Something Old, Something New …
By Patricia Tan
. . . Something Borrowed, Something Blue . . .
We are all familiar with this old English rhyme which gives advice to brides, but what does this have to do with real estate? In today’s real estate market, many areas have few homes being offered for sale. As the availability of resale properties tightens we are seeing a surge in interest in newly constructed homes, and I thought it might be useful to examine the pros and cons of older homes versus their new-build cousins.
When purchasing a home, a buyer will consider what is important to them. These factors may include:
Location
Florida is a coastal state, and early settlers took full advantage of premium waterfront settings for their homes to enjoy spectacular views and cooling breezes. Many homes in prime locations were built some time ago, and land for new waterfront construction, or close to town centers and attractions may be limited. Large numbers of newly constructed homes are more commonly located some distance from beaches and other attractions, where land is more readily available at lower prices. Our international buyers often arrive feeling that they wish to buy a home close to the beach, but then reconsider when they see how much more they can get for their money in a newer home which may be a short drive from the beach.
Rules or No Rules
Much new construction in our state takes place in deed restricted subdivisions, where builders can enjoy some economies of scale. If a buyer wants to have complete freedom over what they can and cannot do on their property, buying a home in a non-deed restricted area may be a better fit, but they will have fewer new homes to choose from. For international purchasers who wish to rent their vacation property when they are not using it themselves, new construction on the Gulf Coast may not be an option, as most new deed restricted communities do not allow short term rentals.
Cost of the Home
It is very difficult to make a direct comparison between the purchase price of a new home versus a resale home. Buyers may find that new homes are being built on small lots as our land values increase, and this may be a consideration. Construction costs when building a home from scratch will typically be lower than the costs to modify/improve an existing structure.
Ongoing Costs
In addition to the purchase price of a home, buyers consider the ongoing costs of that home too. New homes are built to more exacting standards for energy efficiency, and this should result in lower utility bills. More of our new subdivisions use non-potable water for their sprinkler systems and often include this benefit as part of the HOA fees.
The benefits of a builder warranty on a newly constructed home should not to be under-estimated. Nothing is more disturbing to a buyer enjoying their newly purchased Florida home than to find themselves having to make major repairs. These unexpected costs can be mitigated by the purchase of a home warranty for the older home, but nothing gives the same peace of mind as an all encompassing builder warranty.
On the other hand, new homes can come with additional ongoing costs too. Many of our new homes attract Community Development District (CDD) fees. These fees can be significant, depending upon the size and location of the home.
Something Borrowed?
Mortgage rates remain very low, so financing a purchase can be an attractive option. However, lenders may be more “fussy” about the condition of an older home before they agree to grant a mortgage secured upon it. Many builders have partnerships with mortgage companies and may offer preferential terms when a buyer uses one of those companies – always ask the builder representative about financing incentives.
Loans for non-Americans are becoming more widely available too, which has boosted the number of homes being sold to overseas buyers. We often work with buyers from other countries who arrive and wish to pay cash for a property. When they do not find their dream home within their cash budget, many of them will take a small mortgage so they can purchase a more expensive home that better meets their expectations.
As for something blue, my hope is that purchase of a home will not leave the buyer feeling blue!
[1]Patricia Tan was born in England, and her career in international sales and marketing led her to live and work in many countries around the world before moving to Sarasota in 1997. Patricia is a Certified International Property Specialist (CIPS), Graduate Realtor Institute (GRI), and Transnational Referral Certified (TRC). She is involved in global activities of the Sarasota, Florida and National Association of Realtors, and currently serves as NAR President’s Liaison to U.K. Her real estate business operates from Coldwell Banker on St Armands Key, where her focus is to bring international buyers to the local market. She regularly makes marketing trips to Canada, Asia and Europe, to promote Florida’s Gulf Coast and the Sarasota area in particular. Patricia may be reached at 941-504-9232 or Pat@PatriciaTan.com [2].
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