You will find pros and cons to both options when you're trying to decide whether to buy a home vs. build a home.
The freedom to create a house that suits your needs and dreams holds undeniable appeal. Being able to comparison shop houses and find one that meets your needs and is already completed may also appeal to you. Both buying a home and building a home can provide the end result you desire.
Your underlying question may be which option will be the best investment in the long run. Owning real estate is an investment either way. Your return on that investment, and the time it takes to realize that return, will depend on several factors. The real estate market in which you build, the type and size of home you build and the level of customization will be among those factors. The biggest, most customized house on the block may not be the easiest to resell.
Advantages of building a home
You can create a custom-designed home that is tailored to your specific desires and needs with new home construction, whether you hire a general contractor, work directly with a builder or build the house yourself. In all three cases, you can hire an architect to design the home of your dreams. New construction allows you to personalize every detail of your home based on what you like, regardless of who does the work. Building your own home could negatively affect your resell, though. This article covers the risks and realities of being an owner-builder in detail, if you have the skills for that option.
Your investment must be built, one way or the other, before you can start evaluating the return on that investment. Building a home will take six months to a year, according to a National Association of Home Builders survey. This survey says speculation homes or "spec homes" are built the fastest (in five to six months). Homes built by owners take the longest (an average of 11 months). Homes built by a contractor on your own land typically take about eight months.
This time allotment is not necessarily a disadvantage of building, unless you need to move quickly. Buying from real estate listings may also take six months or more, even in a buyer's market. Closing on that home typically takes another 30-45 days. So, neither option is likely to happen within a couple of months.
Disadvantages of building a home
Unexpected costs are the main downside to building your own home. The added stress of making decisions about problems that arise may also be a disadvantage. A good contractor or builder will help you make good decisions and find cost-effective solutions to problems.
You also need alternative living arrangements during construction of your new home. Making payments on a construction loan while paying rent or your existing mortgage could be a disadvantage. If your loan to fund building is not a construction-to-permanent loan, you’ll have to pay closing costs twice.
However, you can buy a new home that you didn’t commission and you won’t need a loan while it’s being built. Builders will often pay your home loan closing costs too. The house obviously won’t be as personalized as one you design yourself. You should have the option to choose from various floor plans and features if you commit to buy a house in a new community (which typically means you make a down payment to the builder).
To read more about determining your budget, determining your housing needs and shopping real estate listings, read our free house buying guide here.
Reasons to buy an existing home for sale
Housing hunting allows you to be a critical shopper, learn what home features you like and negotiate price. While searching through real estate listings and visiting homes may seem tedious, it's the only way to become an expert in specific home types and neighborhoods. You may know exactly what you want because you've owned several homes and gone through this process more than once.
Few homes will have every feature you want, so you will need to make certain concessions. Remodeling may be a compromise that costs less that building from scratch. You will also have cause for price negotiations if the house you're buying needs improvements.
Availability is another reason to buy an existing home. It's possible that the neighborhood you desire to live in has no land or lots for new construction. Buying an exising home and razing it may be the only way to build in a popular neighborhood. Unless the property's a real bargain, that strategy will certainly delay the return on your investment.
Being able to take your time and look at your own pace and choosing a moving date tailored to your needs is another perk to buying in the buy home vs. build home debate. If you're not in a hurry, spend a year looking at homes and if you can't find one to suit you, then investigate building.
How a home inspection protects you in either case
You may ensure that there are no unexpected costs when you buy an existing home with a professional home inspection. Likewise, it is highly recommended that you get a final inspection when you build a home (even if you have paid for two others during the process).
Newness doesn't guarantee perfection. In fact, new homes typically have a few issues with "finish work" done after the final inspection. This article gives a list of problems, both major and minor, to look for before you take possession of your new home. It also reminds you to read your home warranty thoroughly so you know how long you have to ask for fixes.
When deciding whether to buy a home vs. build a home, getting construction estimates and real estate comparison prices are key to making an informed decision. Reply! provides free real estate listings in your area which you may use to look at home prices.