Build a new home or buy an existing home?
While this isn’t a top frequently asked question from potential home buyer’s, it certainly is a question that comes up from time to time in real estate. 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.
What do I classify as a new home? 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. 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, high end 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
There’s a pretty good chance you’ve heard people say that there is nothing like the smell of a new car. The same can be said about a new home. If you decide to build a new home, a benefit is the “new home” 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. The recommended level of insulation in 2018 are much different than they were in 1950. 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:
Rain Collection Systems
Fewer Potential Health Hazards
Newly built homes have considerably fewer potential health hazards than an existing home, which is a benefit to building a new home. Some of the health hazards you may find in an existing home can actually be pretty scare hazards and ones that can terrify potential buyer’s.
One of the biggest potential health hazards that you will find in existing homes that you will not find in a new home is the presence of lead based paint. Homes built prior to 1978 in all likelihood have some presence of lead paint. Lead paint can be hazardous if ingested and can be a big concern for buyer’s who have young children.
There are many other potential health hazards that do not exist in newly built homes, including:
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.
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, however, expect at least a minimum of 2-3% of the cost of the home. 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.
Anticipation often can drive home buyer’s 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 120-150 days to be built. 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 certificates 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.
Future construction is something you should consider before deciding to build a new home as it can be an obvious distraction and drawback. If you are building a new home, make sure you know exactly what the future plans are for the development so that you can assess whether you’re comfortable with the plans.
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.
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 and a finished basement. 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
While classic charm and characteristics can be added to a new home, it comes with a price tag. There is something to be said about an existing homes natural gum wood trims, hardwood flooring, leaded glass, and other classic characteristics that are not found in new homes.
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.
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. If you need to have a finished basement and a 2-car garage, 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 buyer’s 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. Choosing a top Realtor is extremely important. A top Realtor will be able to guide you through the new construction process or the process of purchasing an existing home.