The Truth About Raleigh-Durham's New Construction Housing Inventory
February 16, 2024
If you’re contemplating buying your next home or you’re just curious about the current real estate industry, you may have wondered about temperature in today’s market climate.
These days, because of the low resale inventory, many buyers have found it more challenging to secure their ideal next home.
The common question most sellers in this market have asked is “if I sell now, where am I going to move?”, thus perpetuating the inventory problem.
If you mention anything about the wholesale/discount market, It seems as if distressed homes ceased to exist amid the pandemic.
I digress. At any rate, with an unceasing inventory deficiency there is a growing number of new construction options for buyers to consider.
Many of the listings buyers see today are preconstruction “pre-sale” listings or what we call “ghost listings”.
Most new construction options are contracted before the build is complete. They are listed and marketed in the MLS the same as any other existing home but are labeled as preconstruction or “pre-sales”.
Presale homes are one of many options for buying a newly constructed home.
Each of the following homes differs based on the builder and the level of personalization the buyer is allowed to contribute to the finished product.
What is a "Ghost Listing"?
These days, it can be hard to find a home to buy because there aren't a lot of homes for sale. This is called low inventory. Because of this, many buyers have a hard time finding their perfect home.
Sellers wonder "If I sell my home now, where will I move?" This continues the inventory problem. You can read more about it in an article I was featured in on Realtor.com.
You don't hear much about discounted or distressed homes anymore. But there are more and more new construction options for buyers.
Many listings you see now are for "pre-construction" or "pre-sale" homes. These are also called "ghost listings".
So, What Exactly is a Ghost Listing?
A ghost listing is for a home that will be built in the future. The home is listed in the MLS (Multiple Listing Service) with pictures or drawings. But it hasn't been built yet.
These homes go under contract early, sometimes before construction even starts. Buyers can pick the lot, floor plan, and finishing details.
There is less competition for pre-sale homes. After 2008, builders stopped listing finished new homes in the MLS. Instead they pre-sell homes first, then start building.
The Process of Buying a New Construction Home
There are two main options for new construction:
- A new home in a new neighborhood
- A custom "spec" home
New Home in a New Neighborhood
With this option, you buy a brand new house in a larger community. The builder owns the lots, which makes financing easier.
These homes meet builder standards and often have warranties. But you have less control over customization. Financing is like buying a resale home.
Custom Spec Home
With a custom spec home, you work with the builder for a custom design. You pick finishes and layout. But you may not get amenities of a full neighborhood.
If it's a one-off spec home, you'll likely buy the lot separately. Financing uses a "construction-to-permanent" loan.
What is a Construction-to-Permanent Loan?
Construction-to-permanent (or construction-to-perm) loans finance building a custom home. They combine the construction loan and mortgage into one.
With traditional mortgages, you get the full loan amount upfront. Construction-to-perm loans give funds in stages during building.
There are two phases:
- Construction phase - borrower gets funds to pay for building
- Permanent phase - loan converts to traditional mortgage when home is done
Construction-to-perm loans give more flexibility and control over building. Borrowers can make changes as needed during construction.
Tips for Buying Pre-Sale in Raleigh-Durham
Pre-sale, or "ghost listings," are homes that are listed for sale before construction begins - sometimes even before the lot is purchased.
You can recognize a pre-sale home in the MLS by looking for descriptions that say "to be built" or "proposed construction" and pictures that are renderings rather than actual photos.
As an experienced agent, I advise caution when buying pre-sale, as delays and changes are common.
If you don't have a home to sell, be pre-qualified with a lender experienced in construction loans and ensure you can cover both housing payments during the 8-12 months it takes to build.
If you need to sell before buying pre-sale, list your home with plenty of time to find a new home if needed, and have a backup plan in case of delays.
Carefully review the purchase agreement and only work with reputable builders. Pre-sale takes patience and flexibility.
My team can help guide you through the process, advocate on your behalf, coordinate timelines with your lender and agent, and provide expertise so you can buy smart.
FAQs about Buying Pre-Sale Homes
What is a pre-sale home?
A pre-sale home, also called a ghost listing, is a home that is listed for sale before construction begins. You buy based on plans and renderings.
How do I recognize a pre-sale listing?
Look for "to be built" or "proposed construction" in the description. Pictures will be renderings, not actual photos.
What are the risks of buying pre-sale?
Delays, design changes, and cost increases are common. Builders favor themselves in purchase agreements. Do thorough research.
How do I get financing for a pre-sale home?
You'll need a lender experienced in construction loans. They disburse payments at each stage.
When do I need to sell my current home if buying pre-sale?
List your home with ample time to find alternatives if needed. Pre-sales often take 6-12 months to build.
What costs are due upfront for a pre-sale?
You'll need to pay the lot deposit, permit fees, and design costs upfront, before construction loan disbursements.
Can I make changes to a pre-sale home?
Changes are very limited once the design is finalized. Expect to pay high change order fees.
How do I know if the builder is reputable?
Research online reviews thoroughly. Verify they have built the same style home before.
What happens if the home isn't done on time?
Have backup housing plans and review the purchase agreement terms carefully. Delays are common.
Who represents my interests in a pre-sale purchase?
Hire an agent experienced with new construction to represent you in the transaction.
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