Sunday, November 8, 2020

To Buy Or To Build... That Is The Question

Everybody needs a place to live. Some are happy renting and other people want a home that they own. If your preference leans toward ownership, and you have the financial resources, you have the choice of purchasing an existing property or having one built to your specifications.

Price Is Just The Beginning

Dave Ramsey tells us that last year the average cost of new construction was around $485,000 while the average price of an existing house was in the neighborhood of $309,000. Prices may be higher or lower in your area but there is still a sizeable gap between new and existing housing. New semi-custom tract houses save some money over full custom builds, but they are still around $50,000 higher than an existing residence.

What Do Your Dollars Buy You?

The big draw for many who chose to build is the ability to have a home just the way they want it with the newest materials and the fashionable colors with the perfect room layout. These things are important and they are what makes the place yours. However there is also some real value in things you don't see as well. Beneath the shiny new surfaces you will find some of the latest in home comfort systems. They are usually longer lasting with higher efficiency ratings. Beyond that, they are new with warranties and their full functioning life spans ahead of them.

While you usually won't be able to bargain about the price, there is often the possibility of asking for concessions from the builder like material upgrades or an extra feature or two.

Sounds Great! What's The Downside?

Other than the extra truck load of cash, what else do you have to think about? The most obvious is the time element. Building a new house takes months, not weeks. There are materials delays and weather delays. One summer when I was in college I worked on a masonry crew. I must say I was never in better physical shape in my life. However when we ran into a rainy spell, we only worked half the time. Brick layers sitting in their trucks watching the raindrops fall don't get the job done quickly. If you are in the northern part of the country and you don't get the job done before winter sets in, you could have several months delay. My dad worked for a masonry contractor and spent his winters doing odd jobs as a handy man since the regular outdoor work came to a halt.

If there are delays or interruptions in the materials supply, the builders costs, and your price, escalate, as we have seen with lumber prices through the Chinese flu fiasco. Sometimes this, or other financial reverses stretch the builder's finances beyond their capacity to survive. It is not unusual for some builders to have operated under several corporate entities as circumstances got out of hand for them. This is not to say don't build, but to strongly suggest you look at the financial stability of the builder.

If you are one of the first building in a new development be aware you may have to deal with the mud and the noise of construction equipment all around you. Here again, the buider's stability is important but so are the vagaries of economic fluctuations. During the 2008 debacle I was in the Richmond VA area and there were several new communities with roads laid out and a few homes, besides the sample ready for their home owners. When the financing dried up, construction stopped and the a those who moved in their almost million dollar homes were living in a ghost town with a few house started and abandoned. Where there is an opportunity, someone would come around and pick up the pieces eventually.

Then there is the punchlist. The very existence indicates that there will be bugs in the new home. Reputable builders handle this list of fixes in a timely manner. Here is where talking with their previous buyers is important to your peace of mind and happiness with your purchase.

What About An Existing House

With an existing house you can pretty much see what you are getting and you don't have to wait months to move in, unless there are issue with the seller. You will see the property and the price. If you don't like the price you can feel free make another offer. The seller doesn't have to accept, but often there is room for bargaining unless you are in a strong sellers market.

Whether you knock them down a few thousand dollars or not, you are still paying much less than a new property so there is some space to make the place to your liking. You can, and most assuredly should, have a thorough inspection to be sure you are not walking in to a money pit. If the appliances and HVAC systems work but appear to be on their last legs you can ask the seller to purchase a warranty so you don't get any expensive surprises in the first year or two.

Of course inspectors sometimes miss flaws, but they are few and far between as most have a fetish about pointing out everything that could possibly go wrong and then some. If you are happy with the place as it is presented, it could be a worthwhile purchase..

You will have saved plenty of money to update some of the technology and correct some of the updates from the previous owner to make the place yours.

Pay Your Money and Make Your Choice

Either new or previous construction can meet your needs nicely. Pay attention as you are shopping and either choice can be the right one. Just be aware of the pluses and minuses of each selection and factor them into your expectations and you won't be disappointed.

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