For most people, owning a home is the cornerstone of the American Dream.
It represents the culmination of all their hard work and the sacrifices they’ve made to acquire the house that will become their home–a place where they will raise their kids, live their daily lives, and celebrate a lifetime of memories.
Owning a house is generally the single largest investment that most people will ever have, and so making the decision to purchase a house is fraught with all kinds of anxiety, stress, and demands.
Consider that the median sale price for a new home 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. According to the National Association of Realtors, the median price for an existing home was $232,200 in the same month. Evidently, that’s a fairly large disparity in price.
Buyers typically have a wishlist that includes specific needs (the things they absolutely must have), and wants (the things they would like to have, but could do without if necessary). Combined with considerations like location, price, market trends, property taxes, and homeowner’s association fees, there are many variables to evaluate before making a decision about whether to buy an existing home or to build a new home.
There are good reasons to consider each option–both pros and cons–and in this article, we’ll examine both.
Buying an Existing Home
There are many advantages and disadvantages to buying an existing home versus building a new home, but the two primary benefits are convenience and cost.
Though there are many steps involved in purchasing an existing house–from finding a lender and a working with a qualified real estate agent, to shopping for a home, making offers, conducting inspections and closing the loan–it is still far more convenient than building a new property.
The convenience of being able to move in right away is generally reason enough for many people to choose an existing home, and this is especially true for people who are on a tight schedule–such as relocating for a new job or having children entering a new school.
As mentioned above, there is also a major cost consideration. According to data compiled by the National Association of Home Builders, in most cases, it is substantially cheaper to buy an existing home. Of course, this factor depends on many variables but existing homes are generally more affordable for most people. This is especially true for first-time home buyers.
Another reason why an existing home might be a better option is due to neighborhood concerns. A buyer may want to live in a specific neighborhood–near work, school, family or friends, and if that’s the case, there might be limited options for building a new home in the area.
Additionally, older existing homes generally have mature landscaping on the property, so a home buyer doesn’t have to worry about starting a lawn, planting shrubs, or waiting for trees to grow, as they would with a new home.
Here are a few more advantages of buying an existing home:
- Easy to visualize: You can see the floor plan and the layout of a pre-existing home. When you build a home, it can be difficult to visualize the layout.
- Upgrade costs can be delayed: With a pre-existing home, you can take your time making upgrades, allowing you to better budget for the expenses.
- Opportunity to flip your home: If you buy a home and make upgrades, you have the potential to flip the home, allowing you to roll over the profits into a newer and better house.
The biggest disadvantage of buying an existing home is that you may not get exactly what you want. The floor plan might not be exactly right, or you might wish you had an extra bath, or another bedroom or garage.
Unless you find an existing home that has exactly what you want and is in perfect condition, you’ll probably have to spend additional money on remodeling, repairs and decorating. These additional expenses should be factored into the overall price, especially when comparing the cost to building your own house.
Building a Home
Building a new home is not the same as buying an existing house. Not only do you have to find the land (which will probably not be in an existing neighborhood), but you will also have to hire an architect or builder, and approve and review every element of the new structure.
There will also be concerns about systems, such as whether the land provides access to municipal water and sewage, or if it requires a well and septic system, along with other environmental permits.
For some people, these concerns pale in comparison to the largest advantage in building their own home: getting exactly what they want. For them, this is reason enough to choose building over buying.
Building a house can lead to a level of satisfaction that is distinct from buying an existing home. Being intimately involved in the design and build of a house brings a deeper emotional connection to the structure; it becomes a place that fully corresponds to an individual’s style and personality.
There are other advantages as well. A new home is likely to be more energy efficient, which is not only good for the environment, it’s also likely to save you money on monthly utility bills. It may also be better for your health, with less or none of the toxic materials that can be found in older homes, such as asbestos, lead paint, and mold, etc. New properties also require fewer repairs and less maintenance, which can save both money and time. And most new homes have a warranty, so even if something does go wrong, you may still be covered.
However, there are drawbacks to building a house as well, with higher costs and longer timeframes topping the list. In addition, there is the possibility of cost overruns or problems with the builder. Building a home can result in lots of unexpected costs.
Here are a few other potential disadvantages to building a house:
- Time: It can take anywhere from four months to six months to build a home. That’s a long time to wait, and things can change while construction is in progress.
- Limitations: You might be limited in the style of home you can build within your price range. You might also find that making a lot of changes and purchasing upgrades from the builder can be expensive.
- Temporary housing: You might have to move into temporary housing while you wait for your home to be built. Doing this can mean added expenses from hiring movers and paying for rented storage space.
Though each buyer is different and has varying motivations, the bottom line when it comes to building versus buying is this:
If your ultimate goal is to have a perfect house that meets your every desire—and you have the time and cash to see the project through—then you should build. If having the perfect residence is not as important to you, then you should buy in the price range and neighborhood most appealing to you.