You've made strides in your career and your personal life, and you now consider yourself established. So, it's high time you owned a home, and made that American dream a reality.
And now you're faced with the option of building your own home from scratch or perusing the inventory of existing homes in your desired area. Obviously, either buying or building will get you into a house, but they are two very different paths with different issues that need attention. Consider this as a guide when weighing your options.
buying
Buying a home can be as simple as picking up your local real estate book, contacting the realtor listed with the property and having your reasonable offer accepted. In a perfect world, this would be the norm. But, there is actually much more to consider when purchasing a previously owned home.Pros
The two biggest advantages of buying an existing home are convenience and cost. If your offer is accepted on an existing home, you can likely close and be living in your new home 30-45 days from the time of purchase. Existing homes are often in mature neighborhoods and frequently are not part of a larger home-owner’s group. While there are certainly some drawbacks to being independent, you will not be subject to the rules of the association or their monthly fees and assessments, which always seem to come at the worst times. The established neighborhood principle also has advantages when it comes to things like landscaping, which is often complete and mature, versus a new home that may require additional expense to fill out the yard.Financially, you will likely find better value for your dollar in an existing home as the environment is more conducive to negotiate the price down, especially since it is not "exactly" what you want. Appliances and fixtures are often included in the price rather than subject to additional charges. An existing home, especially older buildings, may also demonstrate superior craftsmanship and material versus new homes, which are often built by developers en masse at the lowest possible price per unit.
Cons
The most common drawback to buying an existing home is that it is likely not going to be exactly what you want. Since the home has already been built, you may have to deal with a floor plan that doesn't match your exact needs. Existing homes, by definition, have been around longer -- some for decades. While this longevity can have its charm, it also comes with its own set of issues. For instance, existing homes are often in need of some maintenance or renovations not only to get them up to your standards, but just to make them livable.Recently, with the well-publicized foreclosure fallout, while buyers are getting what appear to be bargains many of the homes are often in disrepair in some form as the previous owners just did not have the ability to keep them up. The renovations you would like to do or need to do can quickly add up and since these projects are not part of the purchase price you may end up having to take on more debt, often at a higher interest rate. Existing homes, because of their age, obviously are not equipped with the most modern amenities and wiring specifications. It is because of this that older homes tend to be less energy efficient, so while you may not be paying any home-owner’s fees on a monthly basis, that may be offset by higher energy and utility costs.
When making your decision about buying vs. building, don't rule out building too quickly: Building your own home has the potential to be easier than ever, particularly with so many developers offering a predefined set of floor plans and options. Building your own home gives you the flexibility to have things just the way you would like. But even with the added conveniences of a developer, there are some drawbacks as well.
Pros
Building your dream house offers tremendous sentimental value and advantages in the long run. When you build a home, you can have everything your way from the carpet in the den to the cabinets in the kitchen and everything in between, both structurally and design-wise. There are definitive feelings of emotional fulfillment and pride in a house that has become “your baby.” Also, having everything brand-new and up-to-date is a tremendous advantage when you build instead of buying an existing home. For instance, all the appliances will be brand-new and likely under original warranty. Furthermore, the construction materials and building code will be up to the latest safety standards. Modern society also is reflected in a newly built home: Everything from wiring for high-speed internet to the latest in spatial, acoustics and architectural trends can be added without much trouble.Additionally, the advantages are not just limited to your property. If you are building a new home in a new neighborhood, you will often find these developments to feature recreational facilities, community lawn maintenance and location closer to the newer parts of town (read: better shopping, newer schools, etc.). Kevin Daum, CEO of Stratford Financial Services, also cites some added tax and financial benefits, such as being able to deduct the interest, points and property taxes paid along the way. Daum says, “Done right, there can be significant profit in building as well; otherwise spec builders wouldn't be doing it.”
Cons
Speak with anyone that has built their own home and most have horror stories about the project taking too long or exceeding cost expectations. Whether it is inclement weather, problems with obtaining the proper materials, delayed inspections or an overstretched general contractor, building your home from the ground up can come with significant delays. Developers will typically quote six to seven months to build a home from one of their existing floor plans. To be safe, plan for an additional two to three months of time before you want to actually move in. Apart from being frustrating, it may also put you in a financial bind as you find yourself getting hit twice with the mortgage or rent on your current residence and the same on the home you are building. Some families find it to be a race against time and their bank accounts while performing double duty.Also, being in a new development has its advantages, as discussed above, but those advantages come with a price. Certainly, there are additional homeowner fees or assessments in a development to add to your monthly nut, but especially if your neighborhood is brand new, you may find yourself living among the noise of construction of other homes and loud trucks -- not to mention a parade of prospective home owners. Cost is also a huge factor as it is almost always more expensive per square foot to build your home than it is to buy an existing home. New fixtures and upgrades can really add up, especially if you are looking to decorate your home just like the development’s models. The personal time commitment can also be draining to your emotions and your schedule. Consider the meetings with the developer and sifting through the catalog of fixtures and upgrades to find just the right balance. Finally, even though you are building your own home, you may be restricted to the floor plans offered by the developer. You can easily find the right neighborhood, as well as a lack of attractive floor plans that meet your expectations.
find your dream home
The decision to build or buy is not an easy one and each has its own set of advantages and problems that need to be carefully weighed against one other. If this is your first time around, there will be discomfort in any path you choose and there is really no right choice that suits everyone. In making your decision, consider things such as your financial situation, job security, long-term plans for being in the area, and your sanity. Owning a home is a great experience, but it is also an extremely taxing event in your life and you need to be prepared for what lies ahead. Look into both options and take the path that is best suited for you.Resources:
http://www.realestate.com/tipsandtools/Build-vs-Buy/Deciding-Between-New-Construction-and-Existing-Homes.aspx
www.bizjournals.com
http://en.allexperts.com
www.allbusiness.com
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