Why buy an existing home versus a new home?
There's no question that some people prefer that "new-home smell' and a bathtub no one else has ever used. On top of that, many people like to personalize their home by picking out everything from the beginning. Typically some buyers focus on new homes because it will require less maintenance. If this is your goal, then a new home might be right for you. Generally the advantages to a new home are obvious, but the advantages to an existing home are less clear, here are some examples:
New Home Value: In most markets, buyers of new homes typically pay a premium to build a new home . This premium varies from market to market. The national average is somewhere in the range of 10-15% more than a comparable existing home. Remember, if you need to sell in the near future you won't be able to recover this money. In many cases, your main competition may be the developer/builder who has built your home.
Financing: Typically the cost of financing is far less on an existing home than on a new build. Typically a construction loan has a higher interest rate while the home is being built. After it is built, the rate will come in line with existing home rates. Also, there is normally a higher closing cost than with a traditional loan. According to the National Home Builders Association, the premium paid for new building on a new home with a value of $250,000 is $18,210 more than an existing home.
Occupancy: An existing home can be purchased and occupied immediately. Typically a new build will take approximately 180-250 days to complete. The owner will be responsible for mortgage payments on the new structure while it is being built in addition to their current housing costs.
Allowances: Construction contracts often establish cash allowances to allocate costs to portions of the work that cannot be specified precisely for competitive bidding at the time of contracting. This is the single biggest dispute between the developer/builder and the purchaser. Make sure the allowances quoted will cover the cost of the items you want.
Upgrades: These are the items that many purchasers want in order to customize the home. According to the National Home Builders Association, the average new home has upgrade costs between 10% and 18% from the base package.
Interior Finishes: According to the National Association of REALTORS, buyers of new 2,000 square foot homes spend an average of $9,700 in personalizing their home. The main items are window treatments and lighting.
Home Exterior: Landscaping, patios and decks are often enhanced by owners within the first 3 years of ownership. These upgrades often are some of the most expensive improvements homeowners make.
Homes are one of the most common forms of investment, and are often the biggest purchase an individual or family will make in their lifetime. Buying a new home offers excitement. Buyers get the home they want with less surprise maintenance. However, when it comes to bang for the buck, resale value, and appreciation, existing homes are far superior investments and there are no hidden or surprise costs.