Pros and cons of HOA | My experience buying a new construction
There are lots of pros to buying a new construction home, but there are also some things that I wish I knew before building a house. There is beauty in brand-new appliances, built-in warranties, and home appreciation. However, there are also challenges such as permits, inspections, and even homeowner associations (HOAs) that can be certainly frustrating throughout the building and live-in process. At the end of the day, I still believe this was the best decision for me and my family. However, it didn’t come without headaches.
Let’s jump into some of the disadvantages of buying a new home and what to look for in new construction before you sign the contract.
1. Disadvantages of buying a new home: Move-in date isn’t guaranteed
Unlike pre-existing homes, there are often delays associated with new construction homes because of permits, city approvals, or even weather challenges. In my city, builders are required to have the city come out and inspect every level of the building process.
For example, before they can insulate the homes, the dry walls must be checked and approved by the city. Before they can install shingles on the roof, the roof must be inspected by a specialist. It can be a long process of getting on the “Schedule” of these inspection experts and if the work is incorrect (or doesn’t pass inspection), the builder must fix it and then get back on the schedule.
In addition to that, weather conditions impact the building process. If it’s raining a lot and you are in the foundation stage (meaning they are framing the home), it’s not recommended to build as it can represent a faulty foundation which we definitely don’t need. So a week of rain can delay plans - which delays your closing date. My builder had this issue as we started building right before hurricane season. Some days/weeks went by when they couldn’t do anything.
2. Disadvantages of buying a new home: Little to no negotiation
The price is often the price when it comes to new construction. With pre-existing homes, you can use challenges (such as new countertops or a new HVAC system) to negotiate the final offer price. But with new construction homes, it's rare to have them lower the price.
What they will do, depending on the market, is offer seller concessions. If you use their builder, they may offer some closing costs. Or if they are running a special, you may get a lower price than advertised. I ended up getting to take advantage of both of these. However, I bought at a time when no one was buying homes. So inventory was sitting for longer than expected. Builders get desperate and may start to offer incentives. But it’s not guaranteed.
This is where having a good real estate agent comes into play. My agent was amazing and she advocated for me from the very beginning. If you need help finding the best realtor for you, check out
my free checklist
of questions you should ask your potential realtor.
3. Disadvantages of buying a new home: HOA rules can be annoying
If you are buying a home in development (think of a gated community with similar homes - gate not necessary), then you will likely have a homeowners association (HOA). These are created to maintain the upkeep of the property by creating rules/regulations that homeowners and renters must follow.
When I first moved into my home, I received a letter about a month later telling me that I needed to cut my grass or I would be fined. I was shocked! Like first of all, I just moved in. I have bigger fish to fry. But best believe, I cut the grass and had the edges trimmed. It was annoying at first but then my mom reminded me of the resell value of forcing everyone to keep their properties up.
HOAs also cost. They can be as little as $50 a month to $500 a month. The more amenities you have, the more expensive it can be as the common areas are usually paid for out of those HOA fees. So if you have a pool, a gym, a dog park, a lake, etc., those things require upkeep. And you have to pay whether you use them or not.
4. Disadvantages of buying a new home: Estimated property taxes aren’t accurate
This might be the biggest negative response to “Is a new construction home a good investment” because property taxes can be a beast! Once I was under contract and close to moving into the home, I received a closing disclosure that broke down my monthly mortgage payments. One of the common issues with new construction homes is that these estimated payments are usually incorrect. My property taxes shot up about $400 after the first year because the estimated property taxes were based on the land AND NOT the improvements (which is the actual house). Since the home is worth more, you have to pay more. And I hate that they haven’t fixed this yet.
I’m smarter now though and as I move into investment properties, I learn how to ask the right questions and also do my own research to compare taxes on similar properties. It’s still an estimate but a more accurate one. Be sure to ask your agent, lender, and even title companies for help. They have resources and better access as professionals.
In the end, it was still the best decision for me and I’m glad I bought brand new. I’m big on energy and didn’t want to have anyone’s previous energy in my oasis. If you’re ready to purchase your first home, join my
free homebuyer goals challenge where I walk you through the process of getting your finances ready for the big purchase.
Check out my
YouTube video where I dive even deeper into the benefits of both and when to choose which.
Resources:
Video - Closing on my new construction home (part 1):
https://youtu.be/X77z5bIS1ko
Video - Closing on my new construction home (part 2): https://youtu.be/sAtvnE2DUKU
Video - Closing on my new construction home (part 3): https://youtu.be/4HAY7FmcGGA
How to break down your monthly mortgage payment - PITI explained:
https://youtu.be/PUpvUNCGj38
Open a high-yield savings account and get an extra 1% in interest: https://www.marcus.com/us/en/savings/referral?referralcode=JOS-2LH-CT84
How I saved for my down payment with a high-yield savings account video: https://youtu.be/s9fKzC6sZXQ
What is an Earnest money deposit video: https://www.youtube.com/watch?v=xxYZL7I5wx0&t=0s
[VIDEO] My debt free journey: https://youtu.be/C0Tyt3n7PCY
The #1 Workbook for first-time homebuyers: https://www.maximizedmoney.com/ready-to-own
Biggest mistake I made in my homebuying journey: https://youtu.be/Yn-LsYujGtA
First time homebuyer loans:
https://www.maximizedmoney.com/first-time-homebuyer-loans
Instagram (we have lots of fun over here):
https://www.instagram.com/maximized.money
Ready to find the right real estate agent for you? Download my free checklist for questions to ask:
https://www.maximizedmoney.com/homebuyers-checklist
Want to get your finances together for your big home purchase? Join my free Homebuyer Goals Challenge:
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