Building A New Home
New construction is a lengthy process that will require many decisions along the way. There are three types of builders: Tract, Semi-custom, and Custom builders. Tract builders produce an affordable product by allowing very few architectural differences which results in homes that look very similar to each other. Components such as roof trusses, plumbing trees, and stair systems are often prefabricated in factories and installed on-site. This allows tract builders to offer lower prices, which in turn can make homes affordable to a larger percentage of the population. Semi-custom builders have a limited number of plans and styles to choose from, but do allow the customer to add structural changes that alter the floorplan to customize the home to their desires. Finally, a custom builder begins with a list of the customer’s desired features and home style and draws the plan from the ground up.
The first step in new construction is to determine where you’d like to build. If you prefer a rural setting, together will need to find the land, which will very likely not be in an existing neighborhood. Joining an existing development can streamline the process, though it may limit your degree of choice. In a rural setting, you also need to determine whether the land gives access to municipal water and sewage, or requires a well and septic system, along with any environmental and other permits. These will add to the total cost of the project. Speaking of costs, it is important to discuss with your builder how the project will be financed. Some builders will carry the construction loan themselves—at the end of the process, the customer will be required to obtain a mortgage to purchase the finished product from the builder. In other cases, the customer may be required to apply for a construction loan and disburse funds to the contractor throughout the project.
The big advantage: You are much more likely to get exactly what you want. For many, this factor alone is enough to choose building over buying, but there are other advantages, too. “A new home is more efficient, especially with the new energy codes including better HVAC [heating, ventilation and cooling], insulation and air filtration standards,” says Guy Burtt, principal with Riverstone Development Group, Inc., a full-service, licensed general contractor and construction manager engaged in commercial, residential and renovation construction projects. Better efficiency is good for the environment and can save you money on your utility bills each month.
Another perk? A new house may literally be better for you. “A new home is less likely to have the health concerns or toxic materials of an older home – things such as asbestos, lead paint, mold, etc.,” says Burtt. And it can be built with certain materials making it better for the environment. “Green appliances/Energy Star rated appliances, and more efficient toilets, plumbing fixtures and electrical fixtures allow you to build “green” for a more sustainable home in the long run. And you have the option to install, sleeve and/or wire for future technology upgrades, such as home automation and solar,” says Burtt.
Even though the upfront costs of building can be higher, it may be easier to recoup your investment. “You can have more significant profits with the resale of your new home. A newer home is typically more appealing than an older home to most people,” Burtt says. In addition, a new home will require fewer repairs and less maintenance, which can save both money and time. And, as Burtt points out, you’ll have a warranty with a new home, so even if something does go wrong, you may still be covered.
Money and features aside, building a house can lead to a level of satisfaction that you can’t achieve through buying an existing home. “There is a definite feeling of an emotional connection to living in a new home that you have created,” says Burtt. “The new-home smell, no one else has stepped foot (or pets) on your carpet. This is your creation that matches your style and personality, that you created from scratch.”
The biggest drawbacks to building a house tend to be the higher costs and longer timeframe, both of which can increase throughout the home-building process. That said, you can limit the risk that your house will go over budget or take longer than you expected by working with a reputable builder and having a good contract in place. “Have your potential builder provide references and then check their past homeowner references,” says Burtt. To avoid unexpected price increases, “Try to use a lump-sum contract, instead of a cost-plus contract.” A lump-sum contract specifies a fixed price for construction, putting the risk of cost overruns on the builder instead of the buyer.
In addition, your contractor should work with you to help you reduce costs. “Your builder should provide a list of cost-saving items, if requested,” says Burtt. Substituting different materials and fixtures can save thousands of dollars, so if costs are a concern, ask ahead of time if there’s a cheaper alternative. And keep in mind that anything out of the ordinary is going to cost more. “Custom colors and ornate shapes of materials are certain ways to go over budget,” says Burtt.
A reputable builder will allow you access to the work site throughout the construction period and will meet with you on site periodically. It’s important that once the home is enclosed, the buyer is provided with a key. Generally, it’s best to avoid the work site during the day so that the subcontractors are not distracted with questions about details that they may not know anything about.
Read more: Should You Buy or Build a Home? | Investopedia
Buying An Existing Home
There are two primary advantages to buying an existing home: convenience and cost. Once you are pre-approved by your lender, you can shop around, pick out a home and make an offer. As a qualified real estate agent, I can streamline the process by helping you find appropriate properties, guide you through negotiations and assist with the paperwork. Once your offer is accepted, you may be able to close and move in within a month or two.
Even though the process involves numerous steps – such as financing, viewing homes, making offers, home inspections and closing – the convenience of being able to move in right away is compelling enough for many people to choose an existing home over a build. This may be especially true for buyers on a tight schedule, such as those relocating for a new job or whose children will be starting at a new school.
Then there’s cost: In many (but not all) cases it is cheaper to buy an existing home. According to data compiled by the National Association of Home Builders, the median new home price in 2015 was $282,800, versus $208,900 for existing homes during the same year. Depending on your target real estate market, prices for existing homes may still be quite favorable in the aftermath of the financial crisis and housing bust that significantly lowered real estate prices across the nation.
Another reason an existing home may be a better option is if you would like to be in a particular established neighborhood – near work, school, friends and/or family. Odds are, too, that the home will have mature landscaping, so you won’t have to worry about starting a lawn, planting shrubs and waiting for trees to grow. And if you want to live close to town, your best bet will be an existing home since most, if not all, of the land will have already been built upon.
On the flip side, the biggest disadvantage in buying an existing home may be that you won’t get exactly what you want. You may not be in love with the floor plan, may wish that half bath on the first floor were a full bath or that there were another bedroom on the main floor. Older homes in particular may be functionally obsolete, and no longer meet the needs of most buyers. For example, an otherwise beautiful four-bedroom house may only have one bathroom, or the kitchen may be too small with no room for expansion. Unless you find an existing home that has exactly what you want and is in perfect condition, you will have to spend additional money on remodeling, repairs, decorating and/or landscaping. These additional expenses should be factored into the overall price, especially when choosing among various properties or comparing the cost to building your own house.
Read more: Should You Buy or Build a Home? | Investopedia