Tips on buying in a new development

By Tyson Lund
Jun 01, 2010

A year of a constricted supply of homes has helped reopen Carlsbad’s new development projects and welcome back homebuilders to finish out the city’s master plan. Since early 2009, the number of available Carlsbad homes for sale has lessened.

A running average of 12 months of inventory shrunk to 2.5 months of inventory and suddenly homebuyers were finding themselves competing for the few available properties. The competition stabilized a three-year decline in home values and reduced the average time-on-market to from 90 to 35 days.

Homeowners achieved closer to their asking price -- an average of 98 percent for single-family homes under $700,000, which is up from the previous 96 percent. Homebuyers now have more options, as seven home developments have opened to provide a new supply of Carlsbad property.

The pricing is aimed at the current, conservative homebuyer. Six of the seven developments are priced in the $700 thousand range and under: Mirasol at La Costa Greens ($750,000), Blossom Grove at the Foothills ($630,000), Avellino at La Costa Greens ($470,000), 53 Melrose ($529,000), Rockledge at La Costa Oaks ($630,000), Copperwood at La Costa Oaks ($850,000), SolTerra at La Costa Greens ($600,000).

Those interested in new construction should seek the counsel of an unbiased professional prior to visiting the new home development. Once you are registered with the sales staff, an outside broker will be unable to represent you in the purchase.

It is important that a potential homebuyer explore the resale market and compare total costs before purchase. The following are some quick tips to help make your new construction purchase painless:

• Homebuyers must walk their potential home site. A home site in close proximity to noisy schools, a busy highway and/or other neighbors may be at a great price, but it will most likely need to be discounted to sell in the future.

• Buyers should anticipate future development that may affect their property. In 2005, the model homes for The Bay Collection were unveiled to thousands of excited buyers in Carlsbad (92011) boasting panoramic views of the Pacific. The graded pads in front of the model homes were un-built, so the views were unobstructed. Lots were sold off with a small disclaimer that some obstruction of views may occur. As the pads were built upon and homes completed, the views were obstructed as expected. But it then became clear that the neighbors had views into once-private master bedrooms and living rooms -- a difficult metric to assess prior to construction.

• Mello-roos, HOA fees, interior improvements and landscaping are often an afterthought of the new construction homebuyer. Front and rear yard landscaping can be an expensive endeavor and is not included with a new home purchase. Decorative hardscape, irrigation, plants, trees, water features and pools; these are integral to your sanctuary, but costly. Buyers should budget three to five percent of the sales price for landscape; spending more puts the owner at risk of over improving for their neighborhood. Builders will give you basic interior upgrades, but entice you with the model home’s storybook improvements. Buyers should secure several quotes on interior upgrades and landscape to weigh the costs against a resale property with those improvements already in place. It may be time consuming and take a little fun out of the process, but it can save you from spending beyond your budget.

• New construction from a reputable builder should have a one-year ‘fit and finish’ warranty that will cover most of the items in the home. Buyers are encouraged to stress test their new home and even pay for a professional physical inspection. Multiple sub-contractors will have worked on completing the home and human error is inevitable.

A new construction project is an unproven marketplace. Pricing can fluctuate temporarily while the developer sells his large number of homes. If you move often and before the project finishes, you will find yourself competing with the developer should you decide to sell. And you will most likely sell at a discount.

Several of the Carlsbad new construction projects -- Blossom Grove and Mirasol -- are offering a $10,000 incentive to use the builder’s preferred lender. Loan rate, terms and points can vary and it is recommended that you secure several quotes to compare with the builder’s referral. You may find that $10,000 incentive is a washed away by higher closing costs or a higher loan rate.

Buyers should be very clear of the contingency time frames in their purchase. In a traditional resale, you have several weeks to conduct inspections, review documentation and change your mind without penalty. Timelines in new construction are much different. Deposit money may be in jeopardy only after a few days and increased deposit money will be required as one proceeds further along in the transaction.

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