As a homebuyer, the real estate market can present conflicts to you. Should you purchase a home that is already built, or should you try to purchase land and build your own home? There are many pros and cons with either of these options so it is a decision that you will need to make based on your needs, budget and what your personal preferences are.
What is an Established Home?
An established home is a home that is already built and has been lived in by at least one other resident or may have had several owners over the years. Established homes may need updating and renovations to make them “livable” or you may be able to move in right away if you are not very bothered by the state of the house you are moving into and do not feel the need to do anything to change it in any way.
Should You Purchase a House and Land Package or Buy off the Plan?
A house and land package are a process where you will purchase land and then eventually construct a home on that land. If you purchase “off the plan” it means that you will not own anything until the process of building the home is completed. Buying a home “off the plan” means that you purchase a home by viewing an ad and from the impressions of an artist with their idea of what the property is going to look like at completion.
Buying Off the Plan
When you purchase a home this way you might need to wait for several long months before you can move into your home. Property values could increase after you have purchased the property and this is a direct savings to you, having purchased your property at a lower price point. There are some risks involved when you buy a home off the plan and those include:
- Limited flexibility with design meaning that you are not able to personalize the design as much as you would like during the construction of your home.
- Results are not as expected. The home that you end up with may not be what you thought you were getting. During construction, developers might make some changes and the results could be quite different from what you had expected.
- Contracts that are difficult to understand. You want to take any contract you are going to enter into to a lawyer to ensure that you understand what you are legally binding yourself to.
House and Land Package – What is it?
The ever-popular house and land package is a combination of a home build and the land which makes it much more affordable for many people. The purchase of a block of land and the organization of the building of the home are done in one process but with two separate contracts. The land is sold by a developer and the home is sold by a builder (to be constructed).
When you purchase a house and land package you will understand the total price of the home and the land at the start of the process, and this will reduce the anxiety that you might experience because you will not encounter unexpected costs in the future. The mortgage is placed on the land and then a second loan (for the construction of the home) is negotiated. You are making payments to the builder during the various stages of your home being built. What are the risks that you should consider before you decide to purchase a land and house package?
- The process could be lengthy. When you are having a home built, there are often delays for many different reasons. There could be a shortage of building materials or changes to plans or even delays for permits. Whatever the reason, you will need to find a place to stay while you await the completion of your new home.
- Understand what is included and what is not. When you look at a plan or drawings of the result it could include many things that are not included in the project. Make sure that you clarify what is included when you sign your contract with the builder. Fencing and landscaping are often extras that are not included in a standard package price.
- Contract negotiations with your builder can be confusing and draining. You should know exactly what you want and how the builder can help you to realize your vision before you get started. Do not sign a contract until you understand what you are agreeing to.
Is a New Home Better than an Older Home?
If you are looking for an older home with different features, then you understand the differences here. You love the older craftsman or character home for the wainscotting and the built-in shelves and cupboards. New homes are more expensive to build and do not have the same quality and features that holder homes do. If you purchase a home that is already built, then you do not have spend the extra time and money getting exactly what you want in a home. You will have to decide what you are looking for in a home and then weigh the options of purchasing an older home or building a new one to meet your needs and desires.
Will a New Home Retain its Value?
When you build a home, you must spend a lot of money on various aspects of the build. This process can be subject to the fluctuations of the market, and this can make it difficult to build equity in the home. Older homes can be renovated, and this will increase their value whereas a newer home does not have the same improvement opportunities. If your new home has trendy features, it may look dated a lot sooner than an older home that is designed in a classic way. If you want to live in your home for many years and do not plan to move, then you will not need to worry about or consider the depreciation of the home’s value since you will not be trying to sell it.
Costs for a New Build Versus Costs of an Established Home
When you are looking to build a new home, most of the land that is available will be in outlying areas which are farther away from the city. The land in these areas might be more affordable, making it more economical to build in those areas than to try and purchase a home that is built in an area closer into the city. If you want to build a home in a city, then the cost of the land will be higher and the availability of those lots may not be very good in the location you are looking to build in. If you have your mind set on building in a city, then you may need to purchase an existing home and demolish that home so that you can build your new home. Building a new home means that you have many added expenses including:
- Loan settlement fees
- Planning and lot preparation fees
- Building costs
- Stamp duty
- Land cost
- Finishing fees
You should have some control over the cost of some of the construction building costs which can bring costs down. For example, you can choose materials that cost less and have basic landscaping completed. A home that is already built is ready for you to move in and you must accept the price with some negotiation to purchase that home. If you can get the home for a cheaper cost, then you can afford to complete renovations and upgrade some of the aspects of the home to meet your wants and expectations. If the already built home requires a lot of updates and renovations then it can cost you a lot of money to have those completed, especially if there are unexpected costs such as electrical wiring or serious plumbing issues that must be dealt with immediately.
What if you want to Demolish and then Re-Build?
If you want to purchase an as built home and then knock it down then you need to be aware of several potential problems, including:
- Rules of local city council that could put limitations on what you want to accomplish.
- Disruptions to neighbours
- You will need to create a solid foundation for your new build.
- You must educate yourself as to whether your house is a heritage home (and therefore cannot be demolished).
Once you have taken the time to consider the pros and cons of either building a new home or renovating an established home, then you can make a better decision on where to look when you want to purchase. Make sure that you understand everything you need to know before you make a final decision regarding the home that you will be purchasing. It will take some time and simple research, but a good realtor can also help you when it comes to finding a property that meets your needs and desires.
