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We are considering buying a home that is 2 year's old. The subdivision first opened in 2005/2006. I would say maybe a little more than half of the subdivision is complete. My concern is that the entire street in front of this "potential" house are empty lots. It is priced about $50,000 below the brand new one's. It is in a top performing school district and in a very good area. Sales have picked up but as we all know the economy is still bad.
I am looking to get some opinions if you think buying this house would be a good investment or if you think it is a huge risk. Should we move on and purchase in an established subdivision instead?
When looking at potentially buying in a new / unfinished subdivision there are a several CRITICAL factors to consider.
The #1 problem in such situations are the finances of the developer(s) -- if they go broke the whole development could be in limbo for a long time.
Even if they are 'healthy' you want to be be 100% sure that the developer is not going to "reposition" the subdivsion so that the houses they build in future are cheaper / more dense than the one you buy.
If those factors are OK you then have to determine the likely "time to build out" -- if it longer than when you MIGHT like to move-up that is worrisome as then you'd have to price you home to compete with brand new models.
Even if seems likely that you will not move before the place if fully built out you would need to be aware that all that construction is going to mean more trucks and dirt and strange people around your neighborhood for a rather long time.
If you are OK with all those factors then you still ought to wiegh all the factors like HOA, parks common areas, increasing taxes and special assesements.
Lots more risk than I care for, and too many things that truly are outside of your control...
I live in this situation - I knew going in though as I bought one of the models from the builder last year as they were pulling out. I got (what I consider to be) a great price on a fully upgraded home, but did have to consider that currently there are only the 5 homes (all former models) on my street at this time.
The nice part is at least for awhile its like I have a lot of extra land! No nabors behind, next to on one side, or across from me (and actually across from me for several blocks), but its not "natural" land as the lots are all graded etc. but its still sorta nice for now.
The risky part is currently since we only have about 50 of the 250 homes in the development built, our HOA has a hard time keeping up with everything that needs to be done since all the parks and walkways etc are all built out for the ENTIRE development and 50 homeowners paying doesnt cover that very well. The builder sold the land to an investor last year, and in theory they are supposed to pay their share, and they do pay some, but not as much as people in the actual houses do. In reality our Property Management Co keeps things as nice as can be, given the limited funds, but it is a risk you have to be aware of when buying in unfinished subdivisions.
The other risk is that WHEN they build again (and Im confident at some point they will as Im in a growing city and the land is already graded and utilities installed etc.), the houses may be of a different style and price point than the existing homes. If they go NICER, thats a plus for us...but if they go a little lower end than is currently here (we are about middle of the road) that isnt a great thing.
In the end, I weighed all these things with the fact that I was getting a completely move in ready, fully landscaped, furnished (they included all the furniture, appliances, fake plants, pictures etc for an extra 10K), upgraded place at a reduced price in a neighborhood I plan to be in for a long time. If they dont ever build - Im ok with that, although I doubt that will happen. If they do, thats fine also.
In the end, like all of these types of choices, you have to do whats best for you. I ve always maintained the FINANCIAL aspect of homebuying is but a part of the equation, and for many not the determining factor.
Personally I would not do it for the reasons the others listed. All are very good things to consider. If the house's asking price has been drastically reduced there is a big reason for that. Buyer beware. I would keep looking!
There are builders picking up vacant lots and building homes that are 30-50% or more below the neighborhood prices. Even the same builder can switch to building low end homes to move houses and get rid of excess lots.
It's a tough call, especially since your builder pulled out. We bought in one more than 50% and the developer still oversees the HOA and is still building but...several condo's on the outskirts never got finished and the library that was planned for our subdivsion looks like it's on stall. A commercial building that used to have a dental office and a restaurant, only has the restaurant now, and it has changed hands. The rest of the office space sits unused. All parks and greenspace are finished.
It looks like they have lowered the general price on some of the new builds and I would suspect we couldn't at the moment get what we just paid, but you never know. Thing is around here in our price range, anything not new was seriously dated inside. In the 7 months since we closed "some" hot deals came on the market when sellers finally lowered their prices, but does no good to second guess timing now, since we found a buyer for our old house at the best of times, and we got a super low interest rate.
We are considering buying a home that is 2 year's old. The subdivision first opened in 2005/2006. I would say maybe a little more than half of the subdivision is complete. My concern is that the entire street in front of this "potential" house are empty lots. It is priced about $50,000 below the brand new one's. It is in a top performing school district and in a very good area. Sales have picked up but as we all know the economy is still bad.
I am looking to get some opinions if you think buying this house would be a good investment or if you think it is a huge risk. Should we move on and purchase in an established subdivision instead?
Thank you
It's a huge risk as others have stated. Even in a top performing school district.
I decided to unload my home in Maryland in a top rated school district. Very yuppy area. The area was brand new in 2005. Now it's about 50-60% completed. However, the builder dropped the prices by 100K on the new homes in phase 3. I sold my home at a huge loss.
So guess what just happened to the brand new homeowners (that was just purchased in phase 3 at the 100K price reduction...not my resale home but a brand new home). The builders just dropped the based price by another 30K this month since it's the fall and it's a slow selling season.
So those people who purchased brand new just months ago, have gotten screwed because the builders keep on dropping the price.
I personally wouldn't buy in a 50% completed area in this market condition. Maybe if you plan on staying for at least 7-10 years minimal. To me, there's no telling what the builders will do with pricing if they can't sell their current inventory or land. These days builders won't start building until they get a contract.
Thanks everyone! We are going to pass on this house, my gut feeling was right!
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