedition.

The best divorce sale I ever had was a couple who were so nice to each other you thought they were lovebirds. I sold their home in a short sale (6 deals fell apart) over a year and half. This was 2010 and the market and processing of short sales was nuts. I actually used to change the write ups from Puffing Good (which is legal) to a less puffy version, because I needed the homes to appraise for less. “Fabulous lake views from this exquisite ranch home”…..morphed into….. “Quasi pond looks in the wet season from this wood frame fixer upper with some soothing road sounds during rush hour with westerly winds of the Florida Turnpike.” (I’ll write about that another time). Anyhow, my divorced short sellers stuck with me, and they finally got to move on. A few years ago, I actually reached out to my Seller who worked in voice overs, Roch Bordenave and he did my Audible book How Making a Sandwich Can Change Your World, The Amazing Success of the PB&J Strategy.

In real estate, the seven-year itch is what I refer to when the advantages of new construction end. My Mom actually coined the phrase to me when we first moved down to Florida 25 years ago. She said that everything lasts about seven years and then it starts to break. Often it leads to a divorce of the house with a sale instead of the end of a marriage. Here are 27 advantages and disadvantages of purchasing new construction…

Advantages

1. Warranty

Most builders give at least a one-year warranty. Typically, longer for appliances.

2. Roof

Roofs should have a 10-year warranty. See if you can make it transferable should you decide to sell.

3. Insurance

With most everything new, insurance can be lower. Having a roof under 10 or 15 years old and impact glass always brings costs down.

4. Major Components

Your air conditioning unit, water heater, and other major components are all new.

5. Buy Downs and Mortgage

Some builders offer low mortgage rates or buy downs on spec homes.

6. Possible Tax savings

Put in some big-ticket components like the pool or generator out of pocket and it might lower your tax base if homesteaded.

7. Meet the neighbors

My Dad once introduced himself by knocking on the neighbor’s door when he moved into the neighborhood in a resale. The neighbor slammed the door in his face. That wouldn’t happen in a new community. In new construction, nobody knows anyone, and most everyone wants to get to know you.

8. Appreciation

Many times, I’ve seen homes appreciate a lot, especially if you are one of the early ones in and the neighborhood is a hit.

9. Finance everything

You can finance everything into your mortgage.

10. Get it the way you want

Pick out the upgrades you want your way.

11. New Home Smell

There is something special about being the first one in a new home. You are the original owner and no one else has ever lived there.

Disadvantages

1. Pioneer

There is risk in being the first.

2. Resale

You are competing with new construction along with their warranty. In a stagnant market with builders who have a long way to go, you can lose money for a period of time.

3. Location

Oftentimes, new construction is at a farther out location with less things nearby. It might take time for the neighborhood to get local restaurants and shopping.

4. Risk if problem

If the neighborhood is a dog or a recession hits, a builder could go belly up. Check out the health of the builder.

5. Mortgage Rates

Those low rates usually come from a higher price. Just because the rate is low, it doesn’t mean you are getting a great deal. Look at re-sales as well.

6. Bad Market

A bad market hurts resale even more. The builder oftentimes bumps up incentives that are even harder for a resale to compete with.

7. Longer Wait

You have to wait until a home is built which often can be over a year. Sometimes more if there are building shortages.

8. Surprise Material Costs

Read the fine print. During the pandemic, material shortages not only led to a longer wait, but the costs of goods made prices higher. Read the fine print with tariffs here if the builder can raise the price on you after you are under contract.

9. Negotiation

There is usually little negotiation although extras sometimes can be added in.

And as Johnnie Taylor once said about that 7-year itch, remember, “it’s cheaper to keep her”. So, Dad, if you’re reading, don’t take that door slamming event personally. Maybe that guy was just scratching his 7-year itch out on you.