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Columns: Real Estate Adviser
Steve McLinden   Expert: Steve McLinden
Real Estate Adviser
Model homes are typically more spacious, but watch for potential defects
Real Estate Adviser

Model home, a showpiece with hidden flaws
 

Dear Real Estate Adviser,
I'm looking at buying the model home in a brand new subdivision. The company said that it would need to use the model for three years, which is actually fine with me because I'm not going to need the house during this period. What are some of the issues with buying a model home?
-- M. Amaya

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Dear M.,
For starters, a home that has been used for more than three years should be priced more in line with a resale property. With hundreds of people walking through the place by the time you take occupancy, it's a safe bet the cooling and heating systems will have endured considerable use, as will the flooring and other components.

Because it's a showpiece, a model home usually features a larger-than-average floor plan and all kinds of extras to wow buyers, including high-end furnishings, flashy built-in appliances, elaborate window treatments, expensive carpeting or hardwood and possibly a full-house audio system so prospects can enjoy "piped in" music while they tour. If you want these included, make sure they are itemized on an addendum to your purchase agreement.

And I do mean everything. Be sure to take note of the splashy décor in the kids' room to that shady deck covering to those gutters that the rest of the subdivision doesn't have. If the builder removes those expensive drapes you liked, you'll probably have to replace the hardware to put up your own.

And don't let the builder stick you with the retail mark-up on those extras. Frankly, you can add the same upgrades for about half the price in a new home down the block. Such extras were no doubt written off as marketing costs so there should be plenty of negotiating room on them. That makes them worth about 40 percent of their original cost in my book.

Moreover, sometimes the garages of model homes have been converted into sales centers, so the house interior will look less like an office. If you want protected parking, make sure that space will be converted back into a garage at the builder's expense. That should go into the contract as well.

Realize, too, that shortcuts are sometimes taken in a model home's construction. I've seen them started and finished in less than three weeks! Buyers of model homes who are remodeling, sometimes belatedly, discover such things as wallpaper have been applied directly to drywall with no paint primer.

So you will definitely need to secure the services of an independent and thorough licensed home inspector prior to closing. Pay particular attention to the efficiency of the drainage system, which was, no doubt, under-utilized during the home's days as a model.

There's also a property-value factor. While you may be the envy of the subdivision in your voluminous model home, it's much better to own the most modest home in an expensive neighborhood than the most expensive one in a modest neighborhood, in terms of value appreciation.

Your home's physical location may also become an issue. Typically, model homes are built toward the front end of new developments, which means owners have to endure more of the daily subdivision pass-through traffic and perhaps additional noise from the main artery leading to the development.

Good luck in your modeling days.

Bankrate.com's corrections policy -- Posted: May 1, 2009
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