“Nothing is more difficult, and therefore more precious, than to be able to decide.” – Napoleon Bonaparte
Let’s admit it, finding the perfect home can be hard. Do you want new build bliss or a pre-loved gem? If you’re okay with making a few sacrifices, then an existing home may be a good choice for you. But if you’re looking for your perfect dream home that only comes with customization, then building a new home may be the better way to go. Deciding to build a house or buy an existing one will no doubt be challenging, but here’s some insight to help make an informed decision that’s right for you.
Is It Currently a Buyer’s or a Seller’s Market?
If it’s a buyer’s market, this means there are more homes on the market than there are buyers, so if you’re looking for an existing home, you’re golden as you’ve got negotiating power and plenty of choices. If it’s a seller’s market, the inventory of homes in the marketplace is limited, so rather than doing battle for an existing home, building a home may be a more reasonable choice.
How Much Time Do You Have?
According to a report from the US Census Bureau, “the average time to build a single-family home is between seven and 12 months,” so it’s a much more time-consumer process overall. In contrast, “it takes an average closing time of 42 days for a house financed with a mortgage,” states ICEMortgageTechnology.com, so if you’re facing a time crunch, buying an existing home could be the more convenient option.
Is it Less Expensive to Build or Buy a House?
Depending on your location across the country, the costs associated with each option – buying or building – can vary greatly. In general, the recent average sales price of a new home was $505,700, according to Census.gov, while the average cost to build a house, including land, came in at $644,750, states a survey by the National Association of Home Builders. Let’s take a look at factors and considerations that come into play for both scenarios.
| The Cost of Buying an Existing House | The Cost of Building a New Home |
|---|---|
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If the home is older, maintenance and repairs could be expensive |
Land/lot purchase, as well as permits and inspections |
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Older, less energy-efficient appliances ultimately cost more money and may need to be replaced |
Construction cost and building materials, which can include both contractor and subcontractor fees |
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Monthly HOA fees may be required, which typically range from $100-300 depending on the location and amenities provided |
Architect and interior design fees, landscaping, and the cost of furnishing a new home from top to bottom |
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Upfront costs can include:
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If you’re purchasing both land and financing a new home build, you may need to obtain two separate loans |
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Closing costs can include:
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Site prep: the land needs to be ready for construction, meaning you’ll need to address any foundation or drainage issues before building, as well as to run costly utility lines |
The Advantages and Disadvantages of Buying an Existing House
When considering buying an existing home, the most obvious benefit is move-in readiness and the speed at which the entire buying process can take place. On the opposite end, an existing home can come with a lot of compromises, as well as unforeseen maintenance and repair needs. Here are some more pros and cons to consider when buying an existing house.
| The Advantages of Buying an Existing House | The Disadvantages of Buying an Existing House |
|---|---|
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A pre-loved home is likely to be move-in ready, which provides a convenient timeline so you can move in quicker |
The search for a home can be time-consuming and stressful, especially if offers are rejected or a bidding war ensues |
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Typically the purchase price is less expensive. and if you’re financing, this option usually comes with a lower interest rate and/or down payment requirements |
Depending upon market conditions, there can be a limited supply to choose from |
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Depending upon market conditions, you may be able to negotiate on the purchase price |
You may be unable to locate a home that:
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There are possibilities for upgrades and renovations to make the home your own |
There could be maintenance issues, including electrical, plumbing, and appliance problems |
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You can choose a home in a neighborhood that you’ve always wanted to live in |
There’s a possibility that mature landscaping could be in dire and expensive need of maintenance |
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There’s already established and/or mature landscaping |
Unless there’s a tracked renovation history of the home, it’s hard to know if any renovations or repairs done were up to standard, so it can become costly later on |
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There’s a possibility of negotiating the purchase price, especially if it’s a buyer’s market |
You may not be able to initially afford to resolve any maintenance issues or renovations that you’d like to complete, it could take time before the home becomes what you want it to be |
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A home inspection will identify any areas of concern, including structural, mechanical, and hidden items like lead paint or asbestos, so there won’t be any surprises down the road |
There could be heavy traffic patterns or neighborhood issues you’re not aware |
The Advantages and Disadvantages of Building a New Home
When considering building a new home, the most intriguing benefit for consumers is customization as they can truly make a home their own, right down to the very last detail. But the biggest drawback of building a new home is time as many homebuyers need of a home more urgently than being able to wait months before they can move in. Here are more pros and cons of building a new home.
| The Advantages of Building a New Home | The Disadvantages of Building a New Home |
|---|---|
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You can detail and customize your new home to your heart’s content, including the overall design, specific room layouts, and any features you’ve always dreamed of like custom kitchen cabinets, a home workspace, or open-concept living areas |
Because there’s not an existing home that can be used as collateral, financing can be more expensive. They often require a higher down payment and interest rates. Plus you’ll require a separate construction loan in addition to your financing loan. Are there utilities available at the lot? If not, you’ll have to deal with creating access, which could include installing a costly septic system. |
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Once you’ve bought your land, you won’t be competing in the marketplace |
Once you’ve bought your land, you won’t be competing in the marketplace You may be competing against other builders/projects |
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Costs associated with ongoing maintenance can be less as new builds generally come with a builder’s warranty and new appliance warranties |
Costs for labor and construction materials can be higher when you’re building a single home vs. being part of a larger housing development |
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Your home will be built with modern construction materials so there’s no worry about hazardous substances |
There will undoubtedly be unexpected delays and costs; availability of materials, especially lumber, and labor shortages can also come into play. Choose a lump-sum (fixed-price) contract over a cost-plus contract, so any cost overrun falls back onto the builder |
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Your home will be built with energy-efficient materials; you can also choose to prioritize green building materials and sustainable natural landscaping |
With all the different aspects involved, building a home can be a long and stressful process |
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If your contractor uses residential construction management software, you’ll have access to a client portal with real-time communication, which can centralize your entire build If the contractor doesn’t use software, you’ll have to sign off – and sometimes in person – for any changes that happen along the way, which can cause delays and frustration if you’re not aware of what’s happening |
If the contractor doesn’t use software, you’ll have to sign off – and sometimes in person – for any changes that happen along the way, which can cause delays and frustration if you’re not aware of what’s happening |
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Newness is a desirable aspect as many people want brand-new everything inside and out |
It’s hard to build in urban areas as available lots can be few to none, so chances are you’ll be moving to suburbs |
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A well-laid-out home with energy-efficient features can offer a higher resale value |
If your build is part of a larger residential complex, you could be dealing with traffic, construction noise, and a lot of dirt or dust |
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You can choose your lot/land location to match your privacy needs |
Unforeseen costs can quickly add up, especially if you decide to upgrade finishing’s and fixtures. Don’t forget to factor in the cost of curtains/blinds and landscaping. |
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Satisfaction and comfort of getting exactly what you want |
Once construction has begun, it can be very difficult and/or expensive to change the home’s design or layout |
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For more information, read:
6 Relocating Tips You Can’t Afford to Miss
10 Eco-Friendly Ways to Reduce Your Carbon Footprint
Tips and Tricks to Help Win a Bidding War
Author – Connie Motz
