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Buying vs Building a New Home – Which One is Cheaper?

Many new homeowners choose to purchase an existing construction from a previous owner, especially if it is located in a busy urban area where you cannot find enough space to build your own. Another option would be for the prospective home buyer to purchase a piece of land where they have a new home built from scratch. While this approach may raise several concerns about the costs involved in putting up a new construction house, it gives you the freedom to customize the home to your desired style and individual preferences. This article discusses whether building your own home is cheaper than purchasing an existing home.

Factors to Consider Before Building Your Home


A Piece of Land

Building your own home means that you will have to buy land. Once you decide on the area where you’d like to live, then you should look for existing construction that is similar to the size, style, lot and location of the home you want to build. Find out the value of that home in that neighborhood. As the housing market changes, you’ll get an idea of your what your construction budget should be compared to the value of your home. If you are thinking of building a home in a densely populated area you may find it difficult to find appropriate lot sizes and availability to build the house you want, where you want it. In this case, you may want to consider purchasing land in rural areas than to secure more expensive and less common plos in the suburbs of busy cities and towns.

Getting On The Grid

Purchasing an existing construction house can save you time and money when it comes to managing your utilities. You only have to make your monthly payments, and you get access to lighting, water and sewage systems. When it comes to new construction however, running new utilities is an expensive part of the project. Sometimes a vacant lot has utilities run to it already, especially if it’s part of a development or owned by someone who intended to sell it to a builder or developer.

Find out if the lot has water and sewer by calling the county’s planning and zoning department or the building department to see if the are is served by the public system. For power, you can search Google Maps for “county name power” and then call the company and ask if they have power lines on the road in front of your lot. Building on raw land means it needs to be cleared and graded and the groundwork will have to be run for the electrical systems, HVAC, sewage, and landscaping. Some utilities charge $50 to $100 or more per foot to extend existing lines, so long runs to the nearest utility line can be very expensive. Utility costs can be anywhere from $10,000 to over $30,000 depending on your location and proximity to public utility connections. Furthermore, some cities and power companies charge more for their services.

The easiest and cheapest way to get your water is to get service from the municipal water system. You’ll need to have a hookup to the water main installed if it hasn’t already been done. If your property is outside the area serviced by the municipality, you’ll need to install a well which can cost anywhere from $2,000 to $25,000, depending on how deep you need to go.

Hire a Contractor or Do it Yourself?

It is possible to do things like painting the walls, refurbishing the HVAC, and changing the flooring when it comes to fixing up an existing home. However, building a new home from the ground up requires the expertise of professional architects, electricians, and engineers. If you lack all of those skills, then consider hiring a professional to have your structure well done. Your goal when hiring a home construction company should be to get the best price and outstanding service without any complications.

Pricing is one of the most important things that you’ll consider when hiring a construction company. Generally, pricing is very competitive. Therefore, the lowest price should not necessarily attract you since it might literally translate to very poorly done and substandard work. Select the company that offers you a personal, pocket friendly deal that satisfies you and instills confidence pertaining to the kind of work that they will do for you.

Maintenance

Older homes may require high maintenance as they have more wear and tear. It is important to know the age of the main structural components before purchasing an existing home to avoid the high costs of maintenance. Building your own home comes with less upkeep since everything from the HVAC system to major appliances is new with a warranty. There are times when an entire home is protected for more than 10 years because the warranty covers any problems that may arise after the construction is complete. According to Discover.com, the one percent rule indicates that you should set aside at least one percent of your home’s value every year for home maintenance. For a $360,000 house, this works out to $3,600 per year, or $300 per month.

Average homeowner costs can be helpful, but averages are only a starting point for your home’s annual maintenance budget and don’t take into account your unique circumstances. You must calculate personal factors that may increase or decrease your maintenance costs including the location and age of your home, the weather in your area, and the home’s general condition.

Appreciation

There is some context to purchasing an existing home since you can research its previous sale prices and that of similar homes in the area to get a glimpse of whether prices are rising or falling in the real estate market. On the other hand, new construction can be more of a gamble, particularly in up-and-coming neighborhoods. There are not enough data points to validate what could happen in the future without a proven track record of the housing trends.

When you choose to buy or build in a growing community, your home’s value will appreciate in pace with the comparable homes here. The new homes that will be built in the future will be priced higher, as the cost of building materials and labor continues to increase. The sooner you build in this kind of neighborhood, the more equity you’ll see in your home as values rise in your area.

Is it Cheaper to Build Your Own Home?

The decision to purchase an existing construction or buy a new home depends entirely on your goals, ambitions and financial capability. The upfront costs of constructing a new home can be higher than purchasing an existing home since you have to start by purchasing land and building from the ground up. Although there are plenty of factors that go into building or buying, many real estate studies show that buying an existing home is cheaper than building a new one. However, the choice between the two options comes down to where you plan on living and your expectations for the future.

There is no doubt that building a new construction house allows you to customize your home based on your style and preferences. 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. In addition, a new home will require fewer repairs and less maintenance, which can save both money and time. Money and features aside, building a house can lead to a level of satisfaction that you can’t achieve through buying an existing home. It’s your creation that matches your style and personality, that you created from scratch.

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