A home is usually the single largest investment that a person makes. Most buyers end up spending lots of time and energy either searching for or designing "the perfect home" before signing any contracts. Location, price, market trends, property taxes, homeowners association fees and the condition of the property are factored into the house hunt. Also, each buyer typically has a wish list that includes specific needs (the things the buyer absolutely has to have) and wants (the features the buyer would like but could do without if necessary).
Maybe it’s not that simple, but whatever the case may be, buying or building a home is a huge deal. We mean that literally. There’s a lot of information to digest and it takes heaps of time and the patience of a saint to process all of it.
Relative costs of buying or building a house
There are different costs associated with buying and building a house. Buying a home may mean you initially sacrifice some of the features you want, possibly choosing to make renovations later. It also means you are subject to the market. When there are more existing homes on the market than there are sellers available to buy them, prices can be more attractive. However, in a seller's market, you may face a markup you wouldn't otherwise see. Consider the following costs associated with buying a new home:
The initial purchase price of the home and land
The time it takes to find a home, negotiate an offer and close
Any home renovations you need to make to adapt the home to your family's use
Closing costs and legal fees
A real estate agents commission
Building can also be costly and time-consuming. While it offers a perfectly customized home in the end, it can often take longer than you might expect to go from architectural renderings to move-in date. When builders and contractors are busy with many new building projects, it can be difficult and expensive to obtain their services for your new dream house. When they hit slow seasons, just like in any other industry, they're more amenable to making price concessions. Consider the following costs for building a new home:
The initial cost of the land if you're not building on land you already own
Cost of materials and design services
Contractor fees
The time it takes to build the home
Is It Cheaper to Build or Buy a House?
Obviously, another huge factor is price, which covers a wide range for both buying and building. I’m sure it will be no surprise that this depends on location, size and, again, the market.
National average home buying prices:
Existing home: $289,200.00
New home: $383,500.00
The average costs for construction is $246,453.00 but there are a number of additional expenses, like financing, overhead expenses and finished lot costs that can drive the total price upwards of $380K.
Complete customization, from cabinets to counters and everything in between.
Savings from efficient appliances and well-sealed windows.
Warranties with purchases like water-softeners, fridges and even the house itself .
Plus, that new house smell.
The CONS of Building
The resale value is probably going to be lower than what you spent to build it.
Lots of custom choices. Expect to make up to, if not more than, 1,000 selections.
Higher upfront costs like permits, deposits, fees and unexpected expenses.
It can take around six to seven months to build, and that’s being optimistic.
Location choices might be limited, meaning less established or more remote areas.
The PROS of Buying
Less time. It takes around sixty days to move in after the offer is accepted.
More budget-friendly, unless you plan to do immediate renovations.
More info to evaluate and make well-informed decisions (pricing, location, comps).
More charm inside and most likely a better landscape canvas (instead of fresh dirt).
The CONS of Buying
There might be a little more upkeep, maintenance and possible renovations.
Less efficiency that comes with older windows and appliances.
Less customization and more compromises.
Checklist for hiring a contractor when buying or building a house
When hiring a contractor to build a home or renovate your new fixer-upper, it's important to obtain several quotes and investigate each contractor's work before making a final decision:
Check with the Better Business Bureau to see if the contractor has accumulated complaints.
Make sure the company has sufficient workers compensation and general liability coverage. Otherwise, you could be stuck with the bill for any accident.
Check for quality workmanship in the contractor's current and past work.
Be wary of unexpectedly low bids, which might not cover costs that are certain to develop later.
Make sure the company has a permanent address and a good reputation with lenders and vendors.
Ask friends, family or co-workers for personal recommendations.
Make sure you receive a clearly written contract for the work.
There’s a lot to soak up, break down and process, but with the help of these thought-provoking, decision-fueling bulleted lists, you should start to lean one way or the other.
So start filling notebooks, Word docs and Pinterest boards with your wants and must-haves, and when you’re ready, contact a real estate insurance agent and/or builder to help you buy or build your next home.