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As the real estate market continues to heat up, many potential buyers are looking for alternatives to buying existing homes due to the insane increase in home prices over the last few years. Building a house from scratch is an option that many are considering, but is it a better choice than buying an existing home? As a real estate agent, it’s important to understand the advantages and disadvantages of each option in order to better assist clients in making an informed decision. In this blog post, we’ll compare the pros and cons of building a home vs. buying an existing one.

First, let’s look at the cost. As a rule of thumb, building your own home is generally more expensive than buying an existing one. According to the most recent data available from the National Association of Home Builders and the U.S. Census Bureau, the median cost of new construction was $449,000 in May 2022, while the median cost to buy an existing home was $414,200. This means that building a new home costs $34,000 more, on average, than purchasing an existing home. However, there are many variables that can affect the cost, so this isn’t a hard and fast rule.

As the real estate market continues to heat up, many potential buyers are looking for alternatives to buying existing homes due to the insane increase in home prices over the last few years. Building a house from scratch is an option that many are considering, but is it a better choice than buying an existing home? As a real estate agent, it’s important to understand the advantages and disadvantages of each option in order to better assist clients in making an informed decision. In this blog post, we’ll compare the pros and cons of building a home vs. buying an existing one.

First, let’s look at the cost. As a rule of thumb, building your own home is generally more expensive than buying an existing one. According to the most recent data available from the National Association of Home Builders and the U.S. Census Bureau, the median cost of new construction was $449,000 in May 2022, while the median cost to buy an existing home was $414,200. This means that building a new home costs $34,000 more, on average, than purchasing an existing home. However, there are many variables that can affect the cost, so this isn’t a hard and fast rule.

Advantages of Buying a Home

1. If you’re looking to move into a home that is completely finished and ready to occupy, buying an existing home is your best choice. You’ll know exactly what you’re buying and there won’t be any surprises.
2. Your agent can help you with the price negotiation, paperwork, inspection and repair negotiations, and more. The best part is that the seller pays for your agent’s commission, unless you’re working with a private seller. And in many cases, even private sellers are willing to pay the buyer’s agent’s commission.
3. Financing an existing home purchase is typically straightforward and takes only a single-close mortgage loan. Overall, purchasing an existing home is a straightforward and quick process.

Disadvantages of Buying a Home

1. Unfortunately, sometimes your dream home might not be up for sale and you might have to compromise a lot on what you can or cannot have. Renovation is an option in some cases, however, it can be expensive and time-consuming, so don’t forget to factor that into your purchase price if you decide on a home that needs work. Also, unless you need to move to a different location, renovating your current home may sometimes be a better option than buying.
2. Home prices can vary greatly based on location, size, and condition. When purchasing an existing home, you may have to incur home inspection fees and loan closing costs that can range from 2% to 5% of the home’s purchase price based on the type of loan and your lender. Down payments on home purchases can be hefty and need to be taken into account when calculating how much home you can afford.

Advantages of Building a House

1. Complete Customization: Building your own home allows you to make every decision according to your preferences. From floorplans to paint colors, fixtures, and cabinets, you have the freedom to create your dream home from the ground up.
2. Warranty Coverage: Many components of a newly built home, such as the roof, HVAC system, and appliances, come with warranties that can last for several years. This can help reduce maintenance costs and give you peace of mind.
3. Energy Efficiency: Newer homes are built with energy-efficient materials that can save you money on utility bills down the road.
4. Safer Materials: The latest building codes are designed to prevent homeowners from dealing with hazardous materials such as lead-based paint, mold, and asbestos.
5. Cost Savings: If you have the time and skills, you can do some of the construction work yourself and save money on labor costs. However, it is important to ensure that everything you build meets building codes, and that you do not attempt to do work that is beyond your abilities. You don’t want to find yourself in a situation where you have built something with a code violation, which could lead to costly repairs and affect the resale value of your home.

Disadvantages of Building a House

1. Finding Land: You will need to find a piece of land that meets your specific requirements regarding size, location, and cost.
2. Time-Consuming: Building a home from scratch takes a lot of time. According to the U.S. Census Bureau, the average completion time is seven months, and bad weather or other unforeseen issues can sometimes cause significant delays. Therefore, it is advisable to build in a 5% or 10% contingency to take care of unexpected building costs.
3. Paying for Two Homes: You will need to maintain another home throughout the building process, which adds to the upfront costs associated with building a home.
4. Upfront Costs: The costs associated with building a home are higher upfront. Instead of a conventional home loan, you will need loans to purchase the land and fund the construction of your home. However, many banks now offer single-close construction loans that can help simplify the process.

So, which option should you choose?

It really depends on your unique circumstances, preferences, and goals.

If you’re looking for a quick and straightforward solution, buying an existing home may be the right choice for you. It’s usually easier to finance, and you can move in right away without having to worry about construction delays or maintenance costs.

On the other hand, if you have a specific vision for your dream home and you’re willing to invest the time and money to make it a reality, building a house might be the perfect fit for you. You’ll have complete control over the design and finishes, and you’ll know that everything is brand new and up-to-date.

And if you’re somewhere in between, a new community might offer the best of both worlds. You’ll get the opportunity to customize your home while still having the support and guidance of an established builder and community.

In conclusion, whether you decide to buy an existing home or build your own, it’s important to work with a knowledgeable and experienced real estate agent who can guide you through the process and help you make informed decisions.

As a licensed and professional real estate agent, I can provide you with valuable insights and assistance every step of the way. If you’re looking to buy or sell a home in the St Petersburg area, please don’t hesitate to contact me. I would be happy to help you achieve your real estate goals.