Are you thinking about buying a new-build or new construction home? It is a great way to get under contract, not go into a bidding war, and ultimately get your home. But there is a flip side to that coin. Here are 3 factors you need to consider.
3 Important New Build Factors
Construction Delays: Due to labor and materials shortages, Colorado builders are currently running 9 months to a year-and-a-half late on average. This will cause a significant ripple effect and disrupt your initial move-in plan.
Rising Interest Rates: The interest rate of today may not be the same in a year or two years from now. For this reason, you need to ask yourself if you are buying this property at the top of your purchase price. If you are, an increased interest rate will make your loan cost more, and you may be priced out of the market. So make sure that when you are signing on for a new build, it is well within your means to adjust for some of the fluctuations in interest rates.
Changing Need for Rental: When you are in a rental contract waiting to move into your new home, be sure to look at the lease break clause. This states that you will pay a penalty for stopping the lease. I have seen Colorado penalties range from a 1-month break lease penalty to a 3-month lease break penalty. That means if you're paying $3,000/month rent, a 3-months lease break penalty costs $9,000, which could pay for a nice sofa or a new dining room table. Also, if you're unsure when your place might be ready, be careful about renewing monthly. We are seeing month-to-month renewals charging double their usual rent, so you could be losing money on a rental each month you have to renew. I recommend trying to renew for a 3-month or a 6-month period of time. Usually, the increase in months is less costly than if you were to do a month-to-month.