Choosing Between New Homes and Foreclosures

Published by julia | Filed under Buyer / Seller Tips, Communities, Feng Shui Real Estate, Market Trends, Pinellas County Homes, Real Estate

Everyone wants a new home, but when the opportunity to buy a bargain foreclosure comes up, many would consider buying the foreclosed home.

But now that the inventory of foreclosures is falling in many areas, and that previously unexperienced problems associated with foreclosures are cropping up, many prospective buyers are now seriously weighing buying new homes instead of foreclosures.

Aside from the obvious differences between new homes and foreclosures – which are price and age – there are other factors that buyers can consider while weighing their options.

First is the home buying competition, which is now fiercer among foreclosure buyers than for new-home buyers. Since investors and owner-occupant buyers now flock to low-priced foreclosures, a lot of first time buyers get bumped off by cash-rich bulk buyers. Oftentimes also, as more offers are submitted for foreclosed homes, bidding wars occur and the previously bargain prices shoot up to levels no longer affordable.

On the other hand, new homes are wide open for buyers, with several builders and sellers even offering incentives. During the height of the foreclosure crisis when builders were laying off workers because they were making no sales, some even offered free big-ticket home appliances or free house extensions.

The prices for new homes have also become competitive as builders realized they have to cut down their prices before they can sell. Over the past two years, foreclosures have pushed down the median home price for all types of homes by about half in many areas.

To compete, new-home sellers had to adjust, even if it meant taking a loss for some. All in all, the national median price for new single-family homes has dropped by 19 percent from $244,700 in 2006 to $198,400 in April this year.

Second of the major differences is move-in condition. While most new homes are move-in ready, many foreclosed homes need repairs before they can be occupied. Although a number of foreclosures need only minor repairs and do-it-yourself improvements, there are units that need costly repairs and restoration of utilities.

Aside from their move-in conditions, some new homes also offer bonus rooms which are readily convertible to specialty rooms such as a home office or a tech room. Another is energy efficiency, which is now being incorporated into new homes by an increasing number of builders. Consumers are now becoming more environmentally aware, as they are bombarded by the media with the need to save energy and to help save the earth.

On the whole, regardless of whether you’ve decided to buy a new home or a foreclosure, make sure that the title of the home is in order and that the seller has the legal right to transfer the title to you as the buyer.