Building vs Buying- what you should know | Kate Seaman Team at Warren Real Estate
Over the last six months or so I’ve had a few clients who have been debating between buying an existing home and purchasing land in which to build a new home on. It goes without saying that both have their pros and cons. However, with existing home inventory low right now it seemed like an ideal time to explore the benefits of new construction and what to keep in mind if you’re considering it.
For those of you unfamiliar with the home building the process, NewHomeSource.com has a wonderful article with a step-by-step guide on what to expect during the major phases of construction. The longest phases of the process are the “bookends- land development and final finish of the home,” Jack Litzenberger, owner of 2 Pro’s construction says. “The framing, roofing and siding are performed quickly in comparison.” Of course, that development can’t begin until you’ve purchased the land which is the first important step in building a home.
Whether it’s to take advantage of a lake view or to create a passive solar design to help with heating costs; one of the most beneficial parts of building a new home is the ability to select its exact location. Nearly as varied as existing homes, the sizes, shapes and cost of building lots in our area are vast. I always recommend that my clients take their builder out to walk any lot they’re considering buying before making any decisions because the quality of the land can make a large difference on the overall cost. Not only do you have to take into consideration the lot’s topography and zoning regulations, you also need to determine the how your future home will receive water, septic and electrical services. Take your time and find the lot that meets your wants and needs.
Another question I am often asked is the cost difference between building and buying. This is a tough question because you’re never comparing apples to apples. Chances are very likely that a new home design and build will cost you more than buying an existing home. However, depending on the age of an existing home and the repairs or renovations that are needed, the actual price of an existing home can climb pretty quickly. Jack Litzenberger, reminds potential clients that “[with new construction] you have a good chance of little to no maintenance for at least 10 years. You know that the products are new and should perform as such, and warranties come with the new products.”
Another important consideration with any buying decision is financing. Taryn Schwartz, a Mortgage Originator at Elmira Savings Bank says, “When considering new construction verses an existing home a borrower should keep in mind that the closing costs on construction loans are slightly higher; however, the borrower may have a loan to value as high as 95% of the total acquisition cost or appraised value (whichever is lower).” Traditionally loans used to finance new construction can take longer to secure and have stricter standards when it comes to required documentation and the borrower’s credit scores. Often times there are also deadlines on when construction needs to be completed so all of these factors need to be discussed with both your agent, your builder and your bank.
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This content was originally published here.