In the course of evaluating your options, some of you may find yourselves in a position to consider whether to buy an existing home or to build a new one. The appeal of building your dream home can be hard to resist. The paint is fresh, the systems are unused and probably covered by warranties, and, most important, you decide on the materials to be used, the layout of the rooms, and the size of the closets. From a cost-efficiency standpoint, however, you stand to get significantly more house for your money by buying a previously owned and occupied house.
These are the key points:
1. Square foot for square foot, an existing house is cheaper than a freshly built new home. In 1987 the median price of new homes nationally was approximately $105,000, while the median price of existing homes was about $87,000.
2. An existing home has the additional advantage of being something of a known quantity. You don’t have to guess what the utility costs will be, because the people who are already living there can tell you. If there are structural problems in an occupied ñouse — a leaky roof or a damp basement, for example -
can find out about them before making the deal and moving in. As the first occupant of a new home, you’ll be the one to discover all its hidden flaws.
3. Building generally requires undeveloped land, which is scarce almost everywhere and virtually nonexistent in some of the major markets.
4. Financing a land purchase can be a problem, since in many areas lenders prefer not to get involved in land deals. You may have to buy the lot outright.
5. Managing any kind of building project is a headache. No matter what the project — whether it’s rehabbing a kitchen or building a new home from scratch — there always seems to be a force at work that causes every job to take three times as long and to cost twice as much as planned. Finding reliable workers who do quality work can prove to be a challenge, and scheduling and supervising their work even more so. You can hire a general contractor to ride herd, which is expensive, or you can do the supervising yourself, which is vexatious, time-consuming, and usually more difficult than people who aren’t in the business typically assume.
6. A house isn’t going to be perfect just because it’s new. A shoddily built home will mean an endless stream of problems large and small, from a leaky roof to a heating system that breaks down to a stairway that sways. Even in well-constructed homes, settling can cause walls to crack. New systems often have to be debugged, and even small problems can seem worse because you were expecting perfection.
7. Scheduling occupancy is more likely to be a problem with a newly built house than with an existing one. The pressure can get intense when you know you have to be out of your current apartment by an impending date and the contractors are still putting up staging and waiting for materials.
Building a new home can also be a brilliant solution. You may have a special shot at a choice piece of land. You may be living in a region where builders are desperate for work. You may be in a position in which financial factors are not constraining. If so, good luck and God speed.
But if you’re among the almost 90 percent of new homeowners who buy existing homes, then let’s move on to the business of sizing up houses that are already standing.