What you need to consider when buying a new construction
Like many city skylines, the Boston area also has many new development projects for both condos as well single family homes. Developers and sellers of new construction homes will market their properties from the time the ground breaks to when the project is fully completed and move-in ready. At Nuhom, we understand how tricky purchasing a new construction or converted home can be, which is why we use our years of experience and expertise to help guide you through the process. If you’re looking to purchase a new construction home, consider the following.
In Massachusetts, when purchasing a new construction home you will receive a builder’s warranty on the home for one year. So what does this mean? A builder’s warranty is simply a document attached to the purchase contract that states if anything is to go wrong with the property in terms of workmanship or appliance malfunction, support will be provided to the buyer for one year. It’s important to note that this warranty does not include cosmetic wear and tear or aesthetics. New construction homes can be a great purchase because you likely won't have to make many repairs or updates to the home for a very long time.
Another benefit of purchasing a new construction home is having the opportunity to choose your own finishes! Often, new construction allows you the opportunity to make choices such as your faucet type, countertops, paint color, hardwood vs. carpet and more! If a home is midway on completion, it's just important to reference what was initially agreed upon by you and the seller, this is often outlined in a “spec” sheet.
Depending on how far along you are in the construction process, if an offer is accepted before the home is move-in ready, there could be delays in closing on the property. This delay could be caused by multiple factors including delayed deliveries of necessary appliances and materials, a contractor’s punch list of items still left to be completed, and city inspectors who have to sign-off on the property. Sellers will build a buffer into the purchase contract to protect them for this.
For example, Nuhom recently had a client who couldn't move into their new construction condo in Newton for over 2 months from the earmarked closing date due to city inspectors taking their time on providing approvals or comments on an inspection. The closing was repeatedly delayed and it caused much angst for the buyers. They had to shift their plans.
Also, tangentially, we saw the pandemic set back a number of new build projects. Due to the many shortages both prices and number of delays jumped. Homes were in demand, but there wasn’t enough building material to go around.
Time will tell
While new is typically synonymous with better, new construction homes haven’t withstood years and years of New England weather. Unlike homes that have been here for 80 to 100 years, these newly constructed homes might need some added accommodations to weather the storms we’re accustomed to in Boston.
There's no test like the snow, rain, and scorching hot summers we have in Boston to portray a home’s resilience. With older homes you can investigate if something like water entering the home has been a problem by a musty odor in the basement, water line marks along the foundation, or wet stains. The bottom line is with new homes, you simply don't know until Mother Nature decides to put the house to the test.
For example, Nuhom had a client who bought a townhouse in Reading, MA only to have the basement flood 4 months after closing. Fortunately due to the builder’s warranty, the builder assisted in installing a sump pump to prevent future situations from worsening. Luckily only gym equipment was in the unfinished basement and not much was damaged.
As you can imagine, even with a home inspection, there is little ability to foresee this coming.
Financing and appraisals
If you’re purchasing a new construction home, it may need to be appraised more than once. In order for your bank or lender to appraise your new home, the property must be nearly complete so they can accurately appraise it. If you need to get a financing commitment and the project is only half way completed, your lender may have to send an appraiser twice, once at mortgage application submitting stage, and then again closer to the closing when the property is at least 95% complete (if not more). Having a home appraised more than once will ultimately cost you more than what you would generally pay.
The saying, 'they don't make them like they used to' rings true here. When purchasing a new construction home, it’s in your best interest to get the home inspected if you can. The cost to build a home between labor and materials have skyrocketed, thus the finished product builders make today is often not as good as it once was unless you're paying a premium price. If you can, try to get your home inspection included in your offer. The inspection would be best utilized nearing the completion of the home to ensure the builder did not take any detrimental shortcuts.
If you are looking for a new construction home, get started here.