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August 31, 2021
Whenever you hear someone say “I’m having a house built” it sounds impressive. Within the same conversation they may also mention some customization that they are planning and may even roll out the design layout of a soon-to-be newly built home.
With that in mind, there’s no question that building a house can be a rewarding experience. But is it always a better option to buying? It’s one of the very first questions decisions a buyer must make, and the answer depends on a few variables ranging from cost to your individual needs and timeframe. Your exact cost of a custom home will depend on factors that include square footage, region, availability, and cost of raw materials to name a few.
Factors to consider when buying an existing home include location, market trends, possible association fees, and the condition of the property. Also, you will need to determine which specific things that you want in an existing property that are non-negotiable and those and that you would like to have but could do without for the time being.
Let’s take a closer look at some components of “build vs buy” to help you determine which option might be right for you.
According to the Motley Fool, the median down payment for a home purchased in early June 2021 was $27,850, though this number can vary from state to state. Furthermore, according to a report by the National Association of Realtors that was released in 2020, the median down payment percentage was 12% of the home’s value. The same report indicated that in 2019, the median down-payment was 12 percent for all buyers, six percent for first-time buyers, and 16 percent for repeat buyers
Closing costs are defined as the average fees and transfer taxes required to close a conventional purchase transaction in a geographical area. There are several different elements to factor into closing costs that are easy to forget to overlook such as appraisal and credit checks. As an example, according to data from ClosingCorp, the average closing cost in Pennsylvania is $9,437.44 after taxes, or approximately 3.15% to 4.72% of the final home sale price.
The home buying process involves a few steps including getting financing, checking out various homes, making offers, home inspections and closing to name a few. However, the convenience of being able to move in quickly is often reason enough for many people to go with buying an existing home over a custom or production build.
The fact that there’s no new construction involved means that buying an existing home is typically a quicker process than building one. Once you are pre-approved by your lender, you do your home search and make an offer.
According to HomeAdvisor, on average, it'll cost $287,466 to build a house, with most homeowners spending between $124,053 and $450,878 to build their new home. New home construction typically falls between $100 and $200 per square foot but custom and luxury options can reach $500 or more per square foot. Labor makes up roughly 40% of the build cost, with permits, design fees, and materials making up the rest.
It’s important to pay close attention to ancillary costs of a build including hooking up to utilities, drainage, or grading, however, in certain situations, it could be less costly to build than to buy.
Although the market is slowly improving, existing-home inventory remains low, and according to April 2021 data from the National Association of Realtors the median existing-home sales price in March rose by a record-breaking annual pace of 17.2% to a historic high of $329,100, with all regions posting double-digit price gains. Additionally, the median existing-single-family home sales price jumped 18.4% to $334,500, both historic highs.
Green appliances and more efficient toilets, plumbing fixtures, and electrical fixtures allow you to build "green" for a more sustainable home. Additionally, you will have the option to install home automation and solar panels. Some people also like the fact that no one will have ever used the bathrooms or trampled across their carpet before!
If you decide to opt for a build, maintain good communication with your builder, and make sure you are happy with the design/specs prior to building commencing. This will save you both time and money.
Given the fact that in some scenarios building a house may make more sense than buying, you may soon be the one proudly rolling out the design specs of your new dream home.