Home buyers must decide whether to shop for an existing home or build a new one. Most homebuyers spend time and energy searching for or designing "the perfect home" before signing contracts or laying down funds.
Location, price, market trends, property taxes, and homeowners associationfees are factored into a house hunt. Whether buying a new home or an existing property, each path has advantages and disadvantages.
Key Takeaways
- When considering an existing home, buyers factor in the cost of updates or renovations.
- A new home allows buyers to decide on interior and exterior designs.
- Building a new home means buyers can put energy-saving measures in place.
- A tight timeframe makes an existing home purchase more attractive.
Buying an Existing Home
Convenience and cost are two primary advantages of buying an existing home. Once buyersare pre-approvedby a lender, they can shop around, pick out a home, and make an offer.
A qualified real estate agent streamlines the process by finding appropriate properties, guiding buyers through negotiations, and assisting with paperwork. Once an offer is accepted, buyers may be able to close quickly, on average between 30-45 days, and move into a home.
Schedules and Cost
Buyers on a tight schedule, such as those relocating for a new job or whose children will be starting at a new school may find buying an existing home attractive. It can also be cheaper to buy an existing home, according to the National Association of Home Builders. In the United States, buyers save about $6,000 when purchasing an existing home. In 2023, the average total building costs were $421,000, while the median single-family list price was $415,000.
Convenience vs. Customization
Existing homes commonly have mature landscaping with lawns, shrubs, and trees. The floor plan is already visible upon inspection, and buyers can see the layout. However, older homes may be functionally obsolete and require renovations or expansion. Potential buyers must factor these expenses into the overall price, especially when choosingamong various properties or comparing the cost of building a new home.
New rules for the National Association of Realtors, expected to take effect in July 2024, may lower commissions for home buyers and sellers. If a federal court approves the changes, the standard 6% commission ends and sellers no longer have to propose compensation to prospective buyers and their agents. NAR will also require brokers to enter into written agreements with their buyers to help consumers understand what services will be provided, and at what cost.
Building a New Home
Building a new home allows buyers to design the space for their family. While the buildingdoesn't offer the timely conveniences of buying an existing house, buyers can usually choose every element of the new structure.
Buyers can limit the risk that a house will go over budget or take longer than they expected by working with a reputable builder and having a good contract in place.
Design Choices
Building a new home means buyers can get what they want. They can create a more efficient home that meets energy codes for heating, ventilation, cooling, insulation, and air filtration. A custom building timeline can range from six to eighteen months. Joining an existing development may streamline the process, though it may limit a buyer's degree of choice.
Everything Is New
Buyers avoid costly renovations or repairs with a new home build. A new house also incorporates updated environmental standards. New homes commonly come equipped with energy-efficient appliances and HVAC systems. Older homes may contain asbestos, lead paint, or mold that require remediation.
Even though the upfront costs can be higher, it may be easier to recoup the investment. A newer home is typically more appealing than an older home at resale and new homes typically include a warranty. A builder warranty commonly includes limited coverage on workmanship and materials for windows, heating, ventilation, air conditioning, plumbing, and electrical systems.
What Are Some Cost Risks When Building a New Home?
Because of a longer timeline, costs may be added or increased when building a house.
If possible, buyers should opt for 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.
Can Buyers Get a Warranty When Purchasing an Existing Home?
Whether for new or existing homes, sellers and homebuyers can have a warranty that ensures that appliances and mechanical systems remain in working order until the homebuyer takes possession. Most real estate agreements require that a house is in the same condition as when the buyer viewed it. A home warranty can help with unexpected expenses.
Who Supervises a New Home Construction?
New homes are commonly built under the direction of a developer, who creates the plan for the community, the architect who designs the home plan, and the builder's representatives, which may include a sales team and construction superintendent.
The Bottom Line
Location and price are considered when buying a home, but buyers must also decide whether to buy a new or existing home. An existing home usually provides a quick move-in date, though buyers must consider the cost of updates or renovations. New homes allow buyers to decide on interior and exterior designs but often come at a higher price and longer timelines.
