To Buy or Build: Which Home Ownership Option Is Right for You?
You’ve reached that exciting point in your life when you’re ready to bid farewell to renting and enter the world of home ownership. Throughout the process, you’ll be swamped with important decisions that need to be made. The first one: Should you buy or build a home? There’s a lot to think about, including cost, time, and personal preferences. Here’s what you should consider before deciding whether to buy or build.
Should you build?
The most obvious and arguably the most important advantage to building is that it will be designed around your individual preferences. A custom home is made to meet your tastes and can even be changed throughout the building process, according to U.S. News & World Report. In other words, your house will be exactly what you make it.
You could also consider tract homes, which are typically built in similar styles with few variations. The homes are new and still allow for some customization, although not as much. These are usually the homes you see in developments and suburbs. The benefit? Because tract homes are typically made in a similar style, it’s cheaper for a contractor to build them. You’ll get the benefit of a new home, but it will cost less than a custom home.
A new home is also better for the environment and your electric bill. “A new home is more efficient, especially with the new energy codes including better HVAC [heating, ventilation, and cooling], insulation, and air filtration standards,” Guy Burtt, principal with Riverstone Development Group, told Investopedia. Add some Energy Star-rated appliances, efficient toilets, and electrical fixtures into your new home, and you’ll have a green, sustainable house, along with a much more pleasant electric bill.
There are also health benefits to opting for a new home. With older houses, you run the risk of exposure to toxic materials lurking in the walls, such as asbestos, lead paint, and mold. And when it comes time to sell, there’s a good chance you’ll be happy you chose to build. Investopedia writes that potential owners are usually more interested in newer homes, meaning it’s likely you’ll see a higher return.
The Christian Science Monitor reports that there are two things to consider when you’re contemplating building a home: Do you know exactly what you want your house to look like, and are you handy and able to do some of the work yourself? If the answer is yes to both of these, you can cut down on some of the time and expenses that come with building, making it a more feasible option.
If you have a floor plan in mind, you won’t need to spend a lot of time hunting and searching for layout ideas, meaning you should be able to move to the building stage fairly quickly. And if you’re able to hang drywall or install plumbing, you can cut down on labor costs by doing some of it yourself.
Despite the many perks, there are also downsides to building. In addition to paying to construct your home, you’re also going to have to purchase the land it will sit on, which can drastically increase your overall costs, per U.S. News & World Report. When you move forward with a construction company, there’s also the risk that the costs will start to pile up. Unfortunately, the initial housing estimates people see are rarely spot on. There’s no way around it: Building a house is expensive.
It’s also going to be a wait to get into your new home. Building, rather than buying, takes longer, and if there are bumps in the road along the way, your time frame may get pushed back even more.
But there are still ways to limit the risk. Investopedia suggests having a potential builder provide references so you can check with others on whether they were satisfied with the company. You can also decide to use a lump-sum contract, rather than a cost-plus contract, meaning you’ll specify a fixed price for construction. This places the risk of cost overruns on builders, giving them more incentive to stay on time and on budget.
Should you buy?
One of the most obvious benefits to buying a house is that people can often move in soon after closing. According to GoBankingRates, another plus, which is often not taken into consideration, is the landscaping, curtains, and window coverings that already come with pre-existing homes. Already having those in place can really amount to big savings. “Most people don’t think about those expenses when they are building a new home, and they can add up quickly,” realtor Colleen Settles said to GoBankingRates.
It can also be great for your checking account because you don’t have to cough up as much cash immediately after purchasing your home. When you move into a new house, you have to pay for all of your appliances right away. Otherwise, you just won’t have any. However, when you buy a home, appliances are already in place. You can then choose to gradually update things around the house, ensuring your upfront costs don’t significantly impact your wallet.
The timeline is also significantly faster, which is a huge positive when you’re excited to get into your new house. Once you’ve been approved by your lender, you can shop around, pick out a home, and make an offer. Enlisting the help of a real estate agent can ensure you find the perfect property quickly. An agent will show you properties that meet your preferences, guide you through negotiations, and assist with the paperwork. After your offer has been accepted, you can be in your house in as little as a month or two.
You can also visualize exactly what your home will look like. Being able to see a concrete floor plan will come in handy when you’re pre-planning where your furniture will go and what you’ll need for your new home, per GoBankingRate.
The biggest downside? You won’t have a house that’s been built to meet your specific tastes. No matter how much you love the property, there are always going to be things about it you that you would have done differently. Eventually, you probably will do things differently or change things up, which will cost you some extra cash down the road.
With older homes, there may be quirks to them, as well. Some older houses have plenty of bedrooms but only one bathroom, while others have strange layouts and rooms that seem unusable. Some of those things, such as limited bathrooms, are features you may just have to live with. The upside? You’re the house hunter, so if there are things you absolutely can’t live without, just let your real estate agent know.