PROPERTYSPARK ARTICLE
House Hunting: To Build or to Buy?
Deciding between building a new home or buying an existing one is a bit like choosing between a bespoke suit or one off the rack.
Sure, a custom-built home is the ultimate expression of your personal style and needs, but it can come at a bank-breaking price. And while buying an existing home can be more affordable, you may have to forgo having a hot hub or another bathroom. It’s a tough call.
Don’t know which path to take? Let’s explore the pros and cons of building versus buying to help you find the perfect place to call home.
Is Buying an Existing Home a Good Investment?
Buying a home is the quintessential American dream. But it comes with its fair share of challenges and drawbacks. Let’s take a look at the pros and cons of buying a pre-built home (see this article from Westpac for more information).
Pros
1. Less Paperwork
Paperwork is everybody’s idea of a nightmare, and homeownership-related paperwork can be a beast to tackle.
But it’s nothing compared to the land and building permits, building contracts, zoning approvals, and environmental assessments you need to have on hand when building a house.
2. Lower Cost
If you’re buying a pre-built house, you won’t have to spend thousands on building cabinets, buying appliances, or putting in exterior lighting. You’ll also get more favorable loan options, such as a 30-year fixed-rate home loan, which can help you save money.
Plus, you’ll have to spend less to buy a house than to build it, depending on where you live. For instance, the median price of a pre-built home in Texas is $298,325, according to Zillow. But if you tried to build one yourself, your home would cost at least $325,000.
3. Established Neighborhoods and Amenities
Typically, there are zero plots to buy in up-and-up or thriving areas, so you typically have to go further afield to purchase land for your future home. This means you may not have direct access to amenities like schools, hospitals, and parks.
However, when you purchase a pre-built home, you get access to everything you need, such as an established community, a nearby business center, etc. New home communities in Nashville, like those from Harpeth Valley Homes, offer luxury and affordability with options that suit your family’s needs.
Cons
1. Limited Customization Options
If you lucked upon a nice antebellum-style home with gabled roofs, elaborate friezes, and a cupola, that’s awesome! But you won’t be able to change anything about your home’s exterior without spending a pretty penny.
Plus, even changing or upgrading the interior will be difficult — because of all the elaborate details. So, unless you’re planning on spending thousands in renovation costs, it’s better to build your dream home than go for one you think will be “okay” and end up hating it.
2. Potential for a Bidding War
If your agent found a hidden gem of a house and you think it’s totally your style, other people might think that too and put in a higher down payment. The ensuing bidding war might cause you to panic and spend more on a house that was worth way less.
3. Extensive Maintenance
If you’re buying an old property, you’ll have to spend thousands on maintenance every year, especially if you live in an accident-prone area like Florida or Texas.
Plus, you’ll also have to look out for mold, water leaks, air condition breakdowns, and other issues to ensure your quality of living stays high.
Should You Build Your Own Home?
If you can’t find anything on the market, should you wait for a house you like to pop up or build your dream house yourself? Well, here are some pros and cons of doing that:
Pros
1. Highly Customizable
When you’re building your own home, you can go all out. For instance, if you’re looking for a home with a large yard, you can buy enough land to make that true.
Similarly, if you want a sunken living space, you can have that as well. Your budget is your only limit.
2. New Construction Warranties
Most new homes come with a builder’s warranty that covers the foundation, framing, roofing, plumbing, and circuitry. They last for one to two years for cosmetic defects and up to ten years for structural issues, ensuring you don’t have to break out your savings in case of an emergency.
3. Energy Efficiency
If you’re building your home, you can make it more energy efficient by putting in better insulation/ventilation, lighting, and appliances. They’ll reduce drafts, hot spots, and heat emissions, as well as help you save on electricity costs.
Cons
1. Longer Building Process
According to the US Census Bureau, it takes an average of 14.3 months to complete owner-built houses. And this number can increase depending on the soil type, site topography, contractor skill, labor shortages, supply chain issues, and weather conditions.
Plus, you (as the owner) can also throw a wrench in the process by waiting until the last minute to select finishes or make house plan changes.
2. Higher Costs
The national average cost to build was $293,433 in 2022. However, homeowners spent an average of $110,889 to $477,866 on their home builds. Here’s a breakdown of what they spent their money on:
Building Requirements | Average Cost |
Land | $3,000 to $150,000 |
House plans | $500 to $20,000 |
Permits | $1,200 to $2,000 |
Framing | $20,000 to $50,000 |
Plumbing, electrical, and HVAC | $30,000 to $75,000 |
Finishing | $50,000 to $100,000 |
Exterior finishing | $40,000 to $60,000 |
Outdoor space | $4,150 to $11,190 |
Source: HomeAdvisor
So, if you’re building a home, make sure you get a construction loan with favorable terms or have enough balance in the bank to foot the bill. Because if you don’t, you’ll be out of house and land.
Building vs. Buying a Home: The Verdict
To build or to buy, that is the question. But is it really? Building a home gives you the opportunity to create a space that perfectly suits your needs and taste. In contrast, buying an existing home can provide immediate move-in-ready options and established neighborhoods.
However, building a home can be more expensive than buying it. Plus, finding the right piece of land, designing the layout, and constructing your home can take months or years. This can be especially challenging if you’re on a tight budget or timeline.
So, buying a home should be your method of choice (to fulfill your homebuying dreams) if you don’t have the resources to build a house. But if you do, the pros of a home build outweigh the cons by a margin.
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