Should I build or buy a house? The pros and cons for homeowners

To build or to buy? The age-old question of which is better when it comes to purchasing a home is relevant now more than ever due to rising mortgage rates and lack of inventory.

If you’ve been on the fence about whether building a house or buying one is the right choice for you, there are several factors to consider when making your decision. Things like cost, maintenance and energy efficiency should all be taken into consideration, so you know you’re making the right choice.

We’re covering the pros and cons of building a new house or buying an existing home so you can go into one of the biggest decisions of your life with confidence.

Pros of building a house

Building a new house is an exciting adventure. With brand new fixtures and an updated design, it can be tempting to dive into the world of new construction in order to build your dream home. Here are the advantages of building a house that can make this a great option for first-time or seasoned home buyers.

Customization options

When you build from the ground up, you get to have a lot of say in the design of your home. From the floor plan to the finishes to the paint colors – it’s your choice. You get to create your own dream home designed to your personal style and taste.

No bidding wars

You’ve probably heard the horror stories of real estate since COVID-19 as people bought homes way above asking price and waived inspections. This led to construction bidding wars on even the least desirable homes, making it almost impossible for the average home buyer to secure a deal. When you build a house, there’s no competition.

Energy efficiency

Regardless of whether you’re concerned about the environment, having an energy-efficient home is important. With modern appliances and systems in your home, you can save a ton of money on utility bills – an advantage not to be overlooked.

Less maintenance

Like anything that’s brand new, it’s unlikely to break for a while. Building a house means brand new appliances, systems and materials ­that typically come with builder warranties. You shouldn’t have to worry about getting anything fixed for a few years, giving you ­ – and your wallet – peace of mind.

Cons of building a house

Of course, building a home isn’t all pros. There are some disadvantages to consider before pulling the trigger on a new build.

Difficult financing

You could potentially need three different loans in order to build a house. Land loans, construction loans and traditional mortgages all come into play to help you secure your home. A land loan is needed to purchase the plot of land where your house will be built. Your construction loan pays the contractor to build the home. And once construction is complete, you’ll need a mortgage to finance the actual house. These loans can be tough to secure if you don’t have great credit or enough of a down payment to offset risk to the lenders.

Long, expensive process

Building a home is a long process. With labor shortages and material delays, it could take months or years to finish the construction. You’ll also need to be prepared for unexpected costs to occur because contractor estimates aren’t always exact.

Less desirable location

Most of the lots in neighborhoods close to the best amenities are already taken or built upon. New construction usually occurs in the outskirts of town where neighborhoods are in development. Expect a commute to the downtown and fully developed areas when you build a new home.

More effort

Designing your dream home doesn’t mean you can sit back and do nothing. You’ll be involved in the process, which means taking the time to decide on finishes, review contracts, approve changes and manage the finances. However, if you choose a general contractor that uses construction management software, a lot of these tasks can be done from the comfort of your home – so you’re not running back and forth to the job site on your lunch breaks.

Pros of buying a house

If the cons of building a new home outweigh the pros for you, take a look at why buying an older, existing home could be the better option.

Lower cost

As of June 2023, the median sales price of a new home was $415,400 vs. $410,200 for an existing home. Although there’s not much difference, you’ll likely find home loans with better interest rates and lower down payments compared to land loans that are more risky – and therefore more costly.

Long purchase history

Having access to the home’s purchase history will give great insight into its potential appreciation value. You’ll be able to make an educated guess as to how much equity you can expect to gain over time, compared to a new home that has no past information to go off of.

Unique architecture

With today’s developers building homes on a large scale, many houses tend to look the same. Unless you splurge on a very high-end and custom build, you’re likely to find yourself in a cookie-cutter home. Buying an older property means you can enjoy the unique architecture of a mid-century, Victorian or Tudor style home.

Developed landscaping

If you love a yard with lush trees, bushes and flowers, an existing home is your best bet. The landscaping will have had years to grow and mature, meaning you’re more likely to find a home with beautiful greenery ready to go. When building a new home, you’ll have to pay for sod and trees to be planted ­­– and your trees will take years to grow and provide decent shade in your yard.

Cons of buying a house

Before making the decision to purchase an existing home, take the time to consider the disadvantages and determine if this option makes sense for you.

Cost of maintenance

An older home will likely need systems replaced, such as the roof, HVAC, electrical or plumbing, in order to keep up with current safety regulations. You could also experience foundation issues, termites and a whole host of other problems that would need to be addressed. If you find any of these during your home inspection, you can ask the seller to lower the sales price or fix them before closing. However, with low inventory comes more competition. Someone else may be willing to overlook these issues and even pay more than asking price while skipping the inspection.

Utility costs

We mentioned above that newer homes tend to be more energy efficient. Older homes have older materials and systems, which can lead to higher electric, gas and water bills than you’d expect to pay with a brand new build. You may want to consider updating the systems to meet current building codes, but this will be a large upfront cost.

Bidding wars

The competition for existing homes – especially well-priced ones in desirable areas – is fierce. With interest rates the highest they’ve been in 20 years, fewer homeowners are putting their houses on the market. Fewer homes available means buyers are doing everything they can to secure a property, including waiving inspections and appraisals, offering above asking price and making all-cash offers. If you don’t want to compete for a home, buying an existing property might not be for you.

Outdated floor plan

In today’s design world, open concept is king. People are tearing down walls left and right in order to make their spaces feel larger. Older homes tend to be more closed off, creating lots of smaller rooms rather than fewer large ones. If you prefer modern layouts and larger spaces, you may have to pay to remodel your house or consider building from scratch.

Should I build or buy a house?

Whether you’re a first-time or experienced home buyer, this question can be hard to answer. The best way to decide is to pick your top three pros – and whichever option has the majority, that’s your best bet! But just make sure the cons associated with that choice are things you can manage.

If you decide to build a new home or renovate an existing one, be sure to choose a contractor that uses Buildertrend. Our project management software makes the process smooth and enjoyable for homeowners, while giving you peace of mind that your contractor is organized and dependable.

Learn more about why Buildertrend builders are a cut above the rest and give their clients a superior experience.