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Everyone loves new construction! But is it cheaper to build or buy a home? The thought of having a brand new home, all clean and sparkling with nothing to worry about except move in, appeals to most peoples emotions. Buying existing homes brings up one set of things to consider. Building one has a different list of considerations. Here we’ll explore buying an existing home, and building one. What are the pros and cons of building a house?
Buy an Existing Home
Buyers in this section of the market make up the majority of home buyers in an area. Because you are buying a home that is complete the chances are you will make compromises and choose a home that best or nearest fits your dreams. If you can check off 80% of your wish list you’ve likely found a house well worth considering. Getting higher is possible and then you have hit the jack pot. The perfect house is an unlikely goal to achieve.
Don’t compromise too much though. Your goal is to find the best match to the most important items on your check list. Location is a huge part of buying your next home and cannot be changed under any circumstances. Either it works or it does not.
- Location relative to travel to work is usually the highest factor in choosing locations, the average worker commutes 30 minutes to work. Understand the cost and time if your commute is longer. For you an hour might be worth it if sitting in a train. Non workers concerns often include proximity to other family, shopping or leisure, and travel. Trains, buses, airports, where are they?
- Accommodation usually factors in very highly after location. You need enough space for the family.
- Lifestyle is another big aspect of choosing a home. Whether you are looking for acreage, low maintenance, waterfront, city nightlife, active adult communities; all of them relate to how you live your life.
- Schools often factor in for families with children.
Surge forward with your house hunt. Once you understand the needs listed above you’ll likely select areas that work for the parameters you set.
Improvements For Existing Homes
If you are buying an existing home you’ll need to consider what improvements need to be made, or what style changes you’ll want. This is going to add more cost to your purchase but can be spread over time. Improvements can get you closer to your dream home.
First Let’s Ignore TV Shows
- Buyers looking at homes get to see three and pick. Really, that’s not reality at all. Why are so many of them vacant?
- Renovators, whether you need to fix a room or two or do a whole house renovation, do NOT be sucked in by the dollar costs on TV. The impression is you can do so much more than you probably can.
You need to get real time estimates from local contractors for the renovations you want to do.
When looking at existing homes, do not expect them to be like new construction. They have age, have been lived in, styles change quickly, and one persons likes are going to be different to yours. A kitchen does not have to be brand new, it has to function. The same with bathrooms, mechanicals, roofs and so on. The floor plan is important to you and your family. Consider this too. Walls can be added or taken down in many instances. The home’s structure must be considered.
On an inspection a few years ago it was revealed a wall had been removed and the suspicion was it was a supporting wall. There were 2 stories above and the roof-a very heavy item. The property owner had not pulled the necessary permits before removing the wall. The house was essentially not supported and was going to fall, one day! The tell tale cracks were visible. My buyer withdrew.
As you view existing homes, make a mental or written note, of the things you would want to change. For each home you’ll need to assess the asking price and find out from your agent if it’s relevant to the current market and similar homes.
Now you’ll need to look at the improvements you want to make and establish a ball park idea. If you either want to, or of the property needs it; a new kitchen, new bathrooms, floors, windows, roof, or mechanicals can quickly add up to a sizeable renovation budget.
Renovation Return on Investment
Renovations do not yield 100% of the cost. Kitchens and bathrooms do best on a first year return but it’s going to cost you more than it will increase your value.
Sometimes when you add the cost of the home and all the changes you want to make, the conclusion is that it would be cheaper to build your own home new and get what you want at the beginning.
The advantage of buying an existing home is they are yours at closing and for most buyers you can move right in. This also reduces the need for temporary accommodation, or the cost of carrying an existing property and paying for your new construction.
What About A Mortgage To Buy an Existing Home?
Obtaining a mortgage on an existing home is much easier. It’s main street lending, there are banks and lenders at every corner ready to help you buy a home. Should you buy a house in need of a lot of renovations, there are even programs to help you do that. If you have a low down payment, there are plenty of mortgage products to help you especially if you are a first time buyer.
Buying an Existing Home Closing Costs
Your costs to close a mortgage loan should not be wildly different. Your attorney costs will also be about the same. Here in Illinois you’ll buy title insurance for your lender no matter the mortgage product type. Your closing will be at a title company if you buy in Illinois, and those fees are about the same.
Buying a New Home – Spec Homes by Builder
Depending on your location, spec homes from an on site builder may be available. Builders like this are developing neighborhoods and usually have a choice of floorplans. You can customize a home with your choice of interior materials. Depending how early into the build you come along, you will have more say in exterior components as well. If you choose your lot and then they build you get the best of many worlds. Your builder may be open to making even more changes to your chosen plan. It’s like buying a custom home. Be prepared to increase your budget for this.
Most builders have a base level of finish. They’ll draw you in for the base home on a standard lot and then up sell you. Your immediately reaction to the advertised price is wow, I’ll be better off buying a new home. And it’s true, you might be. The reality is though, no-one wants the base home on the base lot. They want more. Whether you want a premium lot, upgrades, changes to rooms or the best of everything, your finished price is going to climb. Only you limit the amount.
Financing this type of new home is not too difficult either. The builders usually carry the financial load because you have signed a contract to build it and pay for it. Builders often have in house lenders that may offer a better interest rate than the general market place. Local lenders will lend too because the funds are taken only after the home is built and permission to close and move in is given by your local authorities.
The same is true for partially constructed homes, the builder is carrying the financial load to build it. You come along with your mortgage approval and they know it’s going to be sold.
Putting Your Spec Home On The Grid
On site builders have done all the prep work for you. In addition to roads, pavements, they have also run utilities to their site. Adding each home to the electric grid or gas lines is a cost absorbed into each property cost. Here in Barrington Illinois, as with other local country suburbs and country areas beyond metro cities, well and septic systems are common. The builder has factored these costs into each build. The same with adding to city sewer and water, all these costs are born by him until you come along and buy. The same is true of building permits, he already has it all squared away, knows what he can build.
Spec home builders also know their costs. They have calculated all of it before coming up with their base prices. As necessary they have paid fees upfront and costs like the roads are already paid. Often builders have their own employees on site and will build many homes at the same time. This can make a spec home a better choice financially for you. It will be less than a custom home, although you are making some compromises, style, lot, finishes etc may be given up, especially if you enter the project near the end.
Buying a New Home has Differences to Buying Existing
When you buy an existing home the first thing a contract allows for is an attorney review. It’s already in the contract in black and white. You can sign and have an agreed offer to purchase, and then the attorney reviews it. It’s a safety net. If you buy a home from a builder the chances are they want you to complete their contract. While it does not usually allow for an attorney review, you should send it over to your attorney to go through with you, before you sign it. Builders contracts are different to our REALTOR purchase offer contracts. Your agent is not a lawyer and cannot advise you. They can certainly explain the contents, but only an attorney can counsel you on the legal aspects.
Most builder contracts do not allow for a home inspection either. They do not think it’s necessary. Maybe for a home not yet built, but if you are about to buy a home that’s ready or very close to being finished, an inspection is a very wise thing to have done. You may have to pay for one and have it completed before you sign that contract. It’s money well spent. The downside is someone else may come along and swoop the property from under your feet.
Building a New Home – Custom
The most exiting home to buy is one that you are involved in from the plan design phase, finding a lot, and watching your dream be built. Whether you select a pre-existing design you like or have an architect draw one from scratch you’ll be able to plan an entire house to fit your lifestyle needs. Having done this myself, I have to say it’s exciting. It’s also hard to think of everything, every little detail. Even after our house was complete we kept thinking of other little things we might have changed. I say might, because none of us seem to be 100% sure of everything, so I consider it’s more a matter of “what if”.
You should spend some time learning how much it will cost to build a house from scratch. Depending on your area there may be more involved than just the construction cost. For example choosing homes that can be added to mains water and sewer services will be cheaper than those where you need a septic system and a water well drilled. The latter can be quite a lot of money. Then there’s the materials and method of construction. You many need to build to a code that protects your home from hurricanes or tornadoes. The best resource is your county, town or village halls. They have the building codes for your area.
Your village halls or your county offices will be the people that issue you a permit to build. There’s a fee for that too. They are responsible for making sure your builder complies will all building codes. Your new home will have several inspections as it rises from the ground. The final inspection will give you the go ahead to move in.
Don’t forget landscaping. Depending on your community, you may have to be partially or fully landscaped before you can take occupancy.
There’s a lot to learn about buying land and building a house costs and procedures.
Types of Construction
Every area in the USA has it’s own styles. With every community controlling the process, you need to explore your ability to build what you want. Planned unit developments may have CCR’s that also have a say in what you can and cannot do. For the most part homes are wood or steel frame with or without a basement, poured onto either a concrete pad or external lower level walls. The exterior is clad with insulation before adding a final product. This could be vinyl or cedar siding, bricks, stone, EIFS, Stucco or a combination of these materials.
Roofs are commonly asphalt, wood shaker tiles, newer materials such as slate and clay tile are in use in certain parts of the country. The weather is a huge factor in material choices.
The interior is likely to be primarily dry-wall. Floors are anything from vinyl to hardwood, tiles to Travertine stone and so on. Most homes have a mix of hard surfaces and carpet.
The Simple Guide to The Build Process
- Location comes first by selecting where you want to live and finding a lot that you like. Soil testing is often needed to make sure the land will support your structure. You should never buy a lot without having a soil test done, or seeing a recent one if provided.
- Once that’s cleared you need to select a plan or hire an architect to draw one. This is not a quick process. You’ll start with simply drawings and take them to a set of plans with everything you can possibly think of drawn including electrical, plumbing, walls, fixtures, supports and so on.
- At the same time you can start talking to several builders to see if they can build what you want and in a suitable timeframe.
- With plans and builder on board it’s time to apply for permits. No-one can do anything until these are issued.
- Location may determine when your builder can break ground. Here in the midwest most builders will not start digging while it’s frozen. They’ll wait for spring and a ground thaw.
- The foundation is carved out first. Either a concrete pad is built or walls are poured. This provides the base for the rest of your house and must be sufficient to carry the weight.
- The exterior of the house is built first all the way to the roof. Windows go in but the final exterior product suck as siding or brick may come later. This protects the inside from the elements.
- The interior comes next with wall framing, electrical, plumbing.
- Finishes are last from flooring and walls to kitchens, bathrooms, paint, doors, trim and so on.
- Exterior hard and land scape is last. It’s important to know what your permit wants to be complete before you can move in. This varies by state, town, village. Do not forget the cost of this!
How Long Will My Build Take
It depends. OK so that’s a cop out right? But actually it does. If your builder is already on site building it won’t take as long as having a builder and his crew coming to a single site. A builder building one home at a time might be sharing contractors with other builders. Having employed crews rather than sub contracted crews is a huge advantage.
Weather as we mentioned can factor it to the timeframe. Warmer states don’t have the problems of winter like we do here in the midwest.
Lastly it will depend on the size and complexity of your build. Smaller homes can be finished in 6 months. Here in Barrington Illinois our homes often take a year. The larger homes can take up to 2 years. None of that takes into account the waiting on our weather. But it does allow for the permit approval time.
Location will come first. Choose where you want to live, then you can go hunting for available parcels. Consider the plan you have chosen. Does it include a lookout or walkout basement? Do you need a sloping lot or can the lot be graded to allow for your plan. Make sure you understand what is needed for walkout basements. The last thing you want is the extra cost of retaining walls and steps up because you did not truly understand what you were getting. ( I got into this issue with my builder and regret what I allowed him to do. )
Are you planning on a swimming pool? Where? Is there room, what are your local rules on fencing pools. Is it being built with the house or a dream for later?
Wells and septic systems take up space in your yard. If they are needed make sure you understand how much space is required. Usually the villages that need these only have lots that are big enough to build the systems.
You might buy your land in advance. Understand many planned unit developments may have rules that will stay with the neighborhood for years. You should have read those before buying your lot, many years ago. When the time comes to build, as the owner you should have been kept informed of any changes.
Lot’s can be bought seperately from your construction. They can also be bought together with a build package with a lender that specializes in this type of loan. Of course there’s always cash.
I Own Land Already
How much to build a house on my land? If you already own the land your cost of building will not change, only the cost to acquire land does not need to be included. This can be an enviable position to be in especially if you picked your lot a long time ago and have a premium location!
These are simply to control the build of your home and make sure building codes are complied with. You end up with. a safe house by today’s standards. Hopefully it prevents your builder doing anything untoward!
The cost in my area can be $15,000. The village will be making several stops to your property and inspecting what the contractors are doing. They make sure the right materials and methods are followed.
Is it Cheaper to Build a House Yourself?
You can save money by being the general contractor of your project. While you don’t need to know what to do, it’s certainly going to be a lot easier if you do. You’ll be responsible for permits and inspections, making sure the contractors are sticking to the building code, being the go to person to call for all issues. This might be a hard job to do if you also have a full time job and even more so if you’ve never been involved in house building.
Never underestimate the job or skills and experience a builder a builder brings to the table.
Putting Your Custom Home on The Grid
Unless you are building in a remote location, water supply and sewer lines should be easy to tap into. For remote locations or country suburban villages like Barrington and Long Grove in northern Illinois, you may need a septic system and a water well drilled. These two items can be a costly addition to the overall budget.
Consider adding solar panels or a wind turbine to add low cost energy to your home. (Depends on area and permit).
Electricity and gas are brought to your home. Again this can be easily achieved if there are homes nearby. Remote locations may not have gas and propane tanks may be more common. Electricity may be under or over ground.
Cleaning Up Your Site
If there’s one thing I can promise, your site is going to be a mess. Over the last several months, machinery has been coming and going, the ground is full of mud, gravel, holes and waste. You can expect this to be graded, cleaned, leveled and returned to normality. Now you need to plant grass, or lay instant grass mats. You’ll likely want flower beds, plants, trees. It’s going to look a little barren for a while. What you need to know is what is needed for you to take ownership of your site and move in to your house.
If you are local while the house is being built, keep an eye on those contractors. It’s not uncommon to dig a hole for a tree next year and find it’s stuffed with contractors trash.
Decorate Your Bare House
An often overlooked thing is decorating a new house. I don’t mean the paint but the soft furnishings. You’ll be inheriting brand new but bare windows. So budget for blinds and drapery including rods and other hardware. A whole house is not a cheap project. Even if all you have is a standard blind, just count your windows and multiple by $100. That’ll be about the cheapest option! Custom blinds, plantation shutters and drapery made to fit will add a lot of cost.
Your builder may include towel rails, toilet roll holders, soap dishes or he may not. You’ll need floor mats for your entrance and exits. Then there’s more rugs and lastly furniture. Most of you will buy some if not all new. Be sure to have some kind of idea and budget set to start the decorating and furnishing project!
New Construction Homes in Barrington Illinois
Although Barrington IL is close to being land locked, we do have some new construction. With some homes in the village being over 100 years old there’s room for regenration too. Here are the latest new homes to browse through.
We have not discussed the cost of modular homes vs. building here because they are not common in the Barrington area.
Conclusion – Is It Cheaper to Build or Buy a Home?
We hope you enjoyed our article asking is it cheaper to buy land and build a house. If we think of anything else to add, we’ll sneak back to do so. Did we miss anything? Let is know, we’ll research it and add the information. In summary the answer is it’s usually more expensive to build. However if you end up doing a lot of renovations on an existing home, well the answer might flip.