It’s time for another match-up, this time we’ll compare buying a new home versus purchasing an existing one.
For the record, some home builders will refer to existing homes as “used,” which sounds kind of silly considering it’s a house and not a car, but let’s continue on.
Untouched and Clean
- The number one reason to buy a new home
- Is probably the fact that it’s never been lived in
- It also might have the newest amenities
- And you shouldn’t have to repair or renovate anything
The most obvious benefit to buying a new home as opposed to old, existing, or used is that it’s brand spanking new. It’s untouched, it’s clean, everything is in good working order and nothing needs to be repaired.
That’s a pretty huge incentive to buy new. You won’t have to worry about the typical costs of homeownership for the first several years, right?
Another benefit to buying new is that the home (or townhouse or condo) should have all the latest amenities. Remember when it was all the rage to have stainless steel appliances and granite countertops?
Well, today’s new homes come with solar panels, energy-saving windows, smart appliances, USB outlets, electric vehicle charging stations, thermostats and door locks you can control with your phone, and other features that might make your used home look really old, especially a few years down the line.
Aesthetics aside, these upgrades could actually save you a lot of money each year on utility costs because they’re designed to be cost-efficient, not just handy. You might even get a tax break!
Not only that, but many of these new homes use low-VOC paints and flooring, which are supposedly better for your health.
Additionally, new home buyers often get the opportunity to fine-tune the home they buy by selecting certain features, colors, styles, etc., and even financing any add-ons into the mortgage.
Easier to Buy a New Home
- It might be easier to finance a new home
- Because home builders have their own mortgage divisions
- So they’ll work with you to get the deal done
- But still take the time to shop around and negotiate
And speaking of mortgages, most home builders have their own financing departments that make it easy to get a mortgage. Whether it’s the best deal is another question, but if you simply want in, your odds are probably better with a new home. The builder has a vested interest to get you financing.
There’s probably also a lot less competition for a new home, seeing that you’re probably checking out a brand new neighborhood full of vacant homes to choose from.
You can even pick among different sizes and floor plans to get just the right amount of space, as opposed to having to conform to what’s available in the existing market.
You might be thinking, hey, this sounds great, sign me up now! Why on earth would I want a used home with dodgy popcorn ceilings and laminate countertops?
But wait, there’s more to homes than what’s inside.
Don’t Forget About Location…
- Location is and will always be the biggest value driver
- And new construction might be in less desirable areas
- Or in the outskirts of urban areas
- So take that into consideration as a tradeoff
Let’s face it; the old saying that location is everything in real estate is true. It’s always been true, and always will be true. That is, if you want to see your property actually go up in value.
And guess what. Brand new homes aren’t being built in the best locations. When it comes down to it, there’s no space for a new development in an established or central location.
Sure, you might see a new condo development, but new homes most likely won’t be that central. They’ll be on the outskirts of town, or in a “trendy” or “upcoming” area.
In other words, there’s going to be a commute if you buy new, and the location might be questionable at best in terms of value.
There might even be multiple new developments surrounding yours, with tractors and hammering construction workers doing what they do all day long.
With an existing or used home, you can buy in the heart of the city, or in an area you know well that is insulated by a lack of available space and construction.
That buffer means the property should hold up well in terms of value, even during a downturn, assuming the area isn’t subject to obsolescence. A used home might also give you the ability to walk to work, or to restaurants, bars, shops, and so on.
At the same time, a used home doesn’t necessarily have to be old inside. If you shop around, you might be able to find an old home that has already been remodeled to your liking.
And even if it hasn’t, that shouldn’t stop you from buying it and making renovations if it’s got good bones.
New Homes Are 20% More Expensive
- You pay a premium for a new home
- Apparently 20% more on average
- So while costs might be lower for maintenance and renovation
- Consider the upfront cost
Back in May, Trulia determined that new homes (built in 2013-2014) cost roughly 20% more than similar existing homes.
They also found that two in five Americans would prefer to buy a new home, compared to just 21% opting for an existing home and 38% declaring no preference.
But when it came to that 20% markup, only 17% would actually pay the premium to get the new house.
So to get this straight, you might have to pay 20% for a new home AND you won’t be in a central location. You’ll be in an untested location that might wind up being a ghost neighborhood in a decade if things don’t work out as planned.
During the most recent housing crisis, a lot of new homes were hit the hardest, whereas existing homes saw their values decline but prop back up over time.
Of course, if you opt for new you’ll probably have all the latest technology and no major issues. If you go with an older home, you might have major bills on your hands when the roof gives out, or you discover serious plumbing issues.
So you’ll need to do your due diligence when buying an old home to ensure the property is in adequate shape. Then again, I’ve heard really negative stuff about new homes too, with many claiming workmanship has gone to you know what these days.
In other words, you’re not out of woods if you buy new either, though there might be some kind of warranty in place for a while.
At the end of the day, it’s probably okay to consider both new and used homes when looking for a property. As long as you take the time to inspect the property and the neighborhood, negotiate the right place, and make sure you can afford the place, you should be okay.
Lastly, you should make sure you actually want to own as opposed to rent because owning comes with many more responsibilities, whether you buy new or used.
Advantages to Buying a New Home
- Brand new, clean, no major issues
- Move-in ready (no wait or work to be done)
- Cool new technology
- Green features could reduce utility costs and/or provide tax incentives
- Trendy design
- Ability to customize
- Can finance additions into mortgage
- Possibly easier to get financing with home builder
- Less competition, more choices on floor plans
Disadvantages to Buying a New Home
- More expensive than buying used
- Location probably isn’t ideal
- Despite being new, workmanship might be questionable
- Could be subject to costly HOAs, even if it’s a house
- Neighborhood dynamic is unknown
- Property values might be more volatile
- Construction nearby (eyesore and noisy)
- More cookie-cutter, less unique
Advantages to Buying an Existing Home
- Possibly cheaper
- Better, more central location
- Can buy in an established school district
- Can own in a more reputable and recognized neighborhood
- Old house might have new upgrades
- You can always renovate if need be
- Older houses tend to have more character, custom design
- Could actually be built better than a new home
Disadvantages to Buying an Existing Home
- Harder to find an existing home (less inventory)
- Might have major problems you don’t initially notice
- Financing could be tricky (if unpermitted work, etc.)
- Could still be more expensive than buying new
- Fewer amenities, especially as homes get more tech-integrated
- The neighborhood might be in decline
- More competition to get your offer accepted
- Might have to settle for a smaller, less ideal home to get right location