by Rob Purifoy

Created on: December 09, 2007

First I have to say that I am speaking from a financial and Real Estate practitioners point of view. I am also speaking from a Texas point of view, where we never experienced the pricing bubble that places like California and Nevada had. Therefore the emotion of a new home does not come into play here, this is purely from a feasible and practical perspective.

Established neighborhoods are far better for equity reasons and if the need for a quick sale arises you won't have builder competition. This is the basics of equity positioning, for most areas. Many homes are bought on emotion and as a client of mine once put it " I'd rather have a home where no one else's butt has been in the bathtub". That is all fine and well for a want and desire of a home. However anyone in the market should know that buying a new home in an unfinished neighborhood means that if you want to sell the home the builder becomes your worst enemy via competition. The neighborhood I am in right now is a prime example, existing homes are slow to sell because the builder is still building and the model homes are the first thing everyone sees. Further, the builder will beat the resale just about every time because of pricing and monetary benefits to the buyer. So it could be said that a better deal can be had if bought brand new from the builder in this case. However, once in the home the person had better plan to stay there until the neighborhood is built out.

No one plans to have to move when they build their dream home but if the need arises that dream can become a nightmare. Especially if the new home was purchased with an adjustable rate loan, values slipped and a refinance becomes impossible. This causes foreclosures within the area and more slip in value making the whole thing a vicious cycle. If you're rich beyond belief of course this perspective won't apply to you. I say this assuming that your part of the country is like mine where we don't have value increases of 50% per year, in those cases again this won't apply.

There are other schools of thought as well, pre-owned homes will be established in not only the foundation and systems of the house but the land and trees as well. The biggest complaint of new homes in Texas is not only the comparatively small lot sizes but the lack of established trees. These are the biggest complaints from my clients that have relocated from other parts of the country. As far as warranties go, a new home comes with one but you can also get a warranty (excluding foundation) from warranty companies when you buy a pre-owned home, so there's not much of an argument either way there.

Going pre-owned is not for some people however, I have had clients that were geared to new homes only because they just didn't want the potential hassle of appliances breaking or other unknowns. At the end of the day it comes down to the individual's situation to weigh all the pro's and con's to make an educated decision. And since emotion plays a huge part in home purchasing, and as long as one can afford a new home, it's hard to beat the look and smell of a new home. And of course you can choose from the builder's styles and colors to personalize the home to your liking. So I am in no way going to say that a used home is better than a new one, rather I am making note of the potential to be equity poor for some years after the purchase.

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