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 wishlist 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).
While the home-buying process involves a number of important choices, one of the very first decisions buyers need to make is whether to shop for an existing home or build a new one. Each path has its advantages and disadvantages. Here's a look at both sides.
Building a House
Building a new house can come with many benefits and opportunities to save money; so although you don’t have to know how to build a house yourself in order to get the best house for your needs, you do need to know some things before you dive into such a commitment.
Here are some advantages to building your own home:
- a) Discounts on materials: If you’re working with suppliers, like your local lumberyard, ask for a builder’s discount.
- b) Everything is new: Moving into an existing property can come with hidden costs, as you might need to make significant home upgrades that might not be entirely obvious during the purchasing phase.
- c) Design control: Everything is what you want from the start, so you won’t have to spend additional funds redoing the home after you purchase it.
- d) Easier entertaining: Entertaining is easier because new homes often have an open floor plan that supports large groups. Older buildings often feature design choices that don’t make sense — such as a setup requiring you to walk through a bedroom to get to a communal bathroom — that newer homes don’t have.
Here are some disadvantages to building a home:
1) Time: It can take anywhere from four to six months to build a home. That’s a long time to wait, and things can change while you are waiting to move.
2) 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.
3) Construction loan and permits: You might be required to carry the construction loan on the building process if the builder does not do this for you. Even if the builder handles the permits, it’s a good idea to understand what’s needed to ensure everything is built up to code. If you’re unsure, it is best to hire your own inspector to make sure the job is done correctly the first time — and factor that expenses into the cost to build a house.
4) Legal considerations: The agreement between you and the builder might limit your rights if there’s an issue with the home-building process and you need to take the builder to court. Read documents carefully and consult an attorney in your state for legal advice, if necessary.
5) 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.
Buying a House
Buying a house is an attractive option for many people because in most cases, you can move into the home soon after closing. Often, homebuyers might fret over the purchase of a home that has some less-than-stellar features. But the home you buy — whether it’s your first home or not — doesn’t have to be perfect down to the wall paint. You can update the unattractive features of a home over time, and you might even profit from a few upgrades.
Here are some benefits of purchasing an existing home:
1) Opportunity to flip your home: If you buy a home and make much-needed upgrades, you have the potential to flip the home, allowing you to roll over profits into a newer and better house.
2) 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.
3) Ability to move quickly: In most cases, the buyer can move in immediately after closing; you don’t have to worry about the wait time or temporary housing.
4) You know the neighbourhood: If you’re buying a home in a pre-existing neighbourhood, then you already know the neighbours, property values and other details.
5) 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 and ensure you’ll both be able to build and afford the home you’ve dreamed up.
Some cons of buying a home, rather than building, include:
1) Buyer’s remorse: You need to discover and get used to the quirks in the house that didn’t stand out when you were in the home-buying process.
2) Upgrade costs: Having to move into a home and make upgrades can be a major time and money investment. Even the simplest home remodelling projects can cost thousands;
3) Being stuck with the layout: You can’t easily change the layout or floor plan of a preowned home.
4) Decorating costs: Aside from paying closing costs and other upfront costs, you might have to invest some time and money to bring the home up to current standards by removing wallpaper, changing paint colours or updating flooring.
5) Higher home insurance: Compared to a new home, your home insurance costs will be higher with a preowned home. New homes come with features that are new and up to date, unlike some pre-existing homes.