Is New Construction Right for You?

If you’re in the market for a new home, choosing between that glistening newly constructed home and that charming pre-owned property can be an overwhelming decision.

For many buyers, new construction provides thy opportunity to buy a “tract” home from a builder – often resulting in lower costs, energy efficiencies, and new fixtures and finishes. Additionally, new home construction allows buyers to see their dream home come to life.

On the other hand, existing or older homes typically have the advantage of architectural charm and sizable lots, and are generally located in more established neighborhoods. However, older homes, and especially ones that were not meticulously maintained, might need a little TLC at move-in time, but can be slightly less expensive than a newly built home.

Benefits of New Construction

1. Modern floor plans designed for the way we live today.
One of the biggest advantages of buying a newly built home is that they are designed and built for today’s lifestyle. They come with flowing open floor plans and features that meet modern-day demands, including open, eat-in kitchens, walk-in closets, large master baths, more access to outdoor entertaining areas, and even additional storage. Many older existing homes built between the 1920s and the 1990s often lack one or more of those features as part of their original home design.

2. More customization and more choices.
Today, more than ever, home builders are offering buyers the ability to customize their homes with a vast number of options. Lighting, flooring, cabinetry, countertops, wall coverings, paint colors, and even landscaping can often be selected from a wide variety of choices. Some of the choices are considered upgrades and will add to your base price, but now builders are adding options that are still considered part of the original price package. You’ll be moving into a home that’s customized for your needs.

3. New homes are energy efficient.
Utilizing new construction materials, just-built homes are usually more energy efficient — and that means potentially lower utility bills. Not only are these newly built homes rated higher for insulation, but many new homes also are incorporating renewable sources of clean energy like solar. All of this new home tech could save you thousands over the course of the years you live in the home.

4. New homes are smarter, too.
New construction homes are often equipped with the latest technology built right in. Think cable, alarm systems, speaker systems, high-speed wired Internet, digital thermostats and detectors — when they’re just the flip of a switch or a voice-command away, you save lots of time and money, not to mention holes in the walls.

5. Fewer maintenance and repair bills.
With new construction or pre-construction purchases, the work is already done for you. You don’t have to do a darn thing. You don’t have to lift a finger (or a hammer). A big financial benefit to a new home is that you won’t have much maintenance to do for quite a while. With modern, new appliances, plumbing, heating, and air, you should be able to live repair-free for a few years.

6. You’ll save money in repairs.
When you buy new from a reputable and established builder, you are able to include your selected upgrades in the original purchase price and mortgage amount, financing them. When you purchase an older home, you will have to secure a mortgage, buy the home, and then begin renovations on a separate line of funds. That means the money for renovations will have to come directly out of your pocket.

This can be especially tough for homebuyers who are low on cash after plunking down a big down payment. New construction, however, allows you to make your choices of upgrades and additions and have those costs incorporated into the overall purchase price of the home. That way, you are able to finance these upgrades rather than pay for them in full, out-of-pocket.

7. New trumps retrofit.
New homes are built with the latest building plans, designs, and materials. Their systems (electrical, plumbing, sewage lines, central heating, and air) already meet today’s codes and standards. It is always much more efficient and practical to have these systems built into a new home, rather than have to upgrade and retrofit existing older systems, which can sometimes mean ripping into the walls, floors, and ceilings to gain access to the key home systems.

8. You’ll have free weekends.
When you buy new, you get more time relaxing at home. You won’t be spending all your weekends at home renovation stores as you try to tackle that “honey-do” list of home improvements each week. Buying a new construction home allows you to enjoy your weekends at home almost as soon as you are unpacked.

If you’re in the market for a new construction home, start your search with Novellus Real Estate today.

What is a CL-100?

I’m often asked by buyers and sellers alike – “what is a CL-100?” When it comes time to buy or sell your home, this is an item many forget which eventually costs time, money, and sometimes, the transaction to fall apart. As beautiful as our home state of South Carolina is, our humid climate makes for a perfect breeding ground for our least favorite insects – termites. “CL” stands for “clear letter,” indicating there are no current termite infestations in your home. However, not that an inspector will not stop there.

What is the Inspector looking for?

There are a few factors inspectors will look for including signs of termites, carpenter ants, carpenter bees, wood-destroying beetles, and wood-decay fungi. The concentration of these wood-damaging forces in the Lowcountry are very high due to our hot and humid climate. In addition, the majority of structures in our area are constructed with white pine, a delicacy for termites. The inspector will check for wood rot (which is most often occurring in a Lowcountry’s crawl space), high moisture content in the wood structure, and other evidence of termite presence and damaged wood.
Additionally, the inspector will look for…

  • Visible evidence of active, or previous infestation of termites or other wood-destroying insects
  • Visible evidence of whether there has been prior termite treatment
  • If there is evidence of active wood-destroying fungi below the main floor (indicating a wood moisture content of 28% or above). Note: Fungus will only grow if there is enough moisture, so it is important to find the direct cause of the moisture and work to resolve the problem.
  • Any visibly damaged wooden members below the main first floor of the home including columns, sills, door jambs, exterior stairs, and porches.

What if my CL-100 inspection comes back unsatisfactory?

During the sale of home in South Carolina involving a lender, a CL-100 is typically mandatory prior to closing. Therefore, the seller must obtain a CL-100 for the buyer to declare the home structurally sound in order to continue the purchase or sale of property.

However, in the event your CL-100 inspection comes back unsatisfactory, the remediation process can take up to 2 days to 2 weeks, and cost anywhere from $250 – $5,000 +, so make sure you order the CL-100 inspection immediately after the contract is ratified so you have time to remediate the issues and obtain a CL-100 for the buyer’s lender. Additionally, if the cost is prohibitive, don’t hesitate to request that your agent propose that the remediation of any issues are born by the buyer, or are at least split down the middle.

One other item to note is that not all lenders will require a CL-100 at closing. Therefore, if you are unable to attain a CL-100 by the closing date, ask your closing attorney to work with the lending institution. Specifically, a good compromise is that a CL-100 be delivered subject to the remediation process being completed after closing.

Always Take Preventative Measures.

As has been established, termites, fungi, wood rot, etc. can throw a serious wrench in the transaction. The good news is that such wood destroying organisms be treated and serious damage can be avoided if the home is covered by a termite bond.
If you’re planning to sell your house in the near future, here are a few tips to protect your home and ensure you receive a “CL-100 clear.”

  • Have your home regularly inspected
  • Remove debris near home and in crawlspaces, including wood piles and thick mulch
  • Provide adequate ventilation in crawl space and between plants and exterior walls
  • Install proper drainage and eliminate wood-to-ground contacts
  • Remove dense vegetation growing close to foundation or siding

Lastly, the best advice on combating termites is to never let them get a foothold to start. Keep up with repairs and keep your termite bond current. This will help you ease through the process of obtaining your “CL-100 clear” and continuing with the purchase, or sale, of your beautiful home.

SC Income Tax Credits & Benefits Affecting Residential Property

Residential Historic Rehabilitation Tax Credit

The South Carolina legislature recently passed a benefit which mirrors the existing Commercial/Income-Producing Historic Rehabilitation Tax Credit; however, the new law now allows residents who rehabilitate their owner-occupied residence to be eligible to subtract up to 25% of the costs of renovations in the form of a 1:1 state income tax credit, which may be (a) taken as a personal tax credit, or (b) monetized through a tax credit exchange market where SC State Income Tax Credits typically sell for $0.65-$0.70 on the dollar.

(i)    For homes to be considered, they must either be (a) listed on the National Register of Historic Places, (b) contributing to a National Register historic district, or (c) determined eligible for individual listing in the National Register by the state’s preservation office.

(ii)    The property owner must submit a historic preservation application, along with architectural plans and technical drawings, to the states Historic Preservation Office (SHPO) prior to the commencement of construction.

(iii)    The property owner must spend at least $15,000 in 36 months on efforts to rehabilitate the residence.

(iv)    Qualifying Rehabilitation Expenditures (QREs) include items such as:

a.  preservation and rehabilitation work done to the exterior of the residential structure;

b.  repair and stabilization of historic structural systems;

c.  restoration of historic plaster;

d.  energy efficiency measures except insulation in frame walls;

e.  repairs or rehabilitation of heating, air-conditioning, or ventilating systems;

f.  repairs or rehabilitation of electrical or plumbing systems excluding new electrical appliances and electrical or plumbing fixtures, and architectural and engineering fees.

Conservation Easement

Another potential tax benefit is a Historical Conservation Facade Easement (HCFE”). An HCFE is the tax-deductible grant of an historic façade easement to a 501(c)(3) tax exempt entity (i.e. The Charleston Historic Preservation Society), which essentially provides for the preservation of the building’s facades (all sides and roof).

The charitable organization that receives the easement has the legal ability to enforce it, should the need arise. If a conservation easement is selected, a charitable contribution is available, thus reducing the individual’s income taxes. This makes financial sense for those in the high-income tax bracket.

The value of the easement is normally determined by the “before and after” method. This approach appraises the underlying property before the grant of the easement and after the grant of the easement, with the difference being the value of the easement.

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2018 Year End Review

Reflecting on the 2018 housing market, there were many headlines that affected Charleston area home values, transactions, and construction alike. From the passage of an ordinance by the Town of Mt. Pleasant limiting future residential units, to interest rate increases, 2018 certainly provided plenty of unknowns. Even through a volatile 2018, the Charleston area real estate market continued to sustain its solid economic foundation.

Moreover, while we have seen slowing in buyer activity, it is not as pronounced as the housing market slow down experienced nationally. More importantly, this pull-back in the market is just that – a pull-back, where consumers have become accustom to higher interest rates and general market volatility, and thus, the market simply “taking a breather”, while creating a more cautious buyer.

One positive trend that will affect the upcoming year in real estate for the Charleston market is continued job growth. The Charleston Metro Area is currently seeing 28 people moving here each day. The forecast is for 22,000 net new jobs over the course of the next two years. This ongoing growth means that there will be a continued demand for housing. However, the demand is relative to the number of people who can afford to buy a home. Factors on the national level also influence the local real estate market – as interest rates are commonly reviewed as a predictor. Interest rates rose over the course of 2018 and are predicted to continue to rise throughout 2019, but at a less accelerated rate. That being said, we remain in an historically low interest rate environment, thus providing inexpensive costs of borrowing money.

Looking ahead, data shows that the Charleston real estate market will most likely experience moderate to incremental growth in 2019 as adequate demand drives transactions. More specifically, we are at the very beginning of a “Buyers Market”, however; Buyers are not quite aware just yet. Therefore, expect 2019 to be a year where buyers are in the driver’s seat in certain transactions and sellers may have to make some creative concessions to sell a property for top dollar. Therein lies the value of an experienced real estate brokerage such as Novellus, that can negotiate on your behalf in a manner which unlocks hidden value, and gets the most for your money.

Finally, buyers and sellers can be assured that in any market the Novellus Real Estate team serves as your best resource in town. We will provide current and accurate resources, advice, and guidance in buying and selling a home in Charleston. While no one can predict the future, working with a top real estate company and agent is the best move every time.

Peter B. Farag, Esq.
Broker in Charge

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