If you are keeping track of what's happening in Lake Chapala, then you are probably aware that there has been quite the building boom going on in the past 7 years. There are countless new developments all over Lakeside in various stages of construction. Now that our MLS lists pre-sales separately, I was mildly shocked to see that there are currently 152 pre-sales as of this writing! So are these a good investment or future home for you? What are the pros and cons to purchasing homes within one of these developments? Read on as we take a deep dive into purchasing into a New Development.
Pros
Brand new home with 1 year builders warranty
By law, builders give you a 1 year warranty on structural, plumbing and electrical issues, including roof leaks. This gives the new home purchaser peace of mind, although depending on the builder and circumstances , sometimes it may be difficult to get them back for repairs.
Customize Your Home
You can customize your home with various features. Again, this will depend on the builder, but most will accommodate some changes to floor plans, types of appliances, water heaters, placement of windows, and even add pools and such.
Builder Financing
Many of the new developments try to increase sales by offering builder financing. This can vary greatly so check the small print. A common theme is to offer to the home purchaser to put down 25%, with 8 installments over the next 8 months (during construction) and a final 10% upon completion and walk-thru. Another is a down payment of 50% at the signing of the purchase contract and the remaining 50% divided in 12 consecutive equal monthly payments. The combinations are endless.
Minimal Or No Repairs
If the builder did a good job and honors the 1 year warranty, you will have no repairs to make for at least 1 to 4 years, which is when homes will usually need a paint job and roof re-seal.
In-Ground Services
Most new gated communities are putting all the services in the ground so you do not need to look at those ugly wires and telephone poles outside your window. A definite plus.
Greater Potential For Property Value Increase
If you are one of the early buyers into a new development, you will definitely see a substantial property value increase within a couple years of the completion of the development. If you purchase at the end of the development, prices will already have risen and you will not see as significant an increase.
Cons
It May Never Develop
The Number 1 big con is that the project stalls or stops completely. This is the biggest risk and it is not impossible that you may lose your deposit.
Building Can Go On For Years
In a better case scenario to the one above, the project might just drag on for years in which case you will be plagued with construction noise, debris, and workers milling about, subjecting you to a greater risk of break-in and an unsightly environment.
Prices Are Set
New home prices are pretty much fixed and there is very little room for negotiation. The room for negotiating is a much smaller amount than you can negotiate versus purchasing an existing home.
Cookie Cutter Homes Lack Appeal
Gated community developments often lack appeal because the homes all look virtually the same. Builders build this way to keep costs lower by getting better deals on purchasing in bulk quantities, and this allows them to build faster and more economically.
Unknown HOA Rules And HOA Fees
Unlike a completed development where you know the costs going in and you can receive a copy of the HOA rules, a new development presents the unknown.
Once a development is 50% completed and sold, it is supposed to be turned over to a Home Owners Association. What happens from there depends largely on the homeowners. Will they vote for a guard keeper, security patrols, 1 or more gardeners for the common areas, etc? The questions and combinations of factors are endless and the resulting costs for maintaining the development will not be resolved until all the personal are in place.
Unknown Completion Date
While builders will promise a completion date, this is largely a hope and prayer. Who knows how sales will be and if sales do not go well then the development (and many times the home you purchased) will not be completed by the contracted date.
You Have No Control On The Final Outcome
Unlike a custom built home on an independent lot, you have very little (if any) say in how the common facilities will look, how the streets will look, even how the foundation of your house will be. Buying into a pre-sale/new development means you need to give up control to the builder as to what the development will become.
Little Or No Landscaping
Developers will normally put in landscaping but for the first 5 years or so, the community will look....well, like a the new community it is. It takes time (even here) for trees to grow sufficiently to provide beautiful shady streets and park-like areas within the development for your enjoyment.
Changes Will Cost Money
Most changes you make to the "master plan" of the home will require extra dollars. I recently went through a negotiating process with some buyers who wanted to purchase in a new development and only about a quarter of their requests were honored at no extra charge, the rest fell upon the purchasers to fork out extra money for the changes/additions that they wanted.
Will It Be A Party Place?
As most new developments Lakeside are geared towards the "tapatio" (Guadalajara vacationing market) there is a high degree of risk that the development you are buying into might end up being weekend/party homes for the city folk. Although, it is difficult to tell in the very early stages, a knowledgeable real estate agent can steer you towards new developments that will have greater appeal to a year around expat population.
So is buying into a new development for you? Only you can decide but now you know the pros and cons and, along with your Realtor, can make an educated decision.
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