To Buy an Existing Home or a New Build? The Pros and Cons of Each.

To Buy an Existing Home or a New Build?
The Pros and Cons of Each.

If you’re shopping the market for a home, one of the first decisions you’ll make is whether to buy an existing home or purchase a new build. Each option has its own respective pros and cons that should be considered before you make an offer on a dwelling. In this article, we'll dive into the key advantages and disadvantages of each to help you make a homebuying decision that works best for your style, needs, priorities, and budget.

For purposes of this article, an existing home is a home that has previously been owned and is currently for sale, typically by the owner. A new build is a home that has recently been built and was not previously owned by anyone other than the contractor or the entity that financed the construction. Examples include spec and model homes. Often, builders develop housing based on the speculation (hence, “spec” home) that they will easily sell. Depending on the builder/contractor, there may be an inventory of such homes available for immediate sale. In addition, many builders sell their model homes when they are done showcasing them to the public.

Pros of Purchasing an Existing Home

• Less Expensive
  Purchasing an existing home could save you tens of thousands of dollars as compared to a new build. According to homeguide.com, the average cost of an existing home ranges from $410,000 to $536,000, while the average cost of a new home ranges from $487,000 to $645,000. Keep in mind, those ranges could vary by market.
• More Negotiating Power
  An individual seller is more likely to negotiate on the asking price of a home because they can be motivated to sell quickly due to various life events. This creates the potential opportunity to get an even better deal on an existing home than you would on a new build.
  
• Established Neighborhoods
  Existing homes are more likely to be in established neighborhoods with mature trees and landscaping. They may also come with a greater sense of community due to: long-time residents; completed amenities such as pools, parks, and fitness centers; and adequate, nearby retail establishments. These features may take years to evolve in a new area that is in development.
  
• Unique Character
  Purchasing an existing home, especially one that is several decades old, provides the opportunity to enjoy the unique architectural and character traits of now popular, historical housing styles that you may not find in a new build. Examples include true Colonial Revival, Cape Cod, Craftsman or Modernistic styles from decades past that were influenced by the trends and leading architects of their time.
  

Cons of Purchasing an Existing Home

• Renovations May Be Needed
  An existing home’s style could have character, but also be outdated and require home improvement projects to make it more livable. Depending on the type of work that needs to be done, the costs can really add up. For example, kitchen remodels can range from $64,000 to more than $125,000 and up. Bathroom renovations typically cost between $20,000 and $67,000 but if you have a vision, and a budget, the sky is the limit. Factor in all the renovations, and get ballpark pricing, when considering an existing home.
  
• Structural and Technical Replacements Could Be Necessary
  Be aware of any structural or technical issues that may require costly repairs or replacement. Examples include issues with the home’s electrical wiring or plumbing; health and safety concerns like mold and radon; if additions/updates such as basement finishes were made following legal codes; and if the major components of the home, such as the roof, windows, or HVAC system, are in good health or aging. These issues are often discovered during the home inspection so do not waive a home inspection if you plan to purchase an existing home.
• Less Energy Efficient
  Depending on when the home was built, it could contain older insulation, windows, and HVAC systems that are less energy efficient than those in a new home. This will likely lead to high energy bills unless costly upgrades are made to improve efficiency. Add a column and calculate these potential costs, too.

Pros of Purchasing a New Build

• No Updates or Maintenance Needed
  The beauty of purchasing a new build is that everything is new, and you’ll have peace of mind knowing you won’t have to do any maintenance or make any major upgrades any time soon. This includes things like painting, replacing windows, the roof, HVAC systems, and appliances (if they are new, too).
  
• Warranty Coverage
  Many builders offer warranty coverage on important parts of the home, including the structure (foundation, roof, load bearing walls), systems (electrical, plumbing, HVAC), materials (concrete floors, windows, door trim, drywall, paint), and workmanship. The length of the warranties ranges from one to 10 years, depending on the component. If it’s not clear, ask the builder! 
• Meets Current Energy Efficiency Standards
  While new builds might cost more, it will likely be more energy efficient than an existing home because builders now strive to meet ENERGY STAR certification requirements. It is estimated that ENERGY STAR certified homes can save approximately $450 per year on energy bills, savings that adds up over time.

Cons of Purchasing a New Build

• More Expensive
  The average cost of a new home ranges from $487,000 to $645,000, which typically makes it more expensive to purchase than an existing home. The price of the lot/land, permits, multiple inspections, upgrades, planting trees and landscaping, materials, and even window treatments all contribute to the higher cost.
  
• Less Negotiating Power
  Builders are typically firm on their price, as opposed to private sellers of existing homes, especially when they have low inventory. They may be more willing to negotiate when they have unsold inventory or need to meet a quota. Timing is everything so if you have time, waiting for the market to soften may work in your favor.
  
• Construction Mess
  Constructions sites are loud, messy, and require a bit of patience. For the most part, new homes are built in new developments where the construction process may be ongoing. This means equipment, workers, and all the noise and dust they create could be around your home for some time.
  
• Unestablished Neighborhoods
  Because new builds are usually located in new neighborhoods, you are less likely to immediately enjoy things like mature trees and landscaping, parks, swimming pools or other amenities. Also, there could be fewer retail establishments and restaurants near your new neighborhood if nearby shopping and dining is important for your lifestyle.
  

Hopefully, this illustrates the factors to consider when deciding whether to purchase an existing home or new build. It all comes down to which option best meets your needs, priorities, and budge—and quite possibly, your personal style and taste. Regardless of which home you choose, an FNBO Mortgage Loan Officer will offer expert advice and help you understand your borrowing options.