Jakemann Racing

If you have bought or are planning to buy a new house in a new subdivision, a recent article in the New York Times entitled “Banks Foreclose on Builders with Perfect Records.” should be giving you sleepless nights.  The article explains that banks have started getting tough with builders, even builders with excellent repayment records who have not missed a single payment.  Like many other businessmen, builders rely heavily on Bank credit and any restrictions such as demands for extra collateral mean almost certain extinction for many builders.  The article estimates that over 20,000 builders are out of business and the number is expected to rise to 50,000 which would mean that one out of every two builders in the USA can be expected to shut up shop.

Why should this development concern buyers or potential buyers?  The truth is that most buyers buy or contemplate buying homes in subdivisions that are still being completed. The builder could go out of business at any time through no fault of his leaving the subdivision incomplete.  No park or club as promised, or worse still a community of half-built houses.  Your purchase price for a house in a new subdivision also factors in these surroundings, the community and the amenities offered.  You don’t have to be a genius to see that resale values in a half-built subdivision would soon drop to rock bottom. 

If banks are already so panicky that they are foreclosing on sound builders, the mind boggles at what they might do next.  You can forget all the fancy sales talk and the community plans.  If you have the slightest misgiving, don’t go ahead with the deal. But walk around the subdivision and judge the progress for yourself.

Other lesser reasons for not buying in a new subdivision are:
- Many of the features that you see in those beautifully appointed model homes are not included in the purchase price and you will have to pay for these upgrades.  You would also have to repeatedly visit the builder to choose the materials for your floating and countertops and so on.  Moreover, the builder would normally insist on an upfront payment towards these upgrades in addition to your normal earnest money deposit.

- A major expense to be incurred in new subdivision houses is the cost of landscaping the back had.  The purchase price will normally cover only the landscaping in front and, if you are a little short of money, you will find yourself over looking an expense of dirt at the back of your house.

- Houses in the new subdivision and to have similar designs and look the same.  Many people would consider that these houses lack charm and character.  The lot sizes would also be much smaller than the lots in which old houses are situated.

- It may take a long time for the surroundings to be fully built and the amenities to be provided.  It will also take years for the landscaping to take effect and in the meantime, you are surrounded by half grown trees and plants.

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