What every home
buyer should know
by Barry Pearce

Buying a new home can be a terrifying endeavor, especially when you have little to go on other than some rough draw ings and the developer’s word. In today’s real estate market, however, that’s the reality many buyers face – spending $200,000 to several million dollars for something they can’t touch.
Of course there are benefits. Why people buy new (or virtually new vintage) varies from one buyer to the next, but the top reasons seem to be the same: superior amenities, greater efficiency and technology, faster appreciation and the ability to customize.

Many buyers are eventually happy with their new homes, but it’s tough to find any who enjoyed the buying / construction process. Some of their dissatisfaction is no doubt the strife inherent in any purchase as important as a home. But many of the common headaches can be avoided if buyers know what to look for and what to expect in a process that is at best imperfect.

The following guide offers some helpful hints and a few fundamentals that every new-home buyer should know.

Old vs. new construction
Whether buying new construction is better than buying an older property depends on the buyer. Some buyers insist on a brand new home while others believe the older the better. Still others have definite criteria in mind – a certain style, various amenities – and whether or not they buy new or old is immaterial.

Perhaps the most commonly cited reason for buying new is the lack of maintenance on a new home. The typical face brick and vinyl siding on today’s new homes is much easier to care for than older wood siding or old brick that may need tuck pointing. The roof on a brand new house should be maintenance-free for years, and it’s under warranty if problems arise. All of the major appliances are newer and more efficient than what are typically found in old homes, and they come with their own manufacturer’s warranties.

In some ways, however, older homes may be the better maintenance bargain.
“In general, the quality of new construction overall is below what I expect,” says Tom Corbett, a home inspector whose company name is Tomacor. “We routinely find that contractors and developers skip many of the necessary details when converting or building new. A lot of new construction is maintenance-free in design, but so much of it is inadequately put together that the maintenance fears are eclipsed by the here’s-another-problem reality.”

Stuart Packer of Lincoln Park Associates says there are advantages to both new and old, but he agrees that construction standards were generally higher earlier in the century.

“A used house has withstood the test of time,” Packer says. “Are there going to be inherent things that go on with a house that’s past half a century old? Of course. But you won’t find solid masonry construction today or what was considered solid masonry 40 years ago. Today’s masonry is cinder block with a course of brick veneer only on the face. Materials were cheap years ago, and the older homes are solid brick, with full dimensional lumber, knee walls; sometimes they’re steel reinforced.”

One advantage to buying something built today, however, is that architects and designers have today’s lifestyles in mind when they shape your home. Newer homes generally have more electrical outlets and better energy efficiency. They frequently have more and larger bathrooms and popular design features such as multiple decks and open kitchen / dining areas.

If you decide to buy in a new development, check out other projects by the same developer. Ask him or her for references and the names of previous buyers. The reputations of the architect and general contractor are equally important. In fact, an inexperienced developer with a topnotch architect and contractor is probably a better bet than an experienced developer with a rookie architect and fly-by-night contractor.

Getting to the bottom of highrises
After a dearth of highrise construction, Chicago now has around two-dozen new condo towers selling units. Buyers have a wide range of price points to choose from, with some new units going for under $200,000 and others exceeding $5 million. In terms of location too, there’s plenty of variety, with new projects stretching from the South Loop to Streeterville.

The new highrise may be the most romantic of housing options, but all the more reason to be practical as you shop. In addition to location, amenities, style and other factors, consider delivery times. Depending on what stage construction is in, first occupancy in a new highrise may be two or more years away. Delivery times are always elastic, but especially in new highrises.

Among the current crop of highrises, one building recently stopped construction for several months because of problems closing a loan and another was delayed because of disputes with the construction company. The possibility that your unit could be a year or more late is not a wild one.

Delivery time may not be important to you, but views almost certainly are. Those sweeping vistas, after all, are why we love highrises. They’re also why the residents of so many downtown buildings are upset. Views are not forever. Remember that the city is in the midst of a great building boom and consider what might be erected next to your building that could ruin the view you’re paying for.

Buildings on the edge of a park, the river, the lake or some other natural barrier to development are the safest. But even then, you should be careful. Buyers at one recent project thought their river views were guaranteed because there was nothing but a narrow stretch of railroad tracks between their building and the river. A developer has just announced plans to build over those railroad tracks, arm’s reach from some very unhappy neighbors.

Don’t believe developers’ guarantees that nothing will be built on the site next door without further proof, and don’t automatically believe their sales figures either. A lot of those impressive numbers announced early can be generated by investors who buy multiple units planning to rent them out or sell them at a profit later. Heavy investor participation in a highrise can hurt a project down the road, especially if a significant percentage of the units remains rentals.

Lofts: something old, something new
The lofts that have become so popular in Chicago are, according to some, the best of both worlds, benefiting from the strength, endurance and materials of old construction but with the modern convenience of brand new amenities and mechanical systems.

The concrete or brick and heavy timber construction of lofts is about the most solid available. The units also tend to lay out in dramatic open spaces with high ceilings, capacious floor plans and charming industrial leftovers, such as exposed brick, wood beams and ductwork. Loft buildings vary widely in both how well they are suited to conversion to residential usage and in how well they are converted. Following are some tips for the quirks of loft shopping.

• Investigate sound transmission. The best loft developers use lightweight concrete and sound insulation in floating new hardwood floors in lofts. Signs that junctions and electrical outlets are not well sealed or a lack of sound batting material or drywall between walls can translate into noisy units.
• Take note of where the vents are placed and make sure the heating and air conditioning systems are adequate. High ceilings, large spaces and lofted areas can mean low comfort levels and uneven distribution of heat. The insulation value of brick is extremely poor. Consider the size of your outside walls and the quality of windows.
• Some dust is inevitable in lofts, but a poor cleanup job after sandblasting can create a lingering annoyance. Simply rubbing the walls with your hand to see how much dust comes off can be telling. Also keep an eye on floors and furniture in model units for evidence of excessive dust and falling particles.

Inspecting homes – and the inspectors
The first advice of home inspectors is, understandably, hire a home inspector. Granting that this might not be the most objective tip, it’s also a fairly smart one. The average home inspection costs about $300 to $600, a bargain considering the cost of new homes today. The investment often pays for itself in problems that are avoided or discovered, saving headaches and major expense later.

Home inspectors will check everything from crawl space to attic, wiring to windows, and give you a detailed assessment of your new house. They generally want the buyer present when they do the inspection and consider the process an education for the consumer. The most important part of the inspection on new construction is coming up with a “punch list,” a series of items for the developer to fix.

Some home inspectors recommend an inspection in two or three stages for a brand new home. This costs more money but may be worth it. Tom Corbett, of Tomacor, likes to inspect new construction three times: just after the concrete has been poured, just before the drywall goes up and for the final punch list because “Shoddy workmanship is almost always covered with a layer drywall.”

Investigating the reputation of your builder is perhaps the most important element of buying a new home, but inspecting the inspector can be equally important. A home inspector who gets referrals from a real estate broker may go easy on the developer or overlook problems for fear of wrecking a deal – and his next referral. Generally, it’s best to find your own home inspector and even then to ask about his relationship with the brokerage community, as well as his experience and qualifications.

Incredible shrinking houses
A funny thing happens between the time a new home is reserved and when it’s built. It often shrinks substantially. No one is sure where all those square feet developers advertise during the sales pitch disappear to when the studs go up, but one guess is into builders’ pockets.

The excuse for this problem used to be that no standards existed for measuring square footage in new homes. A common standard was approved by the American National Standards Institute in 1995, however, and has been largely ignored by the industry.

One useful exercise in examining brochures and marketing materials for developments is to do your own rough calculations. Developers routinely lie about total square footage – and provide accurate room dimensions. Take the time to multiply room dimensions and add the totals. Realizing that awkward corners and curves and some areas legitimately open to debate may skew your calculations, compare your amount with the developer’s number. If the difference seems significant (your 2,400-square-foot home has shrunk to 1,500 square feet, for example), meet with the builders or their sales people to determine exactly what is included in their numbers for square feet.

Timing and negotiation key
In buying new construction, it’s often best to be early or late. The two times developers tend to offer deals are during “presales,” before construction has started, and during “closeouts,” when only a few units remain.

In one way, the presale period is the best time to buy. In today’s financing climate, developers generally must rack up a certain number of presales to show lenders the project is viable so that the cash can begin flowing. To encourage sales during this critical time, developers tend to offer units at lower price points. If the development is well conceived and the market healthy, prices will be gradually stepped up anyway as the project rolls along. It’s quite possible to save 10 percent or more on your home by buying at this juncture.

The downside to buying early is that the risk is greater – the project may never get built – and the delivery time is farther out. But if all goes well, you have your pick of the prime units and save a bundle.
Of course, arriving fashionably late has converse benefits. You have plenty of people to keep you company, the risk is considerably lower and you may actually be able to see and touch your unit – no small comfort when you’re plunking down hundreds of thousands for it. Odds are that prices have already been raised, perhaps several times, but if you’re late enough developers will be anxious to unload those last few units.

“(Developers) tend to be unyielding in terms of price points, but given the timing of where their project is, you may be able to negotiate upgrades, so you negotiate differently with builders,” says Sara Benson, of Benson Stanley Realty. “We can negotiate things like prepaid assessments or maybe a free basement,” Benson says. “One person called me to negotiate her deal, and I had upgrades thrown in, including a free deck and fireplace. We got about 60 percent of what we asked for.”