How to Decide Whether to Buy or Build a House

sculpies / Shutterstock.com

As you start to look at homes, you might be open to the range of options for getting a home. Is it cheaper to build your own home or to buy a house? If you buy a new house, the median sale price in the U.S. was $322,500 in December 2016, according to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development; the median price homebuyers paid to buy an existing home was $232,200 in the same month, according to the National Association of Realtors.

With home prices increasing and mortgage rates remaining low, the time might be ideal for buyers to secure a deal on a new or pre-existing home. Considering all the costs of a new home, which is the better investment: building or buying?

Building a House

Because new home prices are higher, your first thought might be to buy a pre-existing home. But you might be amazed at what you can afford if you decide to build your own house instead. Because builders want to keep their crews working, they offer many discounts to encourage potential buyers to build a house.

Building Wealth

5 Pros of Building Your Own Home

Building a new house can come with many benefits and opportunities to save money; so although you don’t have to know how to build a house yourself in order to get the best house for your needs, you do need to know some things before you dive into such a commitment.

Here are some advantages to building your own home:

Building Wealth

Find Out: 10 Signs You’re Not Saving Enough to Buy a House

5 Cons of Building Your Own Home

Even when you build a new home, it’s still likely that not everything will be perfect. Whether you run into issues with permits or other delays, building your own home can come with a lot of unexpected costs.

“I have never seen a home that was built come in on budget,” said Sissy Lappin, founder of ListingDoor, a service that helps people sell their homes. “I cannot tell you how many times I have had a client buy a lot to build, gave the architect a budget of how much they wanted to ‘be all in the house for’ then bid the plans out only to find out the cost to build the house is 30 to 40 percent more than their budget.”

Here are some disadvantages to building a home:

Building Wealth

Buying a House

Buying a house is an attractive option for many people because in most cases, you can move into the home soon after closing. Often, homebuyers might fret over the purchase of a home that has some less-than-stellar features. But the home you buy — whether it’s your first home or not — doesn’t have to be perfect down to the wall paint. You can update the unattractive features of a home over time, and you might even profit from a few upgrades.

Lappin said that she once remodeled a home that had Venetian columns in the dining room, baby blue carpet and mirrored walls. “It was on the market for 18 months,” she said, saying the home had some tacky design choices. But after remodeling the home, she said, “Someone rang our doorbell and offered us a ridiculous amount of money. Yes, we sold. My husband would have thrown in the kids, he was so happy.”

See: Top 20 Cities Where Home Prices Are Skyrocketing

5 Pros of Buying a House

In order to know if buying a house could be the right choice for you, you need to first understand this kind of purchase and how to weigh the pros and cons. Here are some benefits of purchasing an existing home:

Building Wealth

5 Cons of Buying a Home

You’ll need to consider some disadvantages of buying a pre-existing home, too. Some cons of buying a home, rather than building, include:

Building Wealth

Don’t Miss: 10 Home Renovations That Will Pay You Back

Average Costs for Home Remodeling Projects

Remodeling.com’s “Cost vs. Value 2017” report determined national averages for typical home remodeling projects. Whether you’re building a home or upgrading a pre-existing property, you’ll want to weigh these costs against your plans so you can better decide what’s cost-effective for you.

Home Remodeling 2017: National Average Costs
Upgrade Cost
Attic insulation (fiberglass) $1,343
Basement remodel $71,115
Bathroom remodel $18,546
Deck addition (wood) $10,707
Entry door replacement (steel) $1,413
Family room addition $89,566
Garage door replacement $1,749
Kitchen remodel (major) $62,158
Kitchen remodel (minor) $20,830
Master suite addition $119,533
Roofing replacement $20,664
Second story addition $176,108
Source: Remodeling “Cost vs. Value” 2017


Learn: Sneaky Expenses of Renovating Your Home

Is It Cheaper to Build a House or Buy a House?

When it comes to deciding between buying a pre-existing home and building a new home, there isn’t an exact formula, said Gloria Shulman, founder of Centek Capital, a mortgage brokerage in Southern California. “In my opinion, it is better to buy a habitable house and do a major overhaul,” Shulman said.

Building Wealth

Lappin emphasized that the cost of building a house can be more expensive than you might initially plan. “I had one client that told the architect ‘this will be our forever house.’ When he got the building bid he said, ‘It was going to be our forever house and it would have to be our kid’s kids’ forever house.’ It was so over budget, it would not break even for 50 or more years if they had to sell.”

Homebuyers might forget the cost of window coverings, extensive landscaping, pool, light fixtures and upgrade finishes, Lappin said. “A builders allowance is usually for the minimal finish, and then you have change-order fees. It adds up to thousands,” she said.

When it comes to building versus buying a home, Lappin said, “If someone has lots of time or can hire a designer to pick out the finishes, then they should build. If someone is spending a lot of money, then they should build.”

To help you understand if it’s cheaper to build or buy a house, make a list of the features that are most important to you, then compare costs. 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 meet your criteria. Your home is your biggest investment so it’s perfectly acceptable to be picky and take your time to find the perfect home.

Up Next: How Long Does It Take to Buy a House?

Ruth Sarreal and Michael Galvis contributed to this article.