Is It Better To Build A New Home Or Buy A Resale?

  • 4 min read

This is a question we often receive from our realtor friends and clients: should you build a house or buy an existing one? It’s an excellent question to ask if you’re in the market for moving or relocating. Each option has its pros and cons, and there are some hidden factors to consider. Let’s take a closer look.

If you buy an existing house, you can move in right away. The house is ready, and you only have to wait for the closing and escrow, which might take about a month. However, if you decide to build a new house, it might take eight to ten months, depending on the permits and approvals in your jurisdiction. But that timeframe doesn’t necessarily create a problem for everybody.

One of the biggest obstacles to building a new house is that people think it will cost more. A new home construction will cost around $200-250 per square foot to build. So, for example, if you’re building a 2000-square-foot house, you’re talking about $400-500k in construction costs, not counting the land. If you add in the cost of land, permits, and carrying costs, you could be looking at $600-700k, depending on where you live. For a brand new 2200 square foot home, which is what most people would consider, it is going to cost more than a resale. You can probably find a resale home that is a little less than that in most markets.

However, one thing to keep in mind is that with a new home, you have zero accumulated repairs needed. You don’t have any maintenance clock ticking. Even if you buy a resale home that doesn’t need anything today, if the roof is five years old, you’re only 15 years from needing a new roof rather than 20 or 25. If your septic system doesn’t need anything now, it still might need something in the future. So those maintenance costs accrue, even if they don’t need anything today, and you’re closer to when those things are needed.

In addition, if a house was built even five or six years ago, some of the efficiency details built into the house, such as the installation, the leak down test, and the air infiltration, may not have had the same standards as they do today. And on top of that, with a brand new home, you can build it to your liking. You can choose the colors and the floor plan layout the way you want it. Is that worth something? Maybe or maybe not.

The other factor to consider is depreciation. Real estate appreciates, but the house itself depreciates because the condition, floor plan, and layout of the house get less valuable over time. A new home has all the things that you want from day one, but it is still going to depreciate.

In most cases, building a new home is going to cost more than buying a resale, even if you factor in all those different things. The question is, how long do you want to live in the house? How important is it to have exactly what you want? The other part of the equation is inventory. Is there something available in the marketplace right now that’s acceptable to you, or how long will it take for that to be available? If you think it’s going to take an average of six or eight months to find exactly what you want anyways, you might as well find a piece of land, which is easy to find, and build a house. That way, you’ll have exactly what you want in that time period.

The hard part is dealing with the building process. Even if you hire a general contractor, you’re going to face a lot of challenges dealing with that contractor, dealing with delays, dealing with problems that come up but it may be all worth it to have a unique home that only you’ve ever lived in designed to your specifications.


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