“Is it cheaper to buy or build a house?”
This is one of the most common questions that we get from people who are looking for their dream home. The appeals of building a house are readily apparent: by constructing a new house from scratch, you can make sure that it is completely customized to suit your needs and reduce the chances of expensive repairs and renovations that might not pay off early in the home’s life.
So, why don’t more people choose to build a home on an existing lot?
Well, the two main sticking points for people are time and money. Building a home from the ground up tends to take quite a bit more time than buying a house from someone else. A lot of home owners are interested in selling their homes as fast as possible, so deals in hot real estate markets can move very quickly.
Even if you take the time to learn how to find off-market homes in order to maximize your home search and avoid costly bidding wars, you’ll likely be able to find an existing house before you could have built one.
With that said, having proper planning and working with the right experts can greatly offset the time cost of building a home. So, the primary issue that people have is with the notion that building a home is an expensive endeavor — more expensive than buying a house on the open market. In part, home buyers have this fear because they don’t know how much it costs to build a home, nor do they know how to save money when building a home.
So, what factors go into determining the costs of building vs. buying a home? And is it really that much more expensive to build a home?
Every Market Is Different
It’s almost impossible to overstate the importance of location when it comes to real estate. This isn’t just true when trying to find the perfect neighborhood for your new home, either. The truth is, the specifics of your local real estate market are going to play a huge factor in determining costs and timelines.
That is why it is so important to work with a real estate expert who specializes in your locale. Not only will working with an agent help you get a better price for your home if you decide to buy, but they will also be able to walk you through the details of the local market so you can choose whether building or buying is the right move for you.
As an example, our real estate team helps people buy and sell homes in and around Washington DC, which is one of the hottest real estate markets in the country. Because DC’s hottest neighborhoods are seller’s markets, bidding wars are common and home sale prices can often escalate far beyond the listed amount. This means that buying a house can be more expensive than you originally anticipated — but if your agent lets you know this ahead of time, then you won’t have to worry about unpleasant surprises down the road!
Do not wait to speak with an agent until after you’ve already been looking at homes on your own. Information is your most powerful tool when buying or building a home, so you’ll want to get an agent involved as early as possible!
The Upfront Cost Comparison
When you buy or build a home, a lot of the overall costs are dealt with in the long term: mortgages can be structured over a period of decades and repair costs are often spread out across multiple projects. However, there are still significant upfront costs that you need to take into consideration.
The most visible cost that you’ll need to cover upfront is your down payment. The exact details of this cost will depend on what sort of loan you can acquire — and the type of loan will depend on whether you are building or buying. As a rule of thumb, however, the upfront cost of a home will be cheaper if you are buying.
It is important to note that, if you are interested in buying and selling a home at the same time, you might have access to loan options that others don’t. In particular, bridge loans and Home Equity Lines of Credit (HELOCs) are special loans that can be useful in a move-up buying situation to offset some of the up-front costs — so you don’t have to be worried about getting stuck with two mortgages.
The Price-per-Square-Foot Comparison
The other main comparison that you’ll need to make with your agent is the price-per-square-foot value of the home. When looking at this metric, building a home actually tends to be cheaper than buying an already made home.
There are a few possible reasons for this. When you build a house, provided that you ask the right questions to your home builder, there will be minimal wasted space in the home. Additionally, you will usually get more house for your dollar — and every single inch of that house will be customized especially for you! Building a new home will allow you to forgo premium features and fittings that don’t interest you while splurging on those that do; therefore, you will not be wasting money on luxury items that you never even use.
That’s why one of the questions that you need to ask yourself when building a home is what your must-haves are. If you have a clear vision of your dream home — and share it with your agent and builder, then you can cut down on wasted money and streamline the building process!
So, Is It Cheaper To Buy a Home Or Build One?
Like so many things in real estate, there isn’t a clear-cut answer to this question. Not only does determining the price of your new home depend largely on your local market, but it even changes based on how you define the cost of the property. If you are interested in minimizing the up-front costs, then buying might be the right move — but if price-per-square-foot is more important to you, then you might want to start calling up builders.
Luckily, there is no reason that you have to make the decision on your own! The best thing that you can do is speak with a real estate agent who is an expert in your local market and has great connections with nearby builders. They will help you work through the features that are most important to you in your new home, then assist you in deciding whether to build or buy.
Finally, once you have made the choice, your agent will take care of the nitty-gritty details of your home search or build, so you can stop stressing about the process and start getting excited about your new home!
If you are interested in building or buying a home in Arlington VA, Alexandria VA, or anywhere else in the Washington DC area, then the best move you can make is to contact the Keri Shull Team! Our local experts are constantly hard at work tracking the most up-to-date market trends, so we can help you make the decision that is best for you.
So if you are interested in making your new home search as simple, fast, cost-effective, and stress-free as possible, just click here and schedule a time to meet with one of our experts!