Buying vs. Building a Home: 10 Things to Consider

Moving into a new home is one of life’s biggest milestones. Whether you’re picking out your first home, relocating to a new neighborhood or city, or buying a second home in your favorite vacation destination, it’s an exciting (and sometimes nerve-wracking) time. When shopping for a home, you’ll face a myriad of questions. Single-family home, townhouse or condominium? City, suburbs or rural? Big backyard with room to roam or low-maintenance patio? While the answers to all of these questions are important, there’s one question that you should answer first: Do you want to buy an existing home or build a brand-new home? If you’re having trouble weighing the pros and cons of buying vs. building your next home, consider these 10 factors.

1. Where you want to live

Your target neighborhood can play a big role in your buy vs. build discussion. For example, if you’re looking to live in a densely populated city or in an historic district, land may be hard to come by or be very expensive. But in sparsely populated areas, you may be able to find an affordable lot on which to build your dream home. Of course, in urban areas, there’s always the opportunity to tear down and rebuild, but that can be a costly proposition.

2. Your budget

Speaking of expenses, your financial situation and home budget are always important factors. In general, buying an existing home is more affordable than building a home, but it depends on your target real estate market. It can also vary based on the cost of building materials, labor prices and the level of finishes you want. If you’ll be financing your home, consider that traditional home loans, like a 30-year mortgage, are easier to obtain and often have lower interest rates than land loans or construction loans. This is because lenders consider land and construction loans riskier. You may also be asked to make a larger down payment on a land loan. Finally, if you are considering building, you’ll need the financial flexibility to both pay the land loan and cover the construction costs, while also paying for housing until your new home is finished.

3. The local real estate market

Sometimes, there are factors outside your control that can affect your buy vs. build decision. Let’s say you’re buying a home in a competitive real estate market, one where the demand outweighs the supply of homes for sale. This is called a seller's market. In a seller's market, buyers can expect higher prices, limited homes to choose from and stiffer competition. Buyers often have to compete against each other, which means that sellers have their pick of multiple offers. It’s common in a seller's market for people to turn to new construction to avoid some of the stress of trying to buy in an ultra-competitive landscape.

4. Your moving timeline

Buying an existing home is undoubtedly faster than building a home. Once you’ve found a home you love and are under contract, you can expect to close and move in within 30 to 60 days if there are no home inspection, appraisal or financing challenges. Building a home takes, on average, six to nine months, and this does not include the planning, permitting and inspection phases nor account for any delays that pop up along the way.

5. Tolerance for maintenance and repairs

One of the best things about a brand-new home is that it should be blissfully free of major repairs and maintenance — at least for a good long while. In a brand-new home, all the big-ticket items are new: HVAC system, roof, windows and appliances. This can be especially appealing to people who don’t enjoy home repair and maintenance projects, or those who want to avoid unexpected expenses. In fact, many builders offer home warranties that are valid for a set period of time after closing. And your new appliances should all come with warranties.When you buy a home that’s had previous owners, be sure to ask about the age of the home’s major systems. Before closing on a home, it’s smart to pay for a professional home inspection that should uncover any problems in time for you to negotiate repair costs with the seller. Sellers are required to disclose major issues that they know about, but there’s always a risk that something unknown is waiting in the wings.

6. Layout criteria

If you have very specific layout needs, building a home could be preferable to searching far and wide for a home that meets your specific needs — things like mother-in-law or rental suites, home office space, barns or outbuildings. While you could always buy an existing home and renovate it later, large structural changes are often expensive and time-consuming to complete. If your home wish list is more traditional, you may more easily be able to find an existing property that works for you.

7. Design aesthetic

Even in a buyer's market (when there are plenty of homes on offer), it can be hard to find one that checks all the boxes for your preferred home style. If you have a specific design aesthetic in mind — Modern, Contemporary, Mid-Century Modern, Craftsman, Tudor or something even more unique — you immediately narrow your choices. That’s why building a home can be ideal for someone who wants to achieve a very specific look. Building your own home ensures you can get the style you want, from the architecture all the way down to the interior finishes. This is especially appealing for design-minded people who want to be involved in designing and decorating every aspect of their new home.

8. Energy efficiency

If having an earth-friendly home is important to you, new construction might be the way to go. Today’s homes are built with energy efficiency in mind, which can mean lower energy costs and a lessened environmental impact. It also means that you’ll be able to pick out materials and equipment that are energy efficient and sustainable, like tankless water heaters, heat pumps, double-pane windows and salvaged wood.

9. Landscaping type

A new home lot is a blank canvas and, depending on how much land clearing has been done, may be void of mature landscaping like trees and bushes. If you’re looking for a home with lots of mature landscaping — large trees, lush foliage and an established lawn — you might want to consider buying an existing home. This can save you money, as it can be very expensive to landscape around your new home, given the cost of hardscapes, fencing, plants and sod. Building a house is no small feat. It’s time consuming and complex, and can be stressful. You’ll have to hire a general contractor or manage multiple contractors and vendors, juggle timelines, review contracts and make a lot of decisions along the way. You’ll also have to be comfortable with changing plans, delays that crop up and other unexpected hurdles. Ending up with your dream home is often worth the effort, but if you don’t have the time or patience for a new build, choosing an existing home might be the right path.

The best of both worlds

If you’re trying to decide whether to buy or build a second home in a vacation destination, consider a Pacaso. Pacaso second homes are luxury turnkey second homes available for co-ownership in popular destinations across the United States and beyond. Buying a Pacaso is a win-win. Every home is already built — some are new construction, others recently renovated — and all are professionally designed, fully furnished and maintained, and ready for you to enjoy. Best of all, you can become a co-owner of a Pacaso second home starting with a ⅛ share, putting your dream vacation home within reach now.

Buying vs. building a home: 10 things to consider