The home buying process is an exciting time for many people. As you start to look for homes, you may be wondering if you should build a home or buy a preexisting home. While there are pros and cons to each decision, you may be surprised at what you can get when you compare the two.
According to the National Association of Home Builders, the median price of a new home in the U.S. is $204,400 and the median price of an existing home is $165,600 as of September 2011. This is down 10.4 percent for new homes and down 3.9 percent for preexisting homes since September 2010.
While housing prices may be down in most areas, this can be a great time for buyers to secure a deal on a new or preexisting home.
Building a House
Since housing prices are lower, your first thought may be to buy a preexisting home. But you may be amazed at what you can afford if you build a home.
I went through the home buying process earlier this year and I was shocked when I discovered I could build a new home in my price range. Since builders want to keep their crew working, they are offering many discounts to encourage potential buyers to build.
Benefits of Building a House
I found building a new home came with benefits such as:
- Discounts from the builder: At the time I built my house, I was able to get $10,000 in free upgrades (which allowed me to finish my basement) and there was no lot premium. I was able to choose a private lot that backed to trees for my home (which was #1 on my must have list for my new house).
- Everything was new: I didn’t realize how much I would enjoy moving in to a home that hadn’t been “used” before.
- Annual Savings: Since my furnace and air conditioner were new, I was able to save $360 a year by omitting a the service plan I carried at my old house. I also saved $125 a year on my homeowner’s insurance.
- Designing the Home: Everything was as I wanted from the start, I didn’t have to spend additional funds redoing the home after I purchased it.
The National Association of Homebuilders also has some not so obvious benefits of building a new home. These include:
- Build a Community: Building a community with your new neighbors is often overlooked. Since everyone in the neighborhood is relatively new, great bonds can be formed over the years with your new neighbors.
- Easier Entertaining: Entertaining is easier because new homes have an open floor plan and more open space to support large groups.
- A Clean Slate: You create your home from the start and you don’t have to deal with the decorating styles of the previous owner.
- Outlets: More outlets in the right places which most older homes don’t often have.
Drawbacks to Building Your Own Home
Of course, not everything is perfect when you build a new home. There will be delays and things will go wrong even with the best planning. Some disadvantages to building a house include:
Time
It can take anywhere from 4-6 months to build a home. This is a long time to wait and things can change while you are waiting to move.
Limitations on Changes
You may be limited in the style of home you can build in your price range. You may also find making a lot of changes and purchasing the upgrades from the builder can be expensive.
Construction Loan & Permits
You may be required to carry the construction loan on the building process if the builder does not do this for you. You will also need to understand the permit requirements in your area if the builder does not do this for you.
Even if the builder handles the permits, it’s a good idea to understand what is needed to ensure everything is built up to code. If you are unsure, it is best to hire your own inspector to make sure the job is done correctly the first time.
The Legal Part
The agreement between you and the builder may limit your rights if there is an issue with the home building process and you need to take the builder to court. Make sure to read any documentation very carefully and consult an attorney in your state for legal advice if necessary.
Temporary Housing
You may have to move into temporary housing while you wait for your home to be built. This can mean added expenses in the form of movers and storing your items if your things won’t fit into your temporary space
Added stress
Moving is hard enough and doing it several times a year can be difficult, especially if you are moving during the winter months.
Buying a Preexisting Home
Buying a preexisting home is an attractive option for many people because in most cases you can move into the home soon after the closing.
RealtorColleenSettles, who is celebrating her 35th year with the National Association of Realtors, says one benefit people often overlook with a preexisting home is having the landscaping, curtains and window coverings already available in the home which adds up to big savings.
“Most people don’t think about those expenses when they are building a new home,” says Settles, “and they can add up quickly.” With a preexisting home, those things are usually already done for you.
Benefits of Buying a Preexisting Home
Some additional benefits of buying a home that already exists include:
- Upgrades: Making upgrades on the home as you live there which can help cut down on costs.
- Ability to Move Quickly: In most cases, the buyer can move in immediately after closing. There is no wait time or temporary housing to worry about.
- Know the Neighborhood: You already know your neighborhood and you don’t have to worry what type of home the person next to you might build.
- Easy to visualize: You can see the floor plan and the layout of of a preexisting home. When you build a home, it can be difficult to visualize the layout.
Disadvantages of Purchasing a Preexisting Home
Of course, for some people, having to move into a home and make upgrades is going to be a downside to the process because this can take time and leave you with a messy house until the project is complete. Additional disadvantages of buying a preexisting home include:
Getting to Know the Home
You need to discover and get used to the “quirks” in the house that didn’t come out when you were in the buying process.
You are Stuck with the Layout
You can’t easily change the layout or floor plan of the home.
Decorating Costs
You may have to invest some time and money in bringing the home up to current decorating standards by removing wallpaper, changing paint colors or updating flooring.
So Is It Cheaper to Build or Buy a House?
There are pros and cons that everyone faces during the home buying process and there’s no one-size-fits-all answer.
To help you make the best decision, decide what is most important to you and make a list of these features. Know what you are willing to give up and what you must have in your next home.
Then look for homes in your price range that have the options you desire. Your home is your biggest investment so it’s perfectly acceptable to be picky and take your time until you find the perfect home.
