Buy an older home or buy new construction? (Dallas, Fort Worth: rental, home builder)

[Lakewooder]

You are generally going to have much better appreciation (3-7 times in Dallas) on an older home if you select the right neighborhood - I would not buy a new house in a developing area unless you plan to stay 15 years or more. Also with the more established neighborhood you will have schools where boundaries don't keep changing and social infrastructure. And you will save tons of gasoline...and the trees will keep your AC bills down.

[shaxs]

Originally Posted by nsumner

Very valid points you make. There is really not a just one answer to your question. A home is something that has to fit like a glove when you visit it. No matter how good it sounds on paper, it's something you have to see and feel when you for yourself.

If you like the feel of newer homes, you may want to look at a home that is just a few years old -3-4, that way the homeowner had a chance to put in upgrades that actually add up a lot when you build new such as (ceiling fans, window coverings, landscaping, sprinkler and more)

On the warranty side, the builders only cover the foundation for the 10 years, and they always find that if you didn't water the foundation properly, that warranty is voided.

You can always purchase a home warranty (doesn't cover the foundation) but almost everything else on a pre-owned home for a year. Runs about 400 a year and I would ask the seller to pay for it for the first year.

Energy efficiency: Invest in solar screens. Always try to get a house with gas heat. Weathstripping all the outside doors is a very cheap way. Add insulation in the attic. Insulate your water heater if it's located in the garage. Get acquainted with your programmable thermostat ;-)

Going back to builders, you will be able to negotiate a better deal if the builder has the home you like in inventory. Building from scratch doesn't give you any room to negotiate.

How to pay for renovation: A couple of ways to do it but your mortgage company has to be on board to agree to this.

1) Get estimates on the work you want done, raise the sales price of the house by that amount, then escrow that amount with the title company. The work has to be completed withing a certain time after closing, usually 3-6 months.

2) Get a home improvement loan

3) Lower your down payment and pay for the improvements in cash. Your interest rate will not change since you're not putting down 20% anyway.

Few questions. First, if you put don 0-19%, your interest rate will be the same because it is not 20%?

On a home improvement loan, aren't those usually equity loans and usually pretty high interest rates?

Lastly, the first option sounds good, but how hard are those to accomplish? Will a mortgage company be willing to do that often? Or will it take a special mortgage company? Will they make the interest rate higher to do something like that?

Oh, I lied. I have two more questions about real estate in general. Since there is such a huge surplus and its a buyer's market right now, how much of the asking price, on average, does a seller get? I know here in San Diego, they are pretty stoked if they get 90% asking, sometimes less.

And are foreclosed homes a good deal? Are they hard to find or are they publicly available to be searched online?

[Trainwreck20]

Few questions. First, if you put don 0-19%, your interest rate will be the same because it is not 20%

With 20% or more down, you don't have to pay mortgage insurance (PMI). I am not sure that there is necessarily a hard and fast rule about money down vs. interest rate. There was not much of a difference, if any, when I bought my first house ~12 years ago. In the current market, you may get a lower interest rate by putting mroe down. In reality, the PMI is essentially the higher interest due to a lower down payment. I only paid 5% down on my house, but I paid $200/month of extra principle for the first year and also got a new official appraisal at the end of the first year. I could show that I had over 20% equity (due to appreciation) and got the PMI removed.

As for financing improvements - on my first house, I raised the price that I paid, but the seller paid some of the downpayment. I ended up with cash left in the pocket to fix up the house. It is essentially option 1, listed above, without the paper work. I have heard it is not legal, but I have no Idea if it is true. Of course, the payment price must be reasonable compared to the appraisal price, or you won't get the loan.

Home equity loans are higher than a mortgage rate, but it is still a secured loan and should not be that bad.

[Roma]

I would say a new Custom Home. When you buy older homes, the codes were different and not up to date. The material different and the floor plans are not what "most" people are looking for. So you would have to do a lot of updating on a older home.

[changeofpace]

We have owned 8 homes and are about to close on our 9th and final home. We have had a bungalow built in 1926, a ranch built in 1957, a ranch build in 1978, a victorian built in 1903, a custom home built in 1996, 2 condos (one built in 1972 and one built in 1988 and soon to be a custom built ranch that will be completed in a few weeks.
We looked at older homes and new construction throughout Corpus and found older homes (1950's thru 1990's) to be the same price as building new (custom). A new home is not a new home, in other words, depends on how much you pay. We saw new homes that were very poorly constructed in the $200,000 to $250,000 range and we saw new construction with excellent construction (not just bells and whistles and cosmetic appeal) in the $280,000 to $350,000 price range.
New homes are laid out differently (more open floor plans) are more energy efficient and just have a different feel to them. The main issues with older homes is the cost of remodeling and renovation and with the changes and what you paid for the home will you ever recoup or even break even when you sell it.
Since we are quickly coming up to our retirement, we decided a new home was best so we don't have to replace the roof, mechanical systems and appliances for many years. We have had a air purifier system installed in our last 2 homes and in the one we had built, they are great. You don't have to dust your furniture for several weeks which shows it does in fact filter the air throughout your home.
There is nothing like the character of an older home and nothing like the open flow of a new home and of course in 75 years the home we are building will be an older home and have a character and charm of its own.

[achtungpv]

I've owned both. The new home had very little maintenance except yard work was hard getting the lawn established. The neighborhood quickly went to hell since all homes were $150-$250. Many turned into rentals within 5 years. The appraised value dropped 3 years straight while the county and region as a whole grew 5-15% depending on locale.

Our current house was built in '86. I've done a lot of remodeling in the past year...maybe $60K worth. It's been a lot of work but our neighborhood is established and very desirable to buyers.

One thing I didn't think of was how well the homes were built. I had a contractor over and he commented that our house ('86) was so much better built than any new construction and built with care. He said new homes built by major builders will be lucky to have a 30 year lifespan.

[Trainwreck20]

Depends on the years and the builders. My '77 house was a POS, both from a design and construction standpoint. I spent about 20% of the value to get it close to the energy efficiency and partly up to a new home code level. Wiring in older homes can be bad, and plumbing as well in the even older homes. There were poor quality 'repairs' done at the time of construction that were worse than I would have done with no building experience.

There are some nice 70s and 80s houses, though, so you might do some research about a particular builder if you find a house you like. There are some really unique houses from that 'era' when the housing boom could support lots of custom builders. Some are too quirky for some people, others just seem to be a perfect fit. As for older houses, I personally, am not a fan of pier and beam, but some people really are. A good foundation, especially on the rockier parts of town, should last for forever, basically, and your pipes are not at risk to the elements.

[tstone]

Originally Posted by achtungpv

...I had a contractor over and he commented that our house ('86) was so much better built than any new construction and built with care. He said new homes built by major builders will be lucky to have a 30 year lifespan.

Now that's sad. But I guess it's a sign of the times : gimme the biggest possession right now for cheap, and I'll throw it away like toilet paper when I'm through with it.

[lh_newbie]

Originally Posted by shaxs

...
The energy efficiency thing is huge to me. I have read things here where older. non efficient homes, have 3-4 times higher utility bills. In an older home, the windows probably would need to be replaced. a more efficient AC unit, better insulation, and maybe a radiant barrier?
...

I wanted to chime in on the efficiency thing, as about 15 months ago, my wife and I bought a home built in 1976 that's 2576 sq ft. It has single pane, aluminum windows and when I first moved in, had a $550 September electric bill our first month (in '06). We've made three primary investments that have yielded great results:

- I personally removed the old recessed lighting (what's called a non-IC rated can) and installed IC-rated ones. They only cost like $12 each, so I have less than a hundred bucks invested in this, but it removes a HUGE path that conditioned air inside the home was using to get out. Don't underestimate the importance of this one tip.
- $1200 spent on insulation - upgraded the practically non-existent attic insulation to R49 (DOE recommendation for TX)
- $6600 spent on a new 16-SEER dual stage, dual-speed HVAC unit

These three things cut our cooling bills in summer tremendously. Even with the old windows, we had a peak month this last August of $227.

I'd hate to see someone write off an existing home for energy efficiency reasons. For far less than $8K, we've easily brought our home up to par with most new construction as far as efficiency goes.

We are planning to do more, such as replacing the windows and replacing the ancient dishwasher and clothes washer/dryer with energy star appliances, but if I had to guess - even if we did all those upgrades, the August bill may have dropped from $227 down to make $185-195 (purely a guestimate).

On a side note about efficiency - if you are passionate about making a difference in the environment, it's actually better overall to buy an existing home that needs the upgrading, since you are far more likely to increase it's efficiency than someone that doesn't really care.

Brian

PS: Some day, we're hoping solar panel prices will come down to a reasonable level so we can completely negate our electricity bill - but in the mean time, we're decreasing our usage so we don't have to buy so darn many panels.

[tstone]

Ok, $6,600 - I don't feel so bad now!!! You can never tell with these things from the outside looking in. I spent $6,200 on the outdoor unit + condensor coils. (The two speed fan was already there.) It's 16 SEER also and this thing can freeze you out! New R-410A freon. Full 10 yr warranty. I hope it lasts. This new freon is under 400-500 psi so I've heard! My August bills were running about $180 with this thing (2200 sq ft house). It took a little tweaking of the digital thermostat with the temps & time of day, too.

LH - I'm also an energy saving freak in the house. What kind of insulation you think comes in a 12 year old house (1995)? Mine is the kind you shoot from a canon apparently. It's packed pretty deep though, and would be a pain to remove. Maybe I can rent the gear and stuff some more in myself??

And what about those solar panels powering these little compact flourescent (mercury vapor) bulbs? I've been mixing these helix shaped light bulbs everywhere in the house with those uber-soft Reveal bulbs with good success in creating "moods" - you just have to try out different brands. (Wal Mart brands buzzzzz.)

You really CAN turn an old home into an efficient one with a little vigilance! Good to hear I'm not the only one into this!