New home vs. used home -- which is for you?
The durable argument of whether it's best to buy
a new home or older one dates back centuries. And it's never quite
For every qualifier, there's a disqualifier. For every
"on one hand," there's an "on the other hand."
Homebuilders and old-line real estate sales people
might even bicker heatedly about the topic, with their own "Looks-great!
Less-fulfilling!'' twist on the old light-beer argument.
The truth is, builders can never fully re-create
the nation's quaint old neighborhoods, where every house was built
architecturally distinct from the neighbor's. And home buyers will
never be able to fully assemble their dream homes the way they can
on a vacant lot with a fantaz view.
So the choice between the two is always a relative
call, not a dollar-and-cents one, says business author and investment
expert Ric Edelman.
"There are many factors beyond economics that
drive the decision," says Edelman. "Buying a home should
be more of a lifestyle decision, because so much of the economics
are beyond your control."
Edelman, who penned such bestsellers as "The
Truth About Money" and "Ordinary People, Extraordinary
Wealth," has built two family homes over the years and is now
fixing up a "resale" he purchased..
"One of the fundamental mistakes that consumers
make is a rush to judgment," he said. "They often dismiss
a new home or a resale when one is far more appropriate for them
than the other."
So how do you decide which best fits your needs and
Below are a few pros and cons in the own-resale debate:
Locale: The oft-recited
real estate mantra of "location, location, location" is
still relevant. Most older, established neighborhoods are in the
town's center, which can be good or bad depending on the vitality
of your urban area. New subdivisions -- and newer schools -- are
generally on the outskirts. But the expense of a daily commute is
one factor that many buyers forget to consider, Edelman said.
Price: Existing homes
are usually less expensive per square foot, in part because of escalating
land costs in new subdivisions. But ownership costs are considered
more predictable -- almost inevitable -- in a new home, especially
considering the cost of a code upgrade or remodeling of a vintage
home. Some builders will include closing costs as part of their
price of a new home, although that builder has a set amount he must
get from that home to make a profit. Price is more readily negotiable
for an existing home. Also, a hidden cost in many new subdivisions
is a homeowner's association, with mandatory fees and other assessments
as well as architectural controls that may surface at remodeling
or expansion time. Do your homework.
Move-in complications, advantages:
The resale is sitting there waiting for occupancy, warts
and all. But the wait for a new home can seem interminable, though
the buyer can check on quality control as it's being built. If your
finished house is among the first in a new subdivision, prepare
to navigate through construction teams and precariously misplaced
nails for months on end. And don't forget that daytime hammer serenade.
moving into new neighborhoods are more homogeneous -- the same things
that appeal to you also appeal to others like you," says author
Edelman. "When a development goes up, it offers an opportunity
for you to help create your own neighborhood lifestyle. If you want
to move into community where your children have lots of playmates,
that may be for you." In an older community, he said, people
have moved in and out over the years and you tend to get more diversity
of neighbor backgrounds that include older people, singles, families
Living space and design:
Lower building costs of the past mean more home for the money for
the buyer of a resale. Resale basements may have been finished out
nicely for additional living space. On the other hand, new-construction
homes often employ more efficient, innovative uses of square footage
and property. Also, newer "zero-lot-line" developments
offer more living space per square foot than a same-size lot that
surrounds a resale.
Customization: In a
new house, you can pick your own color schemes, flooring, kitchen
cabinets, appliances, custom wiring for TV's, computers, phones
and speakers, etc., as well as have more upgrade options. Modern
features like media rooms, extra-large closets and extra-large bathrooms
and tubs are also more attainable in ground-up construction. In
a used home, you rely largely on the previous resident's tastes
and technological whims, unless you plan to farm thousands into
a remodeling and rewiring. Be warned: It's unwise to wallpaper for
at least one year in a new house until it settles, says Edelman.
The wallpaper will tear. (But it is OK to paint.)
Character: While many
new homes are built in "contextual" style, which blends
elements of the old and the new, it's still hard to emulate a pre-Civil
War house in New Orleans, a Victorian home in San Francisco or a
brick Row House in Boston. Hardwood floors, vaulted windows, high
ceilings, built-in cabinetry and other design nuances express a
certain individuality in older homes that's nearly impossible to
copy. Many new-home buyers believe they put the character in their
Safety: Builders have
to follow very strict guidelines in new-homes and additions, especially
in the West and Northwest, where earthquake safety standards must
be observed. In general, new homes are usually more fire-safe and
better accommodating of new security and garage-door systems.
trees, robust shrubs, gardens, rose bushes and perennially well-watered
lawns are some of the rewards of an older home, while most new homes
are apt to yield wee trees, fewer walkways and sparse vegetation.
Landscaping is an expensive proposition today for the cost-conscious
Advantage: new construction. Game, set and match as well. New-home
designers can use new building materials such as glazed Energy Star
windows, thicker insulation and other technology that will lower
future energy costs for the owner. Most states now have minimum
energy-efficiency requirements for new construction. Kitchens and
laundry areas in new homes are designed to house more efficient
energy-saving appliances. Older homes, unless they have undergone
an energy retrofit, usually cost much more per square foot to air-condition
Amenities: Many new
subdivisions offer neighborhood clubhouses, swimming pools, playgrounds,
bike and jogging trails and picnic venues for residents. Older homes
don't, although many have better access to urban shopping venues
and restaurants because they're part of old, self-containing city-planning
Maintenance: The charm
of an older home often goes hand in hand with increased maintenance,
especially if the previous owner(s) were not vigilant in upkeep.
Building materials may be harder to replace or match in an expansion
or remodeling. New homes generally come with at least a one-year
warranty for the repair of some problems that develop as it settles
into its foundation. But know what your warranty covers. Many are
Taxes: Newer homes
tend to spring up in less-developed, outlying municipalities, which
may impose higher taxes on you because they're subsidizing fewer
inhabitants than the central metropolitan area. Your community will
still need fire and police coverage, sidewalks, sewers and probably
a new school. A more established home in a built-out area has a
little more predictable tax structure.
Increasingly, "new" is no longer an option
in some towns, and neither is "old" for most folks there.
Realtor Graham Baxter of Los Gatos, Calif., operates in the Silicon
Valley market, where most of the sales are $1 million plus and there
is virtually no new housing stock. "The only new homes that
tend to get built are the result of tear-downs," he said.
To find new subdivisions and less expensive homes
in the region, "You have to go 50 miles from the Valley to
Tracy or Stockton. But you'd be surprised how many people make that
Compromise is obviously the name of the new-or-resale
home-buying game, as it becomes apparent that the perfect house
and perfect site probably don't really exist. And finding what you
want can be a protracted headache.
"Buying a home from anybody is much more complicated
and challenging than people realize," says Beau Brincefield,
real estate attorney and author of "Brincefield's Guide to
Buying a Home; The Twenty-One Biggest Mistakes People Make When
Buying a Home."
With new-construction homes, "You've got all
the same problems you have with resale homes and then some,"
says Brincefield, who is a frequent lecturer on real estate and civil
litigation. Brincefield says dozens of Web sites are created by people
who bought defective new homes from builders but who have since discovered
they have little recourse. "Obviously, there are a lot of good
builders who stand behind their homes...and most people go through
this process with no problems," he said. "But those aren't
the ones I see."
Some builders create no-asset, limited-liability companies
in order to buffer themselves from claims, he said. Home warranties,
especially those purchased from third-party warranty companies,
usually aren't as all-protective as consumers first believe. Read
the fine print, Brincefield advises.
When considering purchase of a new home, make certain
you are dealing directly with a builder who has a substantial net
worth and not a no-asset subsidiary, he said. Avoid giving builders
upfront money, he says. "If they have your deposit and go under,
you won't get either the house or your money back. Make sure the
purchase contract is contingent on financing."
Whether buying a new or resale home, always hire a
properly credentialed individual to inspect the premises before
you settle, Brincefield said. "Even some nationally known home
inspection firms may send out an individual inspector who is minimally
qualified to perform a good inspection."
Because of the contract forms that many inspection
firms use, the company typically has little financial risk for a
poor inspection, Brincefield warns. "If they miss a bad roof,
all they have to do is refund you the $200 or $300 (fee). Anytime
you are given a written contract to sign, you should read it carefully
and make sure you understand what you are signing."
Buying a new or resale home without an experienced
real estate attorney "is like playing Russian roulette,"
he said. "Sure, there is only one bullet in the chamber, so
you're probably going to make it out all right. But there's always
that one bullet."
Potential buyers should also scope out any vacant
fields in the area surrounding their planned purchase and check
with the city or zoning board to determine how that land is zoned,
experts say. Recent buyers into both new and established subdivisions
across the country have been stunned to discover the long-fallow
retail parcel down the block will soon give way to a big-box retail
Because they like the customization options, first-time
home buyers will sometimes opt for a new town home instead of a
resale, with intent to move up to a single-family home in a few
years, Edelman said. But that means the same builder, who will probably
continue to build new units nearby for the next few years, will
in essence determine the future value of that town home. That means
the selling price for the owner of the town home could be tied to
-- or just below -- the price of that newer town house the builder
is still constructing.
While buying a used or new home should be largely
a lifestyle decision, that still shouldn't prevent the potential
buyer from also thinking like a seller, Edelman said.
"For you will be one someday," he said.