by David Ellis
on Friday, February 2nd, 2018 at 9:56pm.
Earning a home is a life goal for many people. Home ownership affords you privacy, gives you equity and there are even tax advantages.
Even for people who already own a home, the essential dream doesn't go away. It just alters focus slightly. You start considering questions about whether a better home is practical.
There is one question that confronts everyone during their quests for home ownership. Should I buy an existing house or look into new construction homes?
Both options provide advantages, but they also include disadvantages. It's important to have a handle on these issues before you make a final decision.
With that in mind, let's dig into the pros and cons of...
Existing Vs. New Construction Homes
Since a home is one of the most expensive purchases a person will make, we'll start there.
The purchase price for a new or existing home depends on a great deal of factors ranging from home size to region and even neighborhood. Even with all that variation, it's still possible to make a broad comparison.
Recent data puts the median purchase price of existing homes at around $255,000 and new homes at around $346,000. In terms of pure purchase cost, you're looking at paying 30% more for newly built homes.
The difference in purchase price is a deal breaker for many people. For some, it's impossible to get the necessary financing. For others, it's a psychological choice to save money and live with whatever inconveniences come with owning an existing home.
What that initial price difference fails to communicate is the medium-term difference in maintenance costs.
New construction homes come out on top in terms of maintenance.
Almost everything is under warranty in new homes, from the structure itself to the roof and appliances. If the roof starts to leak or the air conditioner dies, you can probably get it replaced or repaired by the contractor, subcontractor or manufacturer.
This means your out-of-pocket maintenance costs remain quite low for the first 10-20 years.
Existing homes are another story. Most of the warranties will be expired or entering the phase where strict limits are imposed. That means the vast majority, if not all, of the repairs and replacements will come straight out of your checking account.
If the dishwasher dies, you're heading to a store. The roof starts to leak, you better hit up social media for roofer recommendations. HVAC troubles and you may as well start asking the bank about a loan.
This is all assuming you are happy with the existing house as it is. If you want to change anything inside, you're looking at a whole different set of expenses.
Customization and Remodeling
Part of the appeal of home ownership is having things the way you want them.
Always dreamed about a dedicated library for your books, or a bay window, or restaurant-grade kitchen? It's all possible, but not always practical. This is an area where new construction homes also edge out existing homes.
When you work with a contractor and architect on a new home design, you get to customize the space in whatever way you want. If you love cooking, but hate entertaining, you can trade away entertaining space for kitchen space. Just remember that too much customization can hurt your resale value.
The real advantage here is that it's easy to move things around on paper until you're satisfied with it. It doesn't cost more to build a wall a foot to the right if it's being done from scratch.
Customizing in an existing home isn't so easy. You have to deal with the existing structure as it is.
The organization of the space is largely established. Load bearing walls need to stay in place. Electrical and plumbing are already in place.
Once you start looking at taking down walls or expanding rooms, the price goes up quite a bit. Most locations require that licensed professionals perform major renovations, electrical work, and plumbing changes. That makes DIY a no-go for most serious remodeling work.
The timetable for purchasing and moving into an existing home is radically different than that for a new construction home.
Buying an existing home, especially in a hot market, can feel like a Darwinian free-for-all. A house goes on the market and you've got a small window of time to view and make an offer on it. The window can be as small as a few days.Someone else will swoop in and make an offer if you hesitate for too long.
If you hesitate for too long, someone else will swoop in and make an offer. Then the process starts all over again.
Assume that you make an offer and it gets accepted. Closing times usually fall between 30 and 50 days. That means you get to start moving in your stuff in about 4-6 weeks.
The average build time for a new home is about 6 months. There is also an average gap of about a month between the time building is authorized and the time it begins. All in, you're looking at seven months before your stuff goes into your new digs.
That assumes that everything goes right. The early stages of any construction project are weather sensitive. Get a lot of extra rain one spring and you can expect the completion date to keep moving later into the year.
The importance of timetable is more a matter of personal preference and individual situation. If you need to move in soon, an existing house is your best bet. New construction homes remain a good option for anyone not on a deadline to move.
Making the choice between an existing house and a new one requires you to weigh a number of factors.
You have to balance the initial purchase price savings against a realistic assessment of your medium-term costs. Will renovations eat through those savings enough to justify a new build? How long can you wait to move into the house?
If your budget is fixed and you need to move in sooner than later, you should probably be looking at existing homes. If your budget and timetable are flexible, and you want custom features, new construction homes are probably a better value for you.
The Ellis Real Estate Group specializes in home sales and purchases in St. George, Utah and the surrounding area. If you're looking for a home in the area or have any questions, please don't hesitate to contact us.