In December, AmTrust Title Insurance Company announced the hiring of seasoned underwriter Mary Shelley as its midwest region agency underwriter. We took the opportunity to talk to Shelley, who has
Is It Cheaper To Buy Or Build A House
Dated: January 16 2017
When you decide it’s time to put down roots, you may wonder: Is it cheaper to buy or build a house? Unless you’re rolling in money, you’ll probably want to weigh the pros and cons of new vs. old construction—and the price you pay upfront is only where these considerations start.
Here we lay out everything you need to know about buying an existing home compared with building one from scratch.
If you buy an existing home: According to the latest figures, the median cost of buying an existing single-family house is $223,000. For the average 1,500-square-foot home built before the 1960s, that comes to about $148 per square foot. That said, the exact price can vary widely based on where you live. (Go to realtor.com/local to see the price per square foot in your area.)
If you build a new home: The latest figures show that buying or building new construction will set you back an average of $289,415. That’s $66,415 more than the cost of an existing home! Still, you’ll get a lot more for your money. For one, new homes are usually more spacious, with a median size of 2,467 square feet—so the cost per square foot, $103, is actually lower than that of existing homes.
Another advantage of building new is you pay for only what you want, whereas an existing home may have features (e.g., a finished basement or hardwood floors) you’ll pay a premium for even if you don’t want them. But if an older house happens to have everything that suits your needs, that’s the more bargain-friendly route.
If you buy an existing home: Older homes have more wear and tear, which means certain things may need more maintenance—or, if they’re on their last legs, replacement, points out Michael Schaffer, a broker associate at Colorado’s LIV Sotheby’s International Realty.
Naturally, the cost of this upkeep isn’t cheap, so make sure you know the age of the main items. For example, the average furnace is expected to last 20 years and will cost $4,000 to replace. The typical HVAC system lasts 15 years and costs $5,000 and more to replace. Another biggie is the roof: The average shingled roof holds up for about 25 years. If you need to replace it, you’re looking at a bill of at least $5,000.
If you build a new home: Considerably less upkeep is one of the primary benefits of building a new home, because everything from major appliances to the HVAC system is new and under warranty. In fact, sometimes the entire home is protected for up to 10 years because a builder generally offers a new construction warranty “for any problems that arise,” says Schaffer. Your maintenance outlay for a decade is potentially zero dollars.
If you buy an existing home: A major perk of older homes is mature landscaping with large trees and established plantings. That may not seem like a big deal until you consider that the U.S. Forest Service estimates that strategically placed mature trees can add tens of thousands to a property’s value and save up to 56% on annual air-conditioning costs.
If you build a new home: It may take thousands of dollars—and many years—to get the yard you want. For instance, one 6- to 7-foot-tall red maple will cost about $120 (if you plant it yourself), which will then grow 2 to 3 feet a year. According to HomeAdvisor, the average cost of adding complete landscaping is $3,219.
If you buy an existing home: The latest U.S. Census found the median age of American houses to be 36 years. Older construction means dated windows and appliances—dollars flying out the window on wasted energy.
If you build a new home: New construction almost always beats older homes in energy efficiency, says Kyle Alfriend of the Alfriend Real Estate Group Re/Max in Ohio. Homes built after 2000 consume on average 21% less energy for heating than older homes, mainly because of their increased efficiency of heating equipment and building materials. This translates into lower energy bills.
If you buy an existing home: The nice thing about old homes is that there’s context to your purchase: You can research the home’s previous sale prices, as well as prices of similar homes in the area (known as comparables, or comps) to get a feel for whether prices are rising or falling in your area. If the prices for your home and others in the area have been steadily rising, odds are decent that the trend will continue, which bodes well for you if you decide to sell later on.
If you build a new home: New homes, particularly in up-and-coming neighborhoods, are more of a gamble. Without a proven track record of lots of comps, there just aren’t enough data points to really know what could happen down the line. This is also true for all the latest amenities you might request in your home (think self-cleaning toilets).
“Some trends die quickly, dating the home, and can negate any appreciation,” says Alfriend. So when in doubt, try to steer clear of anything that screams it’s a passing fad.
For Mark Ross, founder of Ross NW Real Estate and professional real estate broker, real estate has always been the career of choice. During his 25+ years in the industry, Mark has gained experience in....
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