Is it really cost-effective to build a new home? Let’s look at its pros and cons

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A home is most likely to be the single biggest investment a person makes in his/her life. Majority of home buyers spend a considerable amount of energy and time in designing and/or looking for their perfect home. The process of house hunting involves several different factors like market trends, location, property condition, homeowners association fees, involved property tax, price of the property and more. Apart from all these, every buyer normally has his/her own unique wish list that includes items of specific needs and wants.


Although homebuying process entails making many such important buying decisions, one of the critical choices that you’ll need to make during initial stages is whether to buy an already existing house or build a new one.

As per the National Association of home builders (NABH) report, the median cost of purchasing an existing home in the United States was around $ 221,600 in November 2015, while the cost of building a new one was $ 305,000 for the same month.

Since building a new home may work out to be more expensive, you may feel more inclined towards purchasing an already existing one. However, you’ll be pleasantly surprised by all that you can afford if you do decide to build a home from scratch. Builders are all the more forthcoming in offering good discounts as home constructions keep them and their crew in business.

Let’s make this decision easier by taking you through the pros and cons of constructing a home.

Pros of building a new home

Discounts on construction materials – You can always ask for handsome builder discounts if you work directly with suppliers, such as your local lumber yard. Many suppliers provide even better discounts if you make bulk purchases. You can expect a discount of anywhere around 10% on millwork and lumber. The savings can be even better when you go out to purchase lighting fixtures and other types of fittings.

You get everything new – You’re most likely to incur many hidden costs when you move into an already existing property, as you’ll need to make several minor/major home upgrades that may not be all that obvious at the time of purchase. To give you an example, if you buy an already existing 2000 sq. ft. home in LA and want the exteriors repainted, the bill for the entire project can be anywhere between $ 2400 to $ 5500. Would you be willing to fork out that kind of money after having spent a good amount of money on the property already?!

You get exactly what you need and want – One of the biggest advantages of building a new home is that you’re more likely to get exactly what you need and want. A large majority of people consider this factor the biggest influencer in their decision to build a home from scratch.

More energy-efficient – A brand-new construction is more likely to be more energy efficient, incorporating new energy codes, including better air filtration, installation and HVAC (heating, ventilation and cooling) standards. Having an energy-efficient home is great for the environment too, and can save you significantly on your monthly utility bills.

Less number of health concerns – A newly constructed home is most likely to have lesser amount of toxic materials and health concerns (associated with mold, lead paint, asbestos etc.) that are a common feature in older constructions. Instead, you can use good quality electrical fixtures, plumbing fixtures, efficient toilets, Energy Star rated or green appliances in the new home, making it a comparatively more sustainable abode in the longer run.

Better resale value – Although you may have to incur many upfront costs when building a new home, you can easily recover your investment, and even make a handsome profit, if you decide to sell it later. It’s no news that new constructions always fetch better prices than the older ones.

Better emotional connection – Keeping money matters aside, building a new home can give you a great amount of satisfaction you can never achieve by purchasing an already-existing property. You’ll have a much better emotional connect with a new home.

Cons of building a new home

Time-consuming – A new construction requires anywhere from 4 to 6 months’ time for completion. It can be a pretty long time for you and your family to wait.

Design and style limitations – You may need to limit the styling aspect of your home depending on your budgetary constraints. Making plenty of changes and investing into upgrades can also spike up the overall costs.

Builder profits – Any homebuilder would obviously add his/her own margin to the cost of construction when taking on a home construction project. This is also one of the reasons that building a new home is considerably expensive than buying an existing one.

Legal considerations – Any agreement you make with a homebuilder would most likely limit your rights in the event that any issues crop up during the construction phase and you need to take legal action against the builder. Therefore, ensure that you read all such documents carefully and take some well-qualified attorney into confidence before entering into any such agreement.

Overall costs – The overall cost of building a new home can be extremely high considering that you’ll have to purchase land and then build a home on it. In addition, since the cost of materials has arisen over the years, a new home would automatically be more expensive than an already existing one (which was constructed using less expensive materials long ago).

Stringent building codes or energy policies – Building a new home can work out to be even more expensive, especially if the building codes and rules have changed for the concerned area, over the years. New homes may need to be built with more stringent energy codes, in order to withstand extreme winds, or constructed at higher elevations in regions vulnerable to floods.

Hidden costs – Apart from the commonly known construction costs, a new home may involve a good number of hidden costs that can significantly dent your pocket. Some of these hidden costs are landscaping expenses, furniture cost, window coverings, fences, upgraded finishes and more.

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