Updated: Mar 3
Dreaming about building your forever home? Building a home can be a lifelong dream for some. Making choices about everything in the home, from the floor-plan to the finishes can be a huge bonus.
Deciding on which way to go depends on numerous factors.
1. Where are you located?
The first question: what is the most important factor in the LOCATION of your home - and how much weight does that carry in the overall decision?
Does your area offer a plethora of new build options that allows you to choose from new home developments with builders that are 'ready to go'? Most large cities offer new home developments in the suburban areas surrounding the city. Perhaps you live in an area that has few - or small - new home developments. If you are in Western North Carolina, there are small home developments (in general), as well as a good selection of developments that are built out with just a few homes (known as rooftops) and a lot of homesites still for sale. This was commonplace when real estate began to lose value in 2007.
2. Do you want a brand new energy efficient home, or do you like the charm of an older home?
Second question: what weight does historic charm or being a new owner carry in your decision?
For some of us, the charm of historic architecture in 'historic neighborhoods' outweighs the need for an airtight home! However, for others, the lure of having everything brand new and being the only owner is a game changer. Of course, new homes are also available 'already built' as well as building one from scratch.
3. How much does cost matter?
Third question: how important is the budget?
Check out the approximate figures. Note that these figures can vary widely depending on your particular circumstances. In most markets around the US, an existing home can be purchased between $160-$250 per SF. New homes can be built between $160-$275 per SF on average. However, these two figures are comparing apples to oranges.
The square foot prices for an existing home take into account the land, which the new home build does not. In fact, you'll notice that both ranges are similar, however, the new home price does not take into account the land. With existing homes, the price you see 'per square foot' on popular home search sites includes the price of the land.
The price of the land can vary dramatically. A foreclosure might be picked up for $20,000. The best lots are likely going to be much more. Your expenditure will depend on where you are looking. A small lot overlooking a lake (unless it is remote) will run you $100,000 and up, and any 'special' lot will start at six figures. Then there is the site preparation. In most circumstances, this is going to start around $40,000. This includes the driveway, possible water, sewer and gas hook ups or septic, and any clearing necessary.
If you are looking at a septic - this will likely range upwards of $15,000. If a well is involved, this can vary dramatically. Always make sure that the lot you purchase actually produces water - yes, really - they can be sold in most areas when they do not!
Drilling a well costs $5,500 for an average depth of 150 feet. Most projects range between $1,500 and $12,000. Budget 15,000 - 20,000 to be on the safe side, to include clearing for the well, testing a couple of sites, and putting the well mechanics in place.
PRICING BUILDING A HOME
1) To purchase a 'bargain basement' lot and site prep, we could estimate $60,000, and midrange, $120,000, with premium lots escalating a lot higher. Now add your $200 per SF build cost, for a 2,000 SF home, and the build cost is $400,000. Add your site prep, and the low range is $440,000. Add land cost of, say, $50,000 and the full cost is $490,000 for a 2,000 SF home. Shave off a little to a low point of $180 per SF to build and whatever you can for the lot, although the location of your new build is not likely the place you want to 'skimp' on. 2) Use your estimated costs to compare what you are building to a 'resale' home - one that is already built as a speculative home, or even a home that has been 'lived in'. Comparing that to a 'resale' home per SF price that most are familiar with, equals $245 per SF. Clearly, it's most likely that a new home will put you at a higher per SF price, if they are compared in the same way. Some people are prepared to pay the premium to get exactly what they want.
One way to decide whether to build or buy an existing home, is to calculate how much it will cost you to build your home.
Estimate how much your lot will cost, after searching a real estate website. Click on TYPE and LOTS and LAND.
Add $40,000 to the lot price for site prep. It could be more or less than this, however, that is a good starting point.
Look at the prices quoted by the home builder. If it is the type of builder where you can see a home plan book, add 20% to the price quoted so that you give yourself plenty of wriggle room. If you google articles on home building, you'll see this is often the suggested amount to add as a cushion - (same with remodeling budgets!). If you are looking in a development, make sure you add in all the fees for the upgrades that you choose.
Take the figure that you come up with and search a real estate website in the area of your choice to see what is already built within your range. How does it measure up? Most real estate websites allow you to save that search, so that you can be automatically emailed the moment a new property that fits your criteria is added.
4. What's the importance of timing?
Fourth question: how soon do you want to move in?
The new build out time depends on the complexity of the home, and the builders involved. Some areas (for example, Asheville NC) are dominated by custom-home builders. A new home build here will take anywhere from one year to eighteen months. Some markets are littered with new home builders, and new home developments, where builders have a model home and are continually building homes on large tracts, dramatically reducing build out time. It takes an average of seven months to construct a new build, according to the National Association of Realtors. This is likely quoted for tract home builders, with custom-built homes taking at least twice that time.