Consider the costs of each
When looking for your next home, it’s important to weigh the considerations of a newly constructed home versus an older home. Whether you’re looking for energy efficiency or architectural interest, your home should fit the needs and budget for your family. Breaking down the true cost of each type of home is a great first step toward making your purchase.
Upfront Cost Considerations
Due to the costs of the lot, building materials, fuel, labor, and other items, newly constructed homes often cost more than older homes. If you’re working with directly with a builder on a new home, you can also expect any upgrades or customization to drive up costs even more. With new construction at all-time lows, competition for new homes is higher, which makes for some fierce bidding wars. Newly constructed homes can sometimes cost up to 20 percent more than their existing counterparts.
Since they’re more widely available, existing homes offer the opportunity for more negotiation. This negotiation can sometimes result in purchase prices below listing price and is significantly lower than newly constructed homes. This lower price can mean huge savings over the life of your home loan. Additionally, existing home often feature larger lots because they were built when land was cheaper.
Repairs and Renovations
An area where newly constructed homes definitely have a leg up on their existing counterparts is repairs and renovations. Since it’s unlikely that you’ll need to do any significant repairs for at least seven years, the out-of-pocket expenses for repairs and renovations will be far down the road for new construction home owners. If you are able to work with your builder to customize your floor plan, the need for any major renovations like floor plan changes are eliminated.
With the character of an older home comes the near certainty of future repairs and renovations, which effectively increases the total cost of purchase. Always have older homes inspected prior to purchase and negotiate with the sellers to cover the costs of any significant findings identified during the inspection. At the very least, you may be able to negotiate a lower purchase price to help offset the cost of the repairs. You should also plan to allot for the costs of future repairs and set aside funds to cover any major projects.
Ongoing Costs of Ownership
New homes often feature more state-of-the-art, energy efficient options than older homes. Better insulation, solar windows, high quality building materials, and more efficient central heat and air units mean that your monthly utility costs should be much lower than those of an older home. Additionally, new homes have new appliances and fixtures, like hot water heaters, toilets, and bathtubs, that won’t need to be replaced for a significant period of time. If your new home has an HOA, be aware that monthly fees can increase significantly around the five to ten-year mark, when many repair and maintenance costs will begin to rear their ugly heads.
With an older home, you may find that the architectural beauty also comes with high monthly utility costs due to poor insulation, older windows, aging building materials, and less efficient appliances. You also never know when the old pipes in your home might become clogged and begin backing up through the bathtub and sinks.
Another ongoing cost that can differ significantly between new and older homes is homeowner’s insurance. Insurance on new homes tends to be less expensive because the home is up and up to date on current building codes. Meanwhile, insurance on older homes can sometimes be difficult to secure and is often more costly, due to older wiring and overall property condition.
One area of ongoing costs where older homes have an advantage is property taxes. Since older homes tend to be less expensive than new homes. This puts older homes in a different tax base and results in a lower tax burden for the owner. Don’t just look at the current rate, however. Be sure to examine how the rate has changed over time, and research any municipal projects that may impact property tax rates in the area in the near future.
Whether you prefer a new home or an older home, it is important to consider the pros and cons of each before making your big purchase. Both options offer great benefits and some drawbacks. Your dream home is waiting for you – be it new, historic, or somewhere in between.
Did you buy a newly constructed custom home or an existing one? Leave us a comment below and tell us about your home buying experience.
EXIT Realty Bob Lamb & Associates is Murfreesboro’s most innovative real estate team.
EXIT Realty Bob Lamb & Associates
2630 Memorial Blvd, Murfreesboro, TN 37129