By Rona Chen, NC/SC Realtor with Monarch Carolina Homes
It’s been a time-honored adage that the American Dream is to work hard, buy a house, and raise a family. In the current economy, it may seem like you can’t afford to buy a house. Many people of all generations have been stuck with this dooming thought for years. It’s only natural, especially if you experienced the foreclosures and bankruptcy effects of the housing crisis in 2008. Many people lost faith in the shared enterprise of our government, and younger generations are faced with accumulating student loans debts and not being able to secure a career in their respected degrees soon enough. Affordability, without a doubt, is the biggest insecurity permeating through our minds. The most common questions I receive are “Are real estate prices dropping?” or “When will interest rates come down?”
The answer is we don’t know. I’m not going to inundate you with the economic principles of supply and demand or how mortgage-backed securities operate. What I do know is that real estate is a good investment, as there will always be a need to buy or sell depending on your life circumstances and financial position. Don’t allow external factors to dictate your living conditions or lifestyle needs. Strategy is more important than interest rates to achieve your housing goals. You are in control, and don’t let anyone convince you otherwise.
As we approach the fourth quarter of the year, new construction builders are feeling the pressure to sell their inventory homes to avoid paying property taxes at the end of the year. If you are interested in pursuing new construction homes, here are some cost savings ideas:
New construction builders can be more price flexible and are willing to negotiate with you as they have end-of-year sales quotas to meet and are eager to earn your business. Price reductions are being advertised more as higher interest rates have put many homebuyers on pause. Many new construction builders are offering price reductions and closing costs incentives. They will give up to a certain dollar amount or percentage of the sales price to contribute towards buyer closing costs. Sometimes the closing costs incentive will be substantial enough to cover all your closing costs, buy discount points to lower your interest rate, and even pay for HOA premiums. Covering the closing costs will help reduce your out-of-pocket expenses and ease the burden of your upfront payout. In exchange, they will ask you to use their preferred lender which they oftentimes have affiliated ownership interest with to capitalize on the deal. I highly recommend asking for a loan estimate upfront to compare the terms and fees of the builder’s preferred lender to an outside lender recommended by your realtor before making any commitments. Few consumers are aware that sometimes outside lenders can price match their terms. You should carefully review the loan estimate with your lender and realtor to better understand the expected closing costs to determine what is the most cost-effective option relative to your financial budget.
Don’t be afraid to ask questions for clarification. One of the factors I assess is to ask the total lots the community will build, and how many they have currently sold. This gives me a baseline ratio of where they are in the building phase. Buying in the early phases of construction offers more room for appreciation and instant equity savings by the time the neighborhood reaches completion, creating more long-term financial gain in resale value when you decide to sell in the future. Builders increase prices for approximately every 4-6 homes sold as demand steadily grows. This is why working with a trusted realtor who asks the right questions paired with strategic negotiation skills can help you make smart decisions to save you thousands of dollars.
New construction homes have the architectural allure of everything brand new. Buyers have the privilege and pride of being the first owners of the house. These homes are low maintenance and equipped with energy efficient appliances, materials, and mechanical systems. Production builders will generally be energy star rated or certified. Your realtor should inquire about their construction standards and ask if they meet any other environmental standards. This results in lower utility bills and a reduced environmental footprint. No costly renovation or repair costs are required because in most cases they are covered under warranty. Builders warranty usually extend for one, two, and ten years. The one-year warranty covers any faulty workmanship defects; the two-year warranty covers defects caused by faulty installation in the mechanical systems; the ten-year warranty covers structural defects caused by load bearing elements.
Can’t resist the time-tested charm of existing homes? Sometimes it takes a grand vision and a little elbow grease to bring an older home up to modern standards. Whether it’s the character or history of the home that attracts you, there is an undeniable charm and good underlying “bones” newer homes aren’t built with anymore. Here are a few benefits to consider when purchasing a resale home:
Down payment assistance programs are available from many participating lenders. Many buyers are unaware of these amazing programs because the realtor does not communicate the benefits of these programs because he/she is not educated on alternative financing options. When affordability is one of the biggest barriers to homeownership, this may be a viable option to consider. There are several different programs offered through state or federal funding. Some private lenders also offer their own DPA (down payment assistance) programs through in-house financing. Buyers can receive anywhere between $8,000 to $30,000 in funding and stack the funds if they meet eligibility requirements. Qualifications can include income limitations, geographic locations of property, sales price limitations, and homeownership counseling courses. There are many intricacies and nuances involved that need to be understood before using a DPA loan. This product may not work with every buyer and the process may take longer than your expected timeline. It is strongly recommended to work with a Certified Workforce Housing agent such as myself who has the educational training, experience, and contacts to connect with these agencies to empower your homeownership goals.
Purchasing an existing home can offer more negotiation leverage. This will be at the judgement of your realtor after speaking to the listing agent. Your realtor acts as your eyes and ears interpreting market data to provide you with full field awareness to help you make educated decisions. Usually, if the home is vacant and has been on the market for several days that means the seller is motivated to sell. The seller must pay twice the carrying costs on their current mortgage and the new housing of where they moved to. This is an opportunity for your realtor to negotiate a reduced sales price, ask for seller paid concessions, and secure a quick closing in less than 30 days. This analogy can best be described as paying wholesale price instead of a retail price when the opportunity presents itself.
Existing homes have mature trees, lush landscaping, wider streets, and houses are generally farther apart from each other compared to new construction homes where the builder squeezes as many lots as they can on the land. Existing neighborhoods are typically located in convenient areas closer to schools, shopping centers, restaurants, and other local attractions. This convenience enhances your quality of life, making it easier and quicker to commute to work, access schools, and socialize. Due to rising land costs, new construction developments are currently being built in the outliers, or second tier cities, farther away from the city to meet their profit margins. This distance and longer commute times can impact your quality of life creating unexpected strains in your family or relationship. Make sure to consult with your realtor to help you find a home that is in a central area with proximity to your family, school, and work.
Choosing between a new construction home and an existing home all boils down to your personal preferences and budget. Remember, it’s not just about the structure itself, but also the neighborhood, lifestyle, and your long-term plans. Take your time, do your research, and when you find the perfect home, raise a toast to new beginnings! The milestone of homeownership is all about what feels like home to you and the world-class service your trusted realtor delivers to help you reach your destination.
Rona Chen is a native born Charlottean, proudly raised in East Charlotte. Her experience in real estate began in 2009 working in property management when the housing crisis imploded, and the economy suffered a tremendous toll in its financial resources. She managed a B class multi-family property and encountered all types of people from various ethnicities, income levels, and walks of life. She is versatile in her communication styles and consultative with her interactions as she listens to her client’s needs with a compassionate heart and attentive ear.
Rona became licensed in 2015 and has served the greater Charlotte metro area with great enthusiasm and intellectual rigor. Over the course of her professional career, she has proudly served on the Diversity Council Leadership Group with Canopy Realtor® Association in 2018 and served as the Committee Chair for the Young Professionals Network with Canopy Realtor® Association in 2020. She understands homeownership is not only the foundation to securing generational wealth but something more profound. She attributes her success to the conviction that homes are more than just brick and mortar. Homes are about the dynamics of people that fill it with hopes, dreams, sorrows, and joy. She believes home is a destination where the heart is, and it’s the only place you will be surrounded by those who love you.
If you would like to work with Rona or have any questions about residential, commercial real estate, or property management, please visit www.MonarchCarolinaHomes.com or email [email protected]. Check out her Youtube channel, Monarch Carolina Homes with Rona Chen for entertaining and educational real estate content.
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