That letter you received from your loan officer, you know the one I’m referring to, it says you’re approved to buy a home and lays out some basic loan terms. Yeah, it’s probably created some motivation to get out there and do some house hunting!
Now it comes down to deciding what type of home to buy. Are you going condo or townhome? Maybe you want a single family detached home with a big yard! How about an existing home vs new construction?
One big benefit of a brand-new home is that it gives you the ability to put your own personal touch on your home! While we know that an older home can be remodeled to suit your lifestyle and tastes, it requires time and money.
If you like the idea of being part of the decisions that go into building a home from the ground up, new construction may be the right direction!
Keep in mind, however, that there can be delays, so if you’re easily frustrated or on a tight timeline to move-in, you might consider an existing home.
When you buy a new home, you’ll definitely pay a premium for it compared to similar existing homes on the market for resale, just like you do if you buy a new refrigerator for example, versus a “scratch & dent.”
Over this past year, we are seeing that new homes nationally sold for close to 30% more than existing homes, according to Prashant Gopal at Bloomberg.com.
What are buyer preferences related to new vs existing homes and how do they compare with yours? In a 2018 National Association of Homebuilders poll, just over 30 percent of the homebuyers surveyed said they prefer new homes, while 46 percent said they prefer to purchase an existing home.
What’s telling though is that when a Harris poll asked those who prefer new homes if they were willing to pay a new construction premium, most respondents said they were not.
So make sure you decide if paying a premium on a new home is in your budget and whether or not you’re willing to pay it.
How about ongoing costs to own a new home? That is the good news as the cost of home ownership are typically lower in a new home, at least for the first four years of ownership. This according to the American Housing Survey from the U.S. Census Bureau. Why? The owner of a new home most likely won’t be faced with unexpected repairs and maintenance costs will be minor.
“In fact, 73 percent of new homeowners spent less than $25 a month on routine maintenance costs,” suggests Peter Bennett at MyBankTracker.com.
New construction homes will simply have more energy efficient features, which is another long-term money saving aspect of choosing new over an existing home.
Finally, many builders offer incentives when the buyer agrees to use their preferred lender. Incentives may include a significant closing cost credit or points paid on the loan, further bringing down the new home premium. I’ve seen recent inventive programs as much as $15,000 on a new home that can be used for more upgrades, closing costs, etc…
When weighing the pros and cons of buying new construction, using a builder’s preferred lender along with their advertised incentive programs, make sure you crunch all the numbers before making your decision.
Location, Location, Location
Sure, it’s the most well-know mantra in real estate, but location is the most important consideration when shopping for a home.
The reality is that location determines whether a home will hold its value and how well it will appreciate over time. Homes in the highest rated school districts, for instance, hold their value better than those located in areas with less desirable schools.
With existing homes, what you see is what you get when it comes to the neighborhood. You can tour the community and get a feel for the type of neighbors you’ll have if you choose to purchase there. Believe me, how well they maintain their homes will either help or hinder the area’s home values.
If you have children and you buy in a new home community, you really have no way of knowing if other families will be drawn to that same neighborhood, providing playmates for your kids.
In new home communities, especially in brand new neighborhoods where sales are yet few and far between, the neighborhood is a wildcard. Only when all the homes are sold will you know what type of neighborhood you have on your hands. That however could take years to accomplish.
In many cases, new neighborhoods are located on the outskirts of town, while established ones frequently are located nearer to community centers or hubs closer to shopping, dining, and all the amenities an area has to offer.
It’s a matter of taste
The decision between buying a well maintained existing home versus a new home may just come down to whether your lifestyle includes doing a little walking in neighborhood “greenspace” versus a short trip to the movies and to dinner at one of your favorite downtown restaurants. If you want more space and openness to your surroundings or do you want to live in an established urban environment closer to the conveniences of life.
Should you decide to go the new construction route in your home purchase, go into the process with representation. Make no mistake – the builder’s real estate agent represents the builder’s best interests just as much as a salesperson at a car dealership is looking out for the dealer’s best interests, and not yours.
Although it may seem easier to use the same agent, it isn’t wise. Feel free to reach out – we’re always available to answer questions.