When in the market for a new home, there is a general assumption that the best financial option is to buy a preexisting home. It is true that building a custom home can have a relatively higher cost of entry, but when the lifetime costs of the home are broken down, the results can be quite astonishing.
Here are some factors to think about when weighing whether building a new home is the right fit for you.
The buyer has input in every phase of the building process. This allows the builder to tailor the home specifically to the client’s needs and desires.
The chances of finding the exact house you are looking for already built and on the market are very slim. If you are interested in spending any substantial amount of time in the home, you will likely be quickly considering renovations. Renovating is a tricky process. It is all about finding the perfect middle ground between getting exactly what you want out of a room and being able to justify cost; the value it adds to the house must justify the expense. Add to this the time spent finding and matching materials, finding reputable contractors and the time of actual work, these add-ons quickly add up.
Many potential buyers don’t think about the fact that when buying an existing home, they may (and probably will be) stuck with extra space that they don’t want or need. But more importantly, they will be paying tax on it year after year.
Take into consideration a 6,000 square foot home valued at $1.8M (or $300/ft). If that house has a typical 350 sf formal living room that will not be used, it costs the home owner roughly $105,000 at the time of purchase and an additional $2,500 per year in property taxes. This initial and annual added cost to a space that will go unused is one of the most powerful examples of why buying preexisting homes may not be the best bang for the buck.
Another distinct advantage to building a new home is just that, it is new. All of the materials, building methods, appliances, etc. are brand new and cutting edge.
When buying an existing house, there is always the looming uncertainty of condition of the foundation, structural integrity, quality of materials originally used, etc. These uncertainties and risks can be bypassed by being involved in the process of selecting quality materials for the structure of the home. Again, this may cost more upfront, but by using these high quality materials from the outset, those initial costs will be dramatically offset by long term maintenance costs.
Another advantage to building is the complete assurance that your home is being built in accordance to the most up to date safety codes.
Additionally, the appliances used will be new and still under warranty. No near-term need to replace refrigerators, ovens, washing and drying machines, or garage doors.
Energy standards have changed dramatically even over the past two years. By building a new home, you ensure that your house will be built with consideration and materials that will save you money every month.
It is very difficult to retrofit old homes to be more energy efficient. Even moderately dramatic work frequently yields less than ten percent annually in energy savings. Even these mild amendments to existing homes can cost you well into the thousands of dollars a job, factor in the number of these it would take to see even a 30-40 percent yield on energy savings, and the cost of buying pre-built really adds up.
There is also a Federal Residential Energy Efficiency Tax Credit to offset annual expenses. This credit allows for up to 30% of certain green building materials to be deducted from your taxes.
Home architecture has changed significantly over the past decade. Older floor plans seldom focused on family traffic through the house, leaving many older houses feeling like a collection of rooms rather than a family-oriented space. Segmented living areas and rooms are a thing of the past.
Building your house around “Great Rooms” allows your family’s kitchen, living, and dining spaces to come together in a design that enhances family interaction and contact. These spaces typically have many windows, filling them with natural light, warming and lighting the room during the day.
Building a home allows you to write off a substantial amount on your taxes. These financial benefits include the ability to deduct interest, points and property taxes paid while the home was being built. Persons building new homes are eligible for the first time homeowner tax deduction (with certain stipulations) up to $6500 dollars. Frank Daum, CEO of Stratford Financial Services notes, “Done right, there can be significant profit in building as well; otherwise spec builders wouldn’t be doing it.”
In the end, there are many variables at play, pros and cons on both sides of the aisle. Just remember, building new not only allows you to create your dream home, but can be done for a remarkably comparable price.