Real Estate For Atlanta Blog

If you’re out looking for a deal on a home and notice some new construction that is bank owned, you may tend to assume that since the home is new there will be less problems with it and it might be a better option than an older resale. While this could be true on some properties, make sure you consider the following:

1. Notice how many other homes in the subdivision are either empty lots or vacant homes. If the community is less than 75% sold, it could take a considerable amount of time for the other properties to be sold. The vacant lots can require some maintenance such as weed control that the bank owner is not likely to do. If there are a lot of partially complete vacant homes, these could become hazards and eye sores to the street as children begin to play in them, etc.
2. Check the health of the Homeowner Association. Many new construction homes are part of a Homeowner Association (HOA) that collects dues to maintain common areas and shared amenities such as pools and tennis courts. If there are only a few occupied homes, these few homes will need to pay high enough dues to cover the costs of maintaining these areas without having the benefit of more homes to share the costs with.
3. Since the foreclosures are as-is sales, make sure the home is complete. Often, these new construction “bargains” are sold as-is meaning that if the electrical wiring is only half installed or the kitchen cabinets aren’t in yet or the floors aren’t finished, what you see is what you get. Make sure to at least ask if a C/O (certificate of occupancy) has been obtained. That at least means that the county has inspected the home and determined that it has all of the basic needs to be moved into by a homeowner. Of course, cosmetic items are completely ignored by the county inspectors.
4. If you do buy a partially finished home and plan to finish it on your own, make sure your lender will be willing to make a loan on it. Most lenders will not lend you money to buy an unfinished property or they will consider it a construction loan; which will at the very least preclude you from getting those 4.5% interest rates that are around these days and might prevent you from being able to obtain financing.
5. Even the best built homes need some tweaking and fix ups after the 1^st year. That’s why most builders offer a 1 year walkthrough to address the issues that come up after closing such as nail pops, squeaky floors, etc. due to normal settling that occurs in the first year as well as things that went unnoticed during construction. Since you won’t have such a warranty on a foreclosure, you will be absorbing the risk on your own. Additionally, you will not have any recourse if there turns out to be a major issue. For example, if the home is built on a sink-hole and develops structural issues shortly after closing, you have nobody to go back to since the builder is not the one who sold you the house.

In summary, there are some fantastic deals out there and in many areas new construction prices have come down more than resales. These can be good deals; but when deciding to buy one of them, make sure you take these factors into consideration to evaluate whether it’s really a good deal or not.

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