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PURCHASING IN A NEW DEVELOPMENT VERSUS AN EXISTING NEIGHBORHOOD: PART III (PRIVATE HOMES AND CONDOMINIUMS)

12/13/2011

   This is the third article in the series discussing the major differences between purchasing a home in a new development versus purchasing in an existing neighborhood.  A comparison of those differences includes:

   The new development should be analyzed for the following risk factors:
•    Does the developer have experience at completing this project on time and within budget? Realistically, one must take into account that a developer, in constructing a development, is reliant on many people and conditions beyond his control, such as the various municipal inspections which must be conducted at various junctures of the construction, numerous vendors which supply the raw materials, and many subcontractors who construct the infrastructure and units, which can affect both the price and the timeline of the construction.
•    Does the developer have the funds necessary to complete this project?  There are a number of new developments that have ground to a halt due to fiscal difficulty over the last several years. The first houses sold in a new development are often considerably cheaper than the last houses, as the first buyer may have to wait months or even years until a developer has contracted to sell enough units to warrant his commencement of the project. At that time however, the price of raw materials may have fluctuated, in which case, the developer may require that the buyers pay more than anticipated, or in the case of some developers, they will deliver shoddier houses than what was originally expected.
•    Will there be amenities at the new site?  Today we are looking for social halls/shul; possibly a mikvah; common area for children and adults inside and outside; pleasant surroundings/landscaping; the right mix of purchasers to suit your family lifestyle. We all know of cases in which the first buyers were provided these amenities as part of the contract price, and the subsequent buyers were required to pay a surcharge for these amenities.
•    How much will estimated maintenance fees be?  If you are counting your pennies, this might make a big difference. Even without required maintenance fees, one doesn’t want to have the only lawn in the block that is overgrown, or the only driveway covered in snow three weeks after the last snowstorm. These small charges can amount to several thousand dollars annually.
The benefits of a pre-existing neighborhood include the following:
•    You will know exactly whom you will be living near and who your new neighbors will be in the surrounding area. However, if the neighbors no longer have any children living with them, and they occupy a large empty house, the neighborhood may undergo demographic changes, when the houses are subsequently sold, whereas if several similarly aged families create or join a new development together, they may enjoy each other’s company for decades.
•    There is a fair understanding of the values on your block and the surrounding area. This too is subject to change as discussed earlier.
•    All the amenities are in place allowing you to decide if they are adequate for your needs.
•    You can inspect the quality of the building since it is already built.  You should look at any property in order to evaluate hidden defects and future needs for repair and renovation. These can often cost tens of thousands of dollars to repair. We all know of people that purchased houses in the winter only to discover six months later that the central air conditioning system was not functioning properly.
•    One should not take for granted that a newly constructed house will not require maintenance during the first few years. Often the reverse proves to be true; a new house may have leaks, faulty plumbing and wiring which must be repaired, whereas an older house which has endured several winters and summers can withstand the elements and heavy use.
   The analysis of these comparative factors will be saved for a future installment in this series.

RESEARCH OF YOUR PROPERTY

   We discussed the need to secure comparable sales in your designated area.  Perhaps you did this.  There are several sources for effective comparison sales.
 
   Your broker should provide you with a listing of all sales in your area in the past 6-12 months.  If the broker’s report is difficult to read, have your broker explain it to you.  If he prepares a decent report, you have a feel for the correct valuations of your property and other similarly situated properties.

   Ask your future neighbors which houses recently went for sale and what is currently for sale.  Try to determine from those neighbors the purchase prices.  If all else fails, and you don’t have sufficient market information, you can go out to the Township Building and pull the information yourself for any particular home. These public records are available online too.  A reader recently recommended the following website to find the local land records www.redloc.taxrecords.com.
 
 
 

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