September 28, 2018September 28, 2018 FOGA

Six Unexpected Costs of Buying New Construction

Real Estate

This situation seems to happen at least twice a week:

 

You are looking at a floorplan with a new home builder, and you love it. The layout looks great and would work perfectly for your family. The best part is that it is comfortably in your budget since the website shows it has a base price of $212,990 and your budget is an absolute max of $250,000. This is fantastic. So, now you go to the model, highly interested in this home, and they have the model on site. You walk in, and you fall in love. It is gorgeous. With an extra bedroom option, tray ceilings, crown molding, wood floors, quartz countertops, stainless steel appliances, and frameless showers in the owner’s bath you are in heaven. You see that they have a beautiful home site backing up to a pond and you are ready to buy your perfect home. They are even offering an incentive of $12,500 towards your design center upgrades! All is well.

 

Then you learn that the home site is an additional $15,000 and the model is over upgraded. To be specific, the model has over $120,000 in upgrades, but most people “only” spend around $25,000 – $30,000 including that $12,500 incentive (this is only on the design upgrades). You’re in shock! Why would they spend that much? Well, it turns out that the stainless steel appliances are not included, the tray ceilings are not standard, the countertops come as laminate, the wood is actually carpet (builder grade carpet at that), and the tile in the bathrooms is vinyl to start with. So, now your dream home went from being perfectly affordable at $212,990 to now being over budget, and you are now depressed to learn that this home that you love is entirely out of your budget.

 

This story is commonplace and happens every day. It turns out there’s a reason all the websites say starting at $212,990. There are more expenses associated with a new home that just the base price of the floorplan. Since I work with this every day (I am a licensed real estate agent who sells new homes exclusively) and we closed on our own new construction home in 2017, I wanted to share some of the ordinary expenses that a lot of people do not always expect when they purchase a new home.

 

Elevations

All the homes will typically have different exterior looks/elevations since the community will not allow two houses that are the same next to one another; the home on the inside will be the same layout.  They tend to have variations in the looks: one will have a front porch, the other will have siding, the other will have brick/decorative stone, etc. You will pay more for the better-looking elevations since they tend to be more expensive to build and more popular (which means the builder can make extra on them).  When we bought our home, there were four elevations available.

We picked one of the upgraded elevations for our home since it looked nicer than the standard elevation (which was the plainest thing I have ever seen), but we did not pick the most expensive one since D didn’t like the front porch look. “We don’t go outside, so there’s no point to having it,” he said. He was not wrong.

 

Home Site Premiums

Unless your home is backing up to another home without any special features, you will more than likely have a home site premium. If a home is on a corner, backing up to conservation or trees, in a cul de sac, or larger in some way, the builder will charge for it. Premiums for home sites can vary greatly. While you would pay a premium for a home site that is bigger but backing up to someone else, you would pay significantly more for a home site in the cul de sac backing up to a pond. I have seen premiums be as low as $1000-$3000 for corner home sites backing up to someone and be over $50,000 for home sites backing up to conservation or pond views. $25,000- $30,000 seems to be a standard for an excellent sized conservation or pond view home site in my area.

We opted for no premium and backing up to another person rather than pay the $25,000 premium for a home site across the street that backs up to a pond. We have a rear fence, so it wasn’t that big of a deal to us.

 

Structural Upgrades

This is the first type of upgrades you will do to the floorplan. These are the upgrades that are required to get a permit for the home, things that need the approval of the community HOA, or would be incredibly difficult to build without knowing first hand. Things that you may be upgrading include but are not limited to:

• Optional Rooms
  • Bedroom, Den, Bonus Room, Bathroom, etc.
• Optional Plumbing
  • Additional sinks in bathrooms, water softener loop in the garage, laundry sink, garden tub in the master bathroom, shower without a tub in guest bathrooms, etc.
• Tray Ceilings
• Some Electrical
  • This may also be done at the design center.
• Optional Windows
• Lanai or Extended Lanai
• Additional Car Garage
• Gourmet Kitchen

All these are things that you would need to pick to be a part of the main contract, and all have a cost associated with them.

When we bought, we managed to keep these costs low since we opted not to do the upstairs bonus room (a $23,000 upgrade) and only add an additional sink in the guest bathroom, a loop for the water softener in the garage, and a tray ceiling in the living room.

 

Design Upgrades

Now, this is where most people lose their shirts. Imagine, you walk into this building, and it has all the beautiful things that HGTV talks about. It has samples of over 100 different countertops from Corian to quartz. It has a whole section of carpet, tile, wood, laminate, and engineered hardwood. People will spend thousands upon thousands here for their home. Most popular upgrades I have seen are:

• Cabinets
• Flooring
• Countertops
• Kitchen Backsplash
• Plumbing Fixtures
• Glass Front Doors
  • Depending on the community HOA, this could be a structural item.
• Crown Molding
• Paint
• Electrical
  • Extra lighting, outlets, fan pre-wires, etc.
• Shower Wall Tile
• Blinds
  • These typically end up being cheaper to do on your own.
• Appliances
  • While essential appliances (stove, microwave, and dishwasher) usually are included (but always check), the fridge, washer, and dryer are not.

We managed to do reasonably okay with this. Since we saved a lot by not choosing a premium home site or doing a lot of structural options, we were able to do things we really wanted. Got the flooring upgraded to wood tile in all the main areas and upgraded the cabinets and countertops throughout. Also, upgraded the carpet in the bedrooms, the glass front door, and splurged on a surround sound speaker system since D assured me that it was cheaper to do it with them than what he was planning. We did not upgrade the paint, appliances (save the dishwasher which was only $100 from the included one), or plumbing fixtures since the pricing was ridiculous. We also opted out of putting in a backsplash, blinds, and crown molding in favor of doing it later for less money and with more options.

 

Closing Costs

Unlike with resale where the buyer and the seller pay for their own expense (unless you negotiate otherwise), the buyer is responsible for all the closing costs in a new construction sale. Some builder will contribute towards your closing costs if you are using their preferred lender and title company, but, even with this contribution, there is still an extra expense that you will have to pay out of pocket.

In our case, we did get money towards closing costs and had an additional $4000 that we had to pay out of pocket.

 

Property Taxes

This is one that a lot of people missed. When you buy a new construction home, you are only paying taxes on the land at first. Once the county you are in reassesses the property, your taxes will go up, and that will increase your monthly mortgage payment. If you are not prepared for this, it will be a very unwelcome shock when your mortgage company sends you a bill for the difference of what they projected for you to pay and what you will need to pay.

Since I work in the industry, I was prepared for this to happen. Our mortgage company has not updated yet since we haven’t even been in the home for two years, but we have kept an eye on the property appraiser website. Our yearly taxes went from $2288.77 to a projected $4832 (we get our official “bill” in November). That’s $211.87 a month difference, and that’s including our exemptions (In Florida, you file can file for Homestead Exemptions and save up to $50,000 off the value of your property for tax purposes)! You’ll see more about this on my September Update, but that is not a happy pill to swallow and even worse if you are not looking for it.

 

Bonus Expenses

While these expenses are not unique to new construction, they are expenses that people always seem to forget to budget in.

 

Furniture & Decor

I see a lot of people buying new furniture when they get a new home. New House New Look seems the be an appropriate name for the trend. It’s not always necessary, but many people find that their furniture doesn’t fit the new space at all. Most new homes in our area tend to fit more of a modern theme with the kitchen islands, open layouts, and less formal spaces, so all the old furniture doesn’t always match the home.

We are a special case because we never actually got furniture together. The stuff we had was from when I got my first apartment and the hand me down future that D’s dad gave him. I hated his stuff because it was ugly. He hated my stuff because it was uncomfortable. So, we got a lot of new furniture. Now we are set for quite some time.

 

Cost of Moving

While most people think of the obvious costs, like either hiring a moving company or renting a truck and getting some friends together for a moving party, there are a few other considerations.

• The costs of transferring all the utilities into your name.
• The cost of boxes and packaging materials.
• The cost of renting storage for your things if you need it or if your home will not be ready for a while.
  • Tip: Always budget for at least a month or two longer than you need. I cannot count the number of times I have heard someone tell me that construction of the home took longer than they expected and they were not prepared for the additional costs. Better to plan for more time and be pleasantly surprised than be caught off guard.
• Pest Control
  • No one tends to think of this, but we learned our need for it VERY quickly. You have to remember that six to eight months ago, your home did not exist, and the bugs were happy and everywhere. Now your home does exist, and the bugs are not happy and everywhere. We got someone out within a week and haven’t had a problem since. They come quarterly now, and we are MUCH happier for it.

 

Maintenance & Upkeep

People tend to forget about any expenses in this category, and that’s a problem because this is where the costs are. You will end up having many people come out to maintain your home. These expenses can include:

• Lawn Care
• Cleaning
• Pest Control
• Cleaning
• AC Maintenance
• Pressure Washing
• Alarm System & Monitoring
• Repairs
  • If you are coming from an apartment, this will be the hardest one to get used to. Remember when the fridge stopped working and all you had to do was fill out a maintenance request for the office to take care of? Now, the fridge stops working, and you have to get someone out to repair it. You also have to be there when said person comes and pay them for the work they do. Having a savings account set up for emergencies will save you lots of stress when these situations happen.

 

We currently have nearly all of the above. With both of our jobs being all over the place, we don’t have time to do it all ourselves and stay sane. D did try to keep up with the yard at first, and then he got promoted (Hooray!), and it all went out the window. Our costs are not as high as others we have spoken to, but it is still a cost of $271 a month for all of it. Definitely, something you will want to consider.

 

That wraps it up for the unexpected costs for a new construction home!

What did you think? Do you agree with what I picked? You have anything else to add? Did any of this surprise you?

 

Let me know in the comments!

 

Until next time!