Build a new home or buy an existing home?
What is best for you–purchasing a new home or existing home. Several years ago there were spec homes — new homes that visitors could visit to get ideas or to meet with builders to design and build their dream home. When we had the down turn in the market several years ago, many builders either went out of business or weren’t able to get financing to build. Then, as now, there are pros and cons to both building a new home and the same can be said about buying an existing home.
There is certainly no replacing the feeling of walking into a brand, spanking new home but there also is no replacing an existing home that is loaded with natural charm and character. Whether you decide to purchase an existing home or build a brand new home, here are several pros and cons to each option. While there is no absolute answer for every person, knowing the pros and cons to a new build and also to an existing home can help make the decision easier.
A new home is a home that has never been lived in before. It doesn’t necessarily have to be a home that has not begun the build phase (spec). In many new home developments, the model home is available for purchase and in most cases, the builder is willing to make changes to the model, prior to occupancy.
Pros Of Building A New Home
If you decide to build a new home, huge pro is the ability to customize the home to your exact wants and needs. Many existing homes, especially older homes, have more of a choppy floor plan. This is the complete opposite of how new homes are being built nowadays. New homes are being built with open floor plans. In addition to choosing the floor plan you desire in your home, you also have the ability to select the quality of finishes. If you’re looking for a home with granite counters, highend cabinetry, and tile flooring, you can have it customized to your desire. In a new build you control exactly how your home will look when it’s completed, which is an obvious benefit to building a new home.
The “New Home” Smell
If you decide to build a new home, a benefit is the “new home” smell – very similar to sitting in a new car and the smell. If you have ever been in the market for a home and looked at existing homes, you’ve probably walked into a home that had a foul odor. It’s a horribly unpleasant experience and foul odors are one of the top things that scare away buyer’s from a seller’s home. If you decide to build a new home you do not have to deal with odors such as smoke, pets, garbage, or any other unpleasant odors, which is clearly desirable.
More Efficient Home
Another benefit to building a new home is that the home is going to be more efficient than an existing home. There is no question that a newly built home is more efficient than a home that was built in 1950. There are many areas in a new home that will be significantly more efficient than an existing home. One of biggest components in a new home that will be more efficient than an existing home is the level of insulation. Generally, the more insulation that a home has, the lower the heating and cooling bills will be. Other potential components of a new built home that will be more efficient than an older home include:
• Heating System
• Air Conditioning
• Rain Collection Systems
• Solar Paneling
• Roofing Material
Cons Of Building A New Home
In real estate there are many different types of “values.” Some examples are assessed value, appraised value, and market value. All three values are different. Another value and one that needs to be strongly considered when deciding whether to build a new home or buy an existing home is the resale value. Generally speaking, the resale value of a newly built home is less than the cost of building the home itself. In some situations the resale value can be significantly less. Installing items that a future buyer may not need or want could reduce the value as well as putting too much into the home for the neighborhood. If you plan to keep the home over many years, then personal enjoyment is the key but; on the other hand, if you place to sell the home in a few years then I would keep upgrade costs within the norm for the neighborhood.
Upfront Costs Are Higher On A New Build!
Higher Upfront Costs
Building a new home often will result in a much larger upfront cost from a buyer. If you decide to build a new home there are several things you need to know, and money is certainly one that comes to mind immediately. The first upfront cost that you will normally be required to pay will be a deposit to hold the desired location of your new build. The deposit will depend on the price of the home you’re having built, as well of the builder’s criteria. Before a builder will begin to build your home, they’re likely to require you put an additional 10% of the price of the home, prior to them starting their excavation and digging. The upfront costs that are involved when building a new home are considerably higher than buying an existing home, which is clearly a potential drawback. Make sure before you decide to move forward on building your dream home, you discuss with the builder all of the upfront costs involved. Also, consult with a mortgage company to see what options are available. While monies were tight a few years ago, we are seeing more options for building.
Anticipation often can drive home buyer crazy, whether it’s new build or existing homes. Waiting for the closing to occur on a home can often be a very anxious time period for a buyer. One con of building a new home is the time it can take for the home to be built. The build time will vary from builder to builder. Generally speaking, a new home will take 6 months to a year to build. This general time period can be effected however by many things that are out of the control of the builder, the buyer, and everyone else. Depending on the location of the new construction, weather can often add time to the number of days it takes for a new home to be built. In addition to the actual time it takes to build a new home, you must also consider the additional time it may take to obtain any required documentation of compliance from your local municipality. The process of obtaining these certificates could potentially add on more time in addition to the actual time it takes to build the new home.
If you decide to build a new home, make sure you understand there maybe some unexpected costs that can arise at anytime, which is an obvious drawback to building a new home versus buying an existing home. Nobody likes surprises, period, but when it comes to new construction, they can occur. A prime example of an unexpected cost during the construction of a new home is additional excavation costs. Unfortunately there is no crystal ball that can predict what exactly will occur once ground is broken. While it would be nice, a contractor is not going to work for free. If the excavation is taking longer than anticipated and is costing more labor hours, the costs in all likelihood will be passed on to the buyer.
Depending on what stage a new development is in, it’s very possible there could be future construction after you have moved into your new home. With future construction comes future noise and possible annoyances.
What do I classify as an existing home? An existing home is one that has been lived in before. An existing home could be only 2-3 years young, but nonetheless, it has been lived in before.
Pros Of Buying An Existing Home
Quicker Closings & Possession
When buying an existing home, generally it takes 45-60 days once a purchase offer is accepted. This is considerably less than the average build time of a new home, which ranges between 120-150 days. If time isn’t on your side, a big plus to purchasing an existing home is the quicker closing and possession. While it’s fairly uncommon practice, the possibility exists you may also be able to get possession of a property prior to closing. Pre-possession is usually frowned upon by attorney’s due to liability issues and in the unfortunate case a buyer gets disapproved for their mortgage. Even though the chance of pre-possession is minimal, since an existing home is already built, the possibility of moving in before closing still does exist which is a plus to buying an existing home.
Get More For Your Money When Buying
An Existing Home
In most real estate markets, you will be able to get more for your money when buying an existing home versus new construction. One benefit to buying an existing home is that you can get a larger home, an updated home, and a home in an area you really want to live in. For example, if you are looking to spend no more than $200,000 on a home, while you certainly can build for $200,000, you may not get the upgrades, space, and location desired. A newly built $200,000 home may only have 2,000 square feet and basic amenities while an existing home may have the 2,500 square feet you desire along with upgrades such as granite counters. In most cases, buying an existing home is a better value than buying new construction.
Another perk to buying an existing home is the neighborhoods will be more established. There are many considerations that should be made regarding neighborhoods when buying a home. The quality of the local schools, cell phone reception, internet connections, and noise levels are just a few noteworthy considerations. When buying an existing home, many of the considerations that should be taken into account are easy to assess in an established neighborhood whereas a new home development maybe more difficult to assess. If you’re looking for a tree-lined, mature, and quiet neighborhood street, purchasing an existing home maybe the best option.
Classic Charm & Characteristics
Finding classic charm and characteristics can actually be done fairly easily when buying an existing home. If you’re looking for classic characteristics, a huge benefit to purchasing an existing home is that you should be able to find them at an affordable price. The neighborhood has had time to develop and mature.
Cons Of Buying An Existing Home
Not Getting Exactly What You Want
One negative to buying an existing home is the fact you will likely not find a home that has absolutely everything you’re looking for. When buying an existing home, you must be ready to make sacrifices. Whether it’s the location of a dining room or the size of a closet in a bedroom, a negative to buying an existing home is you cannot determine all the details of the home. If you decide to purchase an existing home, it’s recommended you determine what your wants and needs are in a potential home, before you begin looking. Make sure you are prepared to give up other things that maybe something you wanted in a potential home.
Upgrade & Renovation Expenses
If you decide to buy an existing home, knowing that you will have to make changes is important. With the desired changes you want to make comes a cost. Having additional costs to upgrade or renovate an existing home can be a drawback to buying an “older” home. After buying a home, many home buyers don’t have tons of money remaining and may not have the money available to make upgrades and renovations.
The above pros and cons to both buying a new home or an existing home should be able to help you decide which is the best option, if you happen to be on the fence. Whether you decide to build a new home or buy an existing home, it’s a very exciting time. It’s almost a guarantee you will have many questions throughout the process, so it’s extremely important you have great representation when buying a home, even if you decide to build a new home. Make sure when buying an existing home or building a new home, you know how to properly interview a buyer’s agent.
Choosing a top Realtor is extremely important. As a top Realtor, I will be able to guide you through the new construction process or the process of purchasing an existing home. I have done both for many years helping my clients throughout the process. This is especially important when moving into a new area.
Let my years of living, working and playing in the LowCountry guide you through the process.