New Homes vs. Existing Homes

Existing Homes

Generally, these homes are in older, more mature, neighborhoods.  Newer existing homes, built in the last 5 years, tend to appear more in the short sale and foreclosures category.  Homes where the last sale was 10 or more years ago have significant equity built up, and unless leveraged with second mortgages, are not short.

Deal with a person

With Existing Homes you are working with a person while short sales and foreclosures it is a corporation.  The difference is that the person may have lived there, or is still living there, and has an emotional tie-in to their home. With corporations, it is numbers.  That has a huge impact when it comes to negotiations and you have to be very conscious of the emotional attachment to the property. Insult them and they won’t sell to you under any circumstances, accepting lower offers. What is an insult?  These include adverse remarks about their décor – paint and wallpaper, overhearing your plans to knock out a wall, or ultra low-ball offers.

Considerations 

While the owner stands to at least break even on the transaction, they have not been immune to the market.  They saw the paper value of their home escalate during the housing boom and have seen the value retract to current values. While these homes are not short sales, they may become short during price negotiations.

Existing homes are more difficult to view than vacant. Typically, they are either owner or tenant occupied and require coordinated scheduling to view. At a minimum, they need 1 to 4 hours, and many times will stipulate 24 hours or a specific day/time window that may not be convenient.

In a New Homes vs. Existing Homes comparison, can the existing home be brought up to current standards, and at what cost? Some components are structural, such as wall height, and can never be brought current. Others are major renovations – kitchen, bath, appliances, flooring, AC, roof – which are quite costly. Other often overlooked is replacing something in personally good condition. An example would be carpet due to your allergy to their pet dander, or the fleas left behind. Can you live with the compromises that can’t be brought to current standards? Are the costs for livability upgrades too great? Does the new home offer greater value than the existing home upgraded?

A common mistake when making an apples to apples comparison above.  “It will cost me $50,000 to upgrade the home so I will decrease my offer by $50,000.” That rarely works. If the existing home was over-priced to fair appraisal value, you are simply bringing down closer to appraisal value. If the home was already at fair appraisal value – which is what attracted you in the first place – why would they want to buy your upgrades that they didn’t get to enjoy? Likewise, if they made upgrades to enhance marketability and priced the home to reflect it, they made decisions – type and color of cabinetry, flooring, countertops, pool design, etc – that you are buying and now have to live with. Contrast that with a new home where up until the final stage of construction, you have a choice.