Building Vs. Buying a Home

Buying a home is the largest purchase most consumers make during their lifetime. Compared to building a home, buying a house is relatively easy. The allure of owning a brand new custom built home is often enough to brave the additional work and stress required when undergoing a major construction project.

Tract

Building a new house does not necessarily mean that house will be a "custom" home. Custom implies the house has been designed specifically for the original owner. There are several ways to have a house built, where it may not be considered a custom home. One way is to purchase property in a new housing tract. Typically a buyer will choose between several available house plans offered by the tract developers. The buyer may be able to make design choices, such as flooring and colors, as well as making minor changes to the floor plan. Some contractors will offer to build their floor plans on an owner's lot. The potential homeowner may be able to make changes to the plans.

Custom

The advantage of building a custom home, as opposed to buying an existing house or house plan, is the ability to obtain a home designed specifically to fit the owner's needs. Instead of living with the choices a previous homeowner made, the consumer will be able to make their own choices. The homeowner typically hires an architect to design an original floor plan based on the homeowner's wishes, such as number of bedrooms, baths, kitchen layout and style of architecture.

Cost

The housing market will determine if building is more or less expensive that buying a comparable pre-existing house. For example, if it is a recession with a high number of foreclosure properties on the market, a homebuyer might get more house for their money by purchasing a pre-existing home. If the housing market is robust, building a house could bring the homeowner more for their money. Another consideration is the availability of build-able lots. If lots are scarce and selling at a premium, the overall cost of building will increase.

Effort

Purchasing a home is a fairly straightforward process. If the buyer needs funding, they must first connect with a lender to qualify for a loan and obtain a loan approval letter. Next they must locate a house to purchase. One easy way to do this is hire a Realtor to do the work. This is not an expense for the buyer, as Realtor's fees are typically paid by the seller. Next the house goes through the escrow process, which the Realtor and title and escrow company can help the buyer move through.
When building a house, the consumer must purchase a suitable lot, verify utility and refuge availability, hire an architect to design the floor plans, hire a contractor to build the home, deal with the local building departments for necessary permits, obtain construction financing, and be prepared to help choose fixtures, appliances, landscaping and more.

Reputable

When purchasing a house, the buyer's concerns include obtaining clear title on the property and evaluating the house's overall condition. A title company will help determine if there is clear title on the property and a home inspector can provide an expert opinion on the property and recommend necessary repairs.
When building a house, the consumer needs to successfully pair a lot with a house plan. Some residential lots are level and require minimal preparation, while others can require thousands of dollars in grading, backfill or retaining walls. Choosing the wrong builder can financially impact the homeowner. If the contractor's work is shoddy, the value of the house will decrease, and if the contractor fails to pay sub-contractors, liens can be attached to the property. It is the consumer's responsibility to verify there is insurance on the construction project.

Stress

Building a home can be a stressful process for some consumers, especially for the novice. In many cases married couples report the endeavor was a strain on their marriage. There are many decisions to be made, and it may take 6 months to a year, after construction begins, before the house is completed. Some consumers sell an existing home and use their equity for the construction project, which will mean renting during the building process and multiple moves, which can cause stress. Other consumers obtain construction loans, whose payments may increase after a specific time frame, adding stress if the project is not completed on time.

Resources

• Construction Glossary