It’s time to think about packing up your belongings and moving into your dream home. But what is your dream home? Is it a remodeled existing house, or something you build from scratch? Does a new construction meet your needs and your budget? Do you know off the top of your head if it’s cheaper to build or buy a house?
You’ll want to maximize the features and space you’re going to get for what you’re spending, so that six months from move-in, you’re not regretting your decision. So let’s break down what you’ll pay with self-built, new construction, and existing homes, so you can narrow down your search enough to have a great real estate agent take you the rest of the way to your dream home.
Source: (KimSongsak / ShutterStock)Self-built homes
There are build-your-own-house programs that can make this cheaper, or you can use shipping containers or tiny homes, so you have a lot more flexibility with price here — to a point. You may also encounter surprises (some unpleasant) when it comes to budget and timelines.
HomeLight’s own experts have determined you can build your own home for anywhere from $16,000 and $350,000, depending on various factors including square footage, energy efficiency, and the level of DIY.
If you’re thinking of building your own home, Ben Marciano, seasoned contractor and owner of A-List Builders, has some sound advice.
“In general, it is totally possible to build your dream home, but it’s critical to work within your budget, and be realistic about it, to make it happen. Understanding how to measure for materials is key, in addition to understanding the skeleton of your home for remodels that aren’t just skin-deep.”
Pros of building your own home
There are several pros to building your own home as opposed to buying one that was constructed to someone else’s specifications.
You can customize the house to your exact desires. You can ensure the primary bedroom has that giant jetted tub you always dreamed of, or that your living room has the reading nook you want. Whatever you desire, you can ensure your custom-built home has it.
They can cost less to live in. New construction tends to be more energy-efficient, and you won’t be heating or cooling any unnecessary or unused spaces.
They can cost less to maintain because everything is new. All new fixtures and appliances means you have a while before anything needs repair.
You’re not paying for any features or amenities some other homeowner wanted. Every amenity or feature is one that you carefully selected and prioritized, and therefore is worth your investment while you live there.
There’s no competition from other buyers to get the house you want. Building your own home means there is no risk you’ll be outbid by another buyer.
It’s new, and you’re the first to own it! Who doesn’t love the fact everything is pristine and perfect?
Cons of building your own home
It is more expensive than buying an existing home. Buying an existing home will nearly always be cheaper than building a new home.
You’ll have to handle every little expense, and it can get pricey fast. Some of the factors you’ll need to consider are land costs, foundations, permitting, systems (HVAC, plumbing, electrical), appliances, finishing, roofing, fixtures, and so much more. For an idea of what these costs can look like, check the helpful chart at the bottom of this article.
As Marciano warns homebuyers, “Materials and finishes truly rack up your budget. People underestimate just how much cabinetry they require, how many tiles, how much flooring materials, and so on.
“Be sure to calculate the measurements of your space, and give yourself wiggle room when ordering your materials. Order a bit extra — always. Mistakes in cabinetry measurements can often be the most costly, for example.”
If you are able to find and qualify for a build-your-own-house program, you may have a bit more leeway, budget-wise.
Trends might fade more quickly than you think, leaving you with a dated house that is hard to sell.
You don’t have a lot of options for negotiating on price here, but you can make decisions upfront that can help you dial in the cost. Decisions like where to build and how much help to leverage can have a huge impact on the price tag for your self-built home.
Source: (Jamar Penny / Unsplash)New construction
In 2019, the average cost of 2,600-ish square feet of new construction was $485,128, according to the National Association of Home Builders.
While the final cost per square foot will depend on several factors, including location, house size, and customization, you do have some control over many of those factors, which means your new construction home could be well above or well below that number.
Pros of buying new construction
Buying new construction offers many of the same pros as building your own house but is much more convenient. Your options for customizations will be more limited, but you can still choose from different floor plans and finishes.
A developer will manage hooking you into the sewer system and electrical grids. Given how time-consuming and expensive this can be when building your own home, this is a major plus.
Lower lot costs are common with new construction managed by a developer.
Andrew Dellavecchia, a single-family-home expert in the Pittsburgh area who recently purchased a new construction home himself, offers firsthand insights.
“If you go with a developer or builder in the neighborhood setting, your lot cost is very inexpensive because they tie in the cost of your lot to the build so they can make it a lot more affordable, and you’re not paying for tap-ins or land development.
“The builder takes all that cost off of you so you can focus on putting the money that you want to spend in the square footage, the fixtures, the finishes, and things like that.”
New construction homes often have warranties for the systems, and those will cover many big issues for the first 10 years you own the house. If you’re unlucky or just put a lot of wear-and-tear on the systems, this can lead to big savings on repair bills.
Chosen wisely: New construction homes can hold their value or even increase in value after you buy, making them a good real estate investment option.
Cons of buying new construction
In many ways, buying new construction will mean a house that’s less customizable than building your own house. You won’t have complete customization abilities with a new construction home, as the developer will be working on a tighter schedule.
Generally, it’s hard to negotiate on price with new construction. Developers have a certain price they need to sell the home at in order to make a profit (on average, the builder’s profit is just 9.1% of the sales price) and are less likely to give up that margin.
There might be construction happening around you for some time after you move in! Just because your home is move-in-ready doesn’t necessarily mean the entire development is, so you might be dealing with ongoing construction for a bit.
You’ll pay extra for premium upgrades to finishes or appliances. While upgrades always cost money, expect to pay more than you would on the open market.
There might be other fees that you need to pay while you own the house. Homeowners association (HOA) fees are a good example of ongoing fees, so keep them in mind when determining your budget.
Source: (Dillon Kydd / Unsplash)Existing homes
The median cost for an existing home was $309,800 in December 2020, according to the National Association of Realtors, which is less than the cost of a new construction. If you’re very budget-conscious, an existing home can be a good option, but there are other potential drawbacks you’ll want to consider.
Pros of buying an existing home
It’s the fastest way to get your foot in the door of homeownership. An existing home is already built, which means you aren’t waiting months to move in while you work with architects and builders and zoning regulators and so on.
The landscaping looks better. The trees and landscaping are likely to look nicer than with a newer home because the plants have had a chance to grow and settle into the design.
It’s easier to optimize for a better buyers market by choosing to purchase when everyone else is waiting for spring.
As Dellavecchia clarifies, “In a seller’s market, as it’s been here for about four years now, the opportunity to get a better deal is in the fall and winter on buying, but most buyers don’t realize that and like to wait for the spring market.” You won’t always have that option when you’re buying new construction, and when building a house, you’ll also be constrained by the climate and weather in your area when it comes to hiring contract workers to help.
Cons of buying an existing home
It might need repairs sooner. Because other people have been putting wear and tear on the home, you may need to repair parts of it sooner than you would with a new construction.
You’ll have to renovate or upgrade to make it what you want, and even when you do, it might not be exactly what you want depending on the floorplan, size, and other variables.
Marciano elaborates: “One major contender in navigating your home remodel is understanding if what you want is structurally possible. Usually, it can be, but if you’re doing this solo, then you run the risk of wanting what seems to you as a cosmetic change but may actually be a significant structural change to your home.”
“An example would be when homeowners come to a contractor and want to ‘open up their kitchen,’ not realizing that the wall making it a “closed” kitchen is a supporting wall for other parts of their house. This could result in going well over budget and cause delays in work if realized too late.”
It will likely be less energy-efficient than a new home as many of the regulations, and best practices of energy efficiency are improving every year.
So what should I do?
While it is almost always cheaper to buy a house that’s already been built, there can be ways to minimize your spend and ensure you end up in your dream home without blowing your budget.
Finding a great real estate agent who understands your needs and budget is a critical step to making your dream home happen, whether it’s already been built or needs to be constructed from the ground up.
Average costs for: Self-built New construction Existing home Land & site work $3,000 – $150,000 $3,000 – $150,000 With an existing home, these have already been covered by the original homeowner and you only need to worry about the sticker price + the cost of any adjustments you may want to make. + Connecting to city sewers The cost of these will depend on how much you want to DIY vs hire contractors to help. $1,300 – $5,000 + Connecting to city electric grid $1,000 – $30,000 + Connecting to city water lines $1,000 – $5,000 Foundation $4,000 – $25,000 + Slab costs $4,000 – $7,000 + Basement (not including finishing) $10,000 – $30,000 Framing $20,000 – $50,000 Exterior finishing costs $40,000 – $60,000 + Roofing installation $5,000 – $11,000 + Windows $3,000 – $9,000 + Exterior painting $2,000 – $4,0000 Major systems – Electrical wiring $20,000 – $30,000 – HVAC costs $1,500 – $13,000 – Rough-in plumbing costs $1,500 – $20,000 Interior finishes $50,000 – $175,000+ – Cabinet install fees $2,000 – $30,000 – Countertop installation costs $2,000 – $4,000 – Door installation costs (multiple doors) $5,000 – $20,000 – Drywall installation prices $5,000 – $30,000 – Flooring install price $10,000 – $35,000 – Interior painting prices $4,000 – $11,000 – Appliance prices $3,000 – $15,000 – Lighting fixture costs $2,000 – $12,000 – Fireplace installation fees $1,000 – $10,000 Median post-purchase adjustments $0 $0 $346,800
Sources: HomeAdvisor 2021 “How Much Does It Cost to Build a House?” and St. Louis Federal Reserve Q4 2020 median home price
Header Image Source: (sculpies / ShutterStock)
#HouseHunting #NewConstructions #Buyers