After selling new construction homes and existing homes for nearly two decades, I can give an insider's view into the real pluses and minuses of both. It really depends on the person whether buying an existing home or building a new construction home. Certain areas like the southwest suburbs have more new construction homes in areas like New Lenox, Homer Glen, Lockport and Frankfort, for example, have a lot of options for both existing and new construction with similar home types and prices, but you need to know exactly what to look for to compare apples with apples and determine which is the best for you.
You need to consider your timetable to move and costs of that. Storage? Where to live in the interim? If you can get a short term rental (hard to get), then the cost of that rental or the cost to continue your current rental. Sometimes if you have a home to sell, this time can work to your advantage, but can also leave you with a few months to go, need to close and no where to go.
Also, what is the cost of waiting? What will interest rates be in that time – no locks that long.
BUILD – Will take 5-6 months minimum. In winter months, could be a little more, depending on weather.
BUY – Typically 30-60 days.
Most of the time, building is more expensive than buying. But here is an idea of the differences.
BUILD – What you see in the models is NOT often what you get. In my experience most people spend 10-15% more than list price on upgrades in lot, features, options, etc.
- Base builder price does not include any upgrades or options.
- Certain lots can have upgraded or premium prices.
- Upgrades from Builders are often a huge profit center – need to compare features and what the potential costs
Look at the features offered, what is in the models and what are the costs.
BUY - Know exactly what you are getting - inspect the home to ensure you know what you are seeing is correct.
BUILD – Most builders give decent one year warranties and most new products are under warranty. The warranty does not cover everything, but it does cover a lot and will give you peace of mind.
BUY – Some sellers will give a home warranty for one year and you can negotiate into most deals if they don’t. It will not cover everything and you will have to pay a service call, but it will give you a similar peace of mind.
INSPECTING HOME QUALITY:
BUILD - Inspections are done by village officials for code requirements. Typically builders do not allow outside inspectors.
BUY - Inspection is done by your own licensed inspector that you hire and pay for code requirements.
BUILD – With new communities, everything will be new and shiny. But depending on the stage/phase of construction you buy in, it may take a while to get there. If you buy early, you will be living in a construction zone for a while and will have to wait a little while or not for neighbors.
BUY – Established neighborhoods, trees, landscaping and no construction zone. Neighbors are instant. But need to look around to see if everyone is keeping up their homes.
BUILD – New is always more expensive so you will be starting property values on a high note and then how well they are maintained depends on future value like anywhere else. There will always be a newer neighborhood or a newer home. But in the ranking, as long as you don’t over pay, values should maintain or increase.
BUY – Established neighborhoods value will depend on surrounding homes, when they have sold, if they have been updated and kept up. Neighborhoods do change around as older people move out, younger people move in. Check areas you are looking for. Values depend on schools, crime, area appeal, etc. As long as that is maintained, values will follow.
BUILD – New construction always has the higher taxes in the area as they are assessed at today’s prices.
BUY – Depends on what has sold in the area. If the area is older and just starting the turnover sales cycle, could be an opportunity to get better taxes. Taxes are based on the surrounding area comparables and are typically slower to increase by margin of area value increases, but not assessed at today’s dollars.
BUILD – You can often make changes and get exactly what you want out of the gate. It will not be free, but you can budget for that and it can be a part of your mortgage.
BUY – If you want changes, you will have to make them after you close. There are some possibilities for rehab loans that will give you money and a couple months to change.
ESCROW – WHAT IF?
BUILD – You will have to give builders up front money – your down payment. Builders are NOT held to the same laws as Realtors, Attorneys or Title companies regarding escrow. Builders do not have to keep it in a separate account. A few years ago, this became a glaring example of problems when some builders went under and people did not get their homes. Some builders filed bankruptcy and did not give escrow deposits back to people. At that point, people had to sue to get whatever they could back. You can insist that your money be held in escrow by a Realtor, Attorney or Title company, which will come at a cost to you, unless it is your Realtor, if the builder allows.
BUY – Earnest money is held in escrow. If the seller does not close for some reason, your money is secure and protected by law.