Contributed by cPort Federal Credit Union
When people decide they want to own a house, they sometimes consider building a new one. In fact, building a home does have advantages, but so does buying an existing home. And both options have disadvantages as well. Time and money are significant factors. In Maine, the average cost to build a home is nearly $552,000, while buying an existing house can be less expensive, at an average of $375,000. Building a house takes at least a year, and usually much longer. So, looking at the pros and cons of each option is essential before making the decision.
When people decide they want to own a house, they sometimes consider building a new one. In fact, building a home does have advantages, but so does buying an existing home. And both options have disadvantages as well. Time and money are significant factors. In Maine, the average cost to build a home is nearly $552,000, while buying an existing house can be less expensive, at an average of $375,000. Building a house takes at least a year, and usually much longer. So, looking at the pros and cons of each option is essential before making the decision.
When you build a house, almost everything can be customized and suit the buyer’s needs. The property’s location can be handpicked, and can include a large garden or outdoor space for children to play. Additionally, the layout and all the fixtures can be tailored to closely suit the new property owner’s needs and tastes. For example, some people want a cook’s kitchen, large walk-in closets, a finished room in the basement, or a high level of energy efficiency. Because the house is new, there should be no worrying about remodeling or maintenance costs for many years.
On the other hand, building a home can pose problems. Interest rates could well fluctuate while the house is being built, before the buyer can lock in a rate. If the rates increase substantially, this could add hundreds of unanticipated dollars to the monthly mortgage payment. If the rate goes too high, there is even a chance that the buyer will no longer qualify for loans for the home they are already building. Also, material and labor costs can fluctuate. For example, a builder may give an estimate of $15,000 to design the kitchen, but by the time the project is finished, the total bill could end up being much higher and might need to be paid out of pocket. The buyer also must manage the project, which means constantly checking in with the builder, and this takes a great deal of time.
Buying an existing house offers some advantages. A real estate agent can help navigate the buying process and can advocate for the buyer, and this partnership can particularly help a first-time home buyer who might otherwise feel overwhelmed. The agent and buyer work together to keep an eye out for the right property, and when it becomes available, they can move quickly to make an offer and enter into negotiations. The real estate agent can help the buyer compare the price of the home with other existing homes in the area to get the best price possible. And after closing the sale, the new buyer can move in quickly, and may be able to time this with the end of their current lease, rather than waiting for months or even years while a house is built. A buyer can purchase a home with plans to redo part of it, either in the near or distant future. Knowing ahead of time what items will be rebuilt can make managing costs easier.
So what are the downsides to buying an existing home? One is that the buyer may only get some of the things that are on their wishlist, or need to make upgrades after the purchase. And older appliances and other features could mean higher maintenance costs. For example, the buyer might move in and immediately need to replace the hot water heater or get a new stove because the older one isn’t working correctly. These unexpected costs can be a pricey surprise, and sometimes there is a wait to find a contractor available to complete the work. Many homeowners pay for updates with savings, but some loan options could help new homeowners. When buying an existing house, an inspection is a must – to minimize possible surprises after the sale is concluded.
When deciding between building and buying a home, consider these pros and cons, and think about time and budget constraints, the importance of customization, and the potential for costs associated with remodeling or maintenance after moving in.
