Building A House Vs Buying: Pros, Cons And Cost Comparison
Victoria Araj5-minute read
January 07, 2022
You’re ready to move into a place to call home, but you’re on the fence between building a house vs buying a house. In a seller’s market, it’s reasonable to consider building your own house, rather than fighting for an existing home. That said, if time is a factor, you may be better off holding out for an existing house.
With so many factors to consider and decisions to be made, we’ve spelled out the key pros and cons to consider before buying or building your new home.
Buying An Existing Home: Pros And Cons
When looking to move into a new home, many consider the option of buying a home first. Of course, there are some advantages and disadvantages when it comes to buying an existing house.
We’ll lay out the facts so that you can come to a decision on what matters most to you.
Pros Of Buying
Here are the pros you should be aware of when buying an existing home:
- Less time waiting for construction: Construction projects will require some time to complete. If you’re in a time crunch, then buying a turnkey home can allow you to move forward quickly.
- Usually cheaper: In general, you’ll likely find it cheaper to buy an existing home. A home loan is less risky than a land loan, and typically comes with a lower down payment and better interest rate.
- More options in developed areas: In some areas, all the suitable lots have already been turned into homes. Buying an existing home can place you in the area you desire.
- Mature landscaping: An existing home will likely have some landscaping, eliminating that expense.
- Home renovation options: You can make upgrades to the home when you have the time and money available.
Cons Of Buying
Of course, there are also drawbacks to buying a home. Consider the following:
- Time and effort: Searching for the right home can be time-consuming. However, working with a good real estate agent can make the process easier and quicker.
- Potential bidding war: Depending on the market, you may have some competition for a house, which could include a stressful bidding war.
- Compromise on floor plan: It can be tough to find a home with the exact floor plan you desire. You may have to make some compromises.
- Maintenance issues: With older appliances, plumbing and electricity, you may run into major maintenance issues sooner rather than later.
- Less energy efficient: Older homes are more likely to be less energy efficient, which can lead to higher energy costs.
Building A New Home: Pros And Cons
As with buying a home, building a home will come with advantages and disadvantages. We’ll lay out the facts so that you can come to a decision on what matters most to you.
Pros Of Building
Here are the pros of building a home:
- Total control: If you have a dream floor plan in mind in a particular location, then building a home will give you the control you’re seeking.
- Customizations: You can make the decisions when building the home, so it will reflect your tastes accordingly.
- No competing buyers: Once you buy the land, you won’t have to deal with any competition for your dream home.
- Less ongoing maintenance: A newer home can mean fewer maintenance costs on the horizon.
- No toxic materials: You won’t have to worry about materials such as asbestos or lead paint in a brand-new home.
- More energy-efficient: Newer homes are built with energy-efficiency in mind. If you are concerned about your environmental impacts, you can make choices throughout the build to prioritize green architecture and sustainability in your home and future.
Cons Of Building
Here are the cons of building a home:
- Riskier loan: Because of the lack of collateral, land loans may be harder to obtain, and they often come with a higher down payment and a higher interest rate to offset the risk to the lender.
- Unexpected costs: Although you may receive an estimate of the costs upfront, it is not usual for unexpected costs to crop up throughout the project.
- More effort: Building a home requires a more hands-on approach. You’ll have to work with a variety of people to create the home of your dreams and make countless decisions along the way.
- More time: Building a home will not happen quickly. It will be a much longer process than simply buying a home and moving in.
- Stress: Depending on the situation, building a home can be more stressful.
- No landscaping: You’ll need to add a new landscape which can be a hefty cost.
- Preparing the land: Not only will you need to find land to build on, but it will also need to be cleared and prepared for building. It may also need extra work to have utilities and a road built to it.
Cost Of Building A House Vs. Buying
In 2020, the median sales price of a new home was $336,900, compared to just $300,200 for existing homes. In 2019, the average cost of construction for a single-family home was $296,652 or $114 per square foot, according to the National Association Of Home Builders. On top of that, you’ll need to pay for land.
Of course, the actual cost could look very different for you depending on your location and the type of build you want to complete. Let’s take a closer look at the costs involved with each option.
Costs Of Buying
If you’re looking to buy a home, there are some costs that will stand out.
- Maintenance of older elements: With older elements in your home, you should expect more maintenance and repairs. Building materials will lose their strength with time.
- Less-efficient major appliances: Older appliances are typically less energy efficient. Plus, you may not have a home warranty for these older items.
- Real estate agent commission: When buying a home, this can be an expense to drive up your total costs.
- HOA fees: An existing home may come with a homeowners association (HOA)
Costs Of Building
The bulk of the cost to build a home are likely tied to the following:
- Building materials: The basic materials you need to build a home will add up quickly.
- Multiple loans: You may need to take out two separate loans to fund the construction of your new home: a construction loan and a land loan.
- New major appliances: You won’t have older appliances to live with for now. Instead, you’ll have to purchase new appliances when you move in.
- Permitting and utilities: It can be expensive to add connections for basic utilities. Plus, the permitting process for new builds can be expensive.
- Excavation: The land you buy may have quality issues such as drainage and foundation issues that can be costly to resolve before building.
The Bottom Line: Should You Build A House Or Buy?
As you move forward, the decision to build or buy a home can be tricky. Since both options have positives and negatives, it will really come down to your unique situation.
Building a home may be the only way to realize your dreams for custom features and unique satisfaction. While you should expect a more expensive process that will require more energy and effort on your part, you can typically expect a higher return on your investment when you sell.
Buying a home can help you move forward quickly, which can come in handy if you are pressed for time. Although you may have to compromise on the perfect floor plan, buying an existing home is usually less time-consuming and less stressful.
Once you decide which option is best for you, take the time to learn more about how to buy a house or build an affordable home. With the right knowledge, you can ensure a smooth process as you move forward with your homeownership goals.
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