Lisa Johnson's House and Home - Articles on Home, Family, and Living

Lisa Johnson on Buying a New Home or House

Chapter 3: The Advantage of Buying Early into the First Phase

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October 1, 2003

As Steve and I came to learn after the fact, buying a home early into the first phase of construction offers the most advantages to the home buyer. When we made the decision to buy a house at the development in Menifee, the fact that it had just opened recently, was one of the factors. At the time, we didn't realize what advantages it offered, we just figured that there would be more lots still left unsold.

That was only partially correct. The advantages you get when you buy early into the first phase are as follows:

• Cheaper prices
• Greater customization options
• Choice of the better lots

Cheaper Prices

The first phase of construction is always the cheapest phase. A "phase" refers to which set of lots are being built first, second, third, fourth, and so on. A development may have 100 lots (homes). But the developer will not build all 100 homes at once. Rather, they might build only 20 at a time. Thus, they would have 5 phases consisting of 20 homes each.

It may take five months to complete each phase. Thus, with five phases, it would require 25 months to complete the development once the actual home construction starts. During that time, the developer must pay property taxes on all unsold land, and during that time the value of real estate usually appreciates. So, every day the developer owns that land, they are losing money.

The first phase of construction is the cheapest because each phase after that the developer has paid taxes, which they seek to recover by selling the later phases at higher prices. In addition, over time, rising market values allows the developer to charge more.

If you are unlucky to buy a new construction home during the last phase, the developer will have passed all the taxes, fees, and costs associated with holding on that land for the last several months, or perhaps years. You may very well end up over paying the actual market value of that home.

Greater Customization Options

When Steve and I put a down payment on the house we chose, it had not yet begun construction. Because of this, we were able to customize more of the amenities.

Developers do not normally wait for a buyer to buy a home before they start building. In fact, everything is scheduled well in advance. Construction dates for each home is set well before buyers buy them. If a home does not have a buyer by the time construction starts, the developer will construct the home with basic amenities. At that point, whoever ends up buying that home will have fewer customization options.

When we put the down payment on our home, we were able to chose the carpeting, the tiling, the closet organizers, closet doors, placement of telephone jacks, cable television jacks, closet lighting, ceiling fan wiring, etc. We picked out the wood paneling on the cabinets, picked out a fireplace mantle, picked out the stair railing, even picked out the appliances. We had to option to add a balcony, decide between five, six, or seven bedrooms, whether or not to add a loft, and whether or not we wanted surround-sound speakers built into the walls.

There were several more choices, and it's too much to write about. Each development offers its own slate of options and customization choices.

Some of our neighbors, who bought well after the home was built, had very few options. Basically, they could only choose the carpeting and floor tile, and their choice of appliances were limited.

Choice of the Better Lots

When Steve and I decided which development to buy in, and decided upon the floor plan, there were only two lots we could choose from. One lot was actually slightly larger, but about half of its backyard space consisted of a large slope ascending up to a hill. Meaning, half of its backyard was useless. Thus, our choice of lots was an easy decision to make.

In most cases, the developer has chosen which floor plan to build on which lot. The buyer doesn't normally get to make that choice. Though, some developments do offer that choice, provided the buyer is able to make the purchasing decision well before construction starts.

Thus, if you decide upon a floor plan that you like, you then need to find out which lots that floor plan is earmarked for. Personally visit those lots, and choose the one you like the most. Don't just consider the size of the lot. The developer will charge more for larger lots. Instead, consider the following factors:

• Which lots have the smallest slope in the backyard: Especially in Southern California, where the land is covered with hills and valleys, homes are often built on inclines. This means, each lot has a slope descending or ascending to its adjacent lots. The steeper the inclines, the larger the slopes. Slopes are pretty much useless, and yet they are still part of the lot you are paying for, and will continue to pay for through property taxes.

• The direction of the sun: Figure out what rooms of the house will get direct sunlight. If you live in an area with high temperatures, you want a house where your primary living areas, such as the family room, your office, or back patio, are shaded. Otherwise, the sun will shine directly into these areas, and you'll just be hot all the time.

• Proximity to high traffic: Take a look at the streets running near your home. Are there are many major streets nearby? Look for homes in a cul-de-sac, or at the end of a road, or away from major streets.

You may have other needs or preferences. You may prefer the corner lot, or the lot with the best view of the mountains. Most likely, you will plan to live in this house for several years. If you are fortunate enough to get into a development during the early part of the first phase, take advantage of this luxury, and find the lot you will be most happy with.

Next:   Chapter 4 - Do You Need a Real Estate Agent?

Suggested Links

·  Tips on Buying a Home

·  HUD Homebuying Guide

·  Homebuying Consumer Info Center

·  Real Estate ABC

·  Home Buying Guide.com