New Construction or Resale?
As you continue your home search, I’m sure you’ve wondered if it’s better to buy new construction or a resale home. You might love the idea of owning a home with the latest safety standards and modern technology. Or you might like the idea of buying an older home because of its charm. But of course, both will come with their fair share of pros and cons. Here are a few reasons you may prefer to buy a newly built home over an existing one.
- Your energy cost will be lower than an older resale.
- New homes are designed to have more usable space, otherwise known as an open floorplan.
- Modern home automation and technology.
- Newly built homes go by modern-day safety codes.
- The builder may offer financing through a lender they have a good relationship with, making it easier to obtain a mortgage.
- Buying a brand-new home is less competitive than trying to buy a resale.
Buying a Resale Home
You might consider buying an older home because of its traditional features, such as a formal dining room. However, suppose you’re not a fan of dining rooms. In that case, you can easily convert it into a home office instead.
- An older resale home could offer more charm and character, such as a wrap-around southern-style porch.
- You may be able to buy more house for less than or equal to a newly built home.
- There’s a chance you will be closer to metro areas while most new homes are in the outlying suburbs.
- Resales have lower property taxes, but that will also depend on your location.
- Though it’s not brand new, you can still bring it up to date by making home improvements.
- Depending on your location, the lot sizes for an existing home could be more significant.
Building New Construction
Generally speaking, there’s a big price gap between newly built and existing homes. The national median sales price for a resale home is just over $272,500, while the average cost to construct a new single-family home is $485,000.
If you plan on building a new home, there are three main types of home builders to know about. First, you have custom home builders. If you’re going with a custom home builder, you will have to buy your own land, which will be an added cost. This home builder is often the most expensive choice and takes six to twelve months to build a home on average.
Secondly, you have the choice of spec home builders such as D.R. Horton and Toll Brothers. Spec is short for “speculative,” as they erect a few homes first and then try to sell them before going any further. Ideally, they would like to have the homes sold just before completion. Spec home builders will typically build out small neighborhoods. Each house will typically take a period of six months to build.
Lastly, you have tract home builders such as Ryan’s Homes and Centex. Tract builders buy large tracts of land to build new neighborhoods, and often cost less than a spec home. Although you will have more options to choose from specs, don’t expect to alter their floorplans very much. A certain number of lots per phase will usually have to be sold for construction to begin, and you may be able to hand-select your own lot. Big box builders can also fully erect a home within six months.
All in all, building a new home can range from $160,000 to $480,000, but that will depend on your location.
One of the rewards of buying new construction is they are built to use less energy. An older home can also be designed to become energy efficient. Replacing old windows with new energy-efficient windows can save 12% to 33% in heating and cooling costs. But depending on the house’s age and condition, the cost to do so could very well outweigh the benefits. Keep in mind many new homes are being constructed with green building materials. Thus, still keeping energy cost lower than an upgraded resale.
Maintaining Existing and New Construction Homes
A common drawback with a resale home is the need for more maintenance. Some of the most common home repairs are usually related to the roof and utilities. On the bright side, you can ask the seller to make the necessary repairs. However, after closing, the upkeep of the property is on you.
In the first few years of living in a newly built home, you will probably have little to no maintenance issues. But in reality, something will eventually need to be fixed. Whenever problems happen to occur, all of them won’t be major. In that case, you might be able to resolve the issue yourself.
If you’re buying new construction, mechanical and structural items can be repaired or replaced while under warranty. Just bear in mind that it will only last for a set period and will vary per builder. But what if you’re buying a resale property with older appliances and utilities? Then you can negotiate a home warranty to be purchased by the seller.
Contrary to what you may think, a home inspection isn’t only for those buying a resale home. With a newly built home, a government inspector will examine the property after its finished. The shocking truth is that government inspectors only look for the minimum code requirements. This is why many contractors tend to cut corners. As a result, multiple code and safety violations will exist. In conclusion, it’s best to order a home inspection and be safer than sorry.
Cost of Homeowner’s Insurance
New construction homes are built with far more safety features than the average resale home. For that reason, the cost to insure a newer house will be lower than an older home. But you can lower the cost of insurance if you’re buying a resale home. Suppose you’re installing a new home security system in an older pre-existing home. In that case, you could save 2% to 10% on your insurance. Many home insurance companies offer a discount of 20-percent on premiums for resale homes less than ten years old. Last but not least, if you’re a policyholder and have a history of little to no claims, your insurance company may reward you with a 20-percent discount.
Marlon A. Thomas Jr. is a residential Realtor and blogger in Williamsburg, Virginia, and has been living there since he was two. As a Realtor, his job is to act as a personal marketing expert and consultant for buyers and sellers. July of 2015, Marlon was on a family vacation in Miami, Florida. The skyline filled with a vast array of skyscrapers under construction further sparked his interest in real estate. His long-term goal is to become a commercial real estate investor. While also being an avid car lover, Marlon loves to attend drag races and car shows when possible.