Choosing a New Home: New Construction or Existing?

by Craig Axelrod
July 13, 2009

Are you thinking purchasing a new house in a newly developed development? Are you attracted to the sparkle and style of new construction? Are you set to make the move to a newly built house, but don't know what questions to ask?

Purchasing new construction is significantly many than buying a used home. It isn't always harder (in many ways it's easier) but you do need to consider different factors and ask many questions.

With older construction, you need to bring in an engineer to inspect the home and look for shortcomings. Many used home will have problems, and very often the repair will fall on the new homebuyer. From the seller's angle, their offering it at this price for the condition it's in; while the condition is not perfect, you're not paying for new construction.

In other words, they're charging less for a older house because it needs repairs.

New construction, in comparison, should be delivered in excellent condition. While you will definitely need to do a walk-through inspection prior to closing, the procedure is much simpler. During construction, you can very often inspect the progression of building as it is being completed. If you see something that is an problem, you are able to quickly correct it during the building phase as opposed to going back and fixing it at a later date. Since many repairs and existing houses are the result of the age-such as split foundations, sagging walls, leaky ceilings, and broken pipes, damaged faucets, cracked tiles, old windows, lack of insulation, etc., you could have very little of these problems with a newly built house.

While you may surely hire an engineer to inspect a newly built home, they're generally searching for issues that generally are not present in a new house. Also, since most new homes carry a warranty, you have a level of protection you would not have with a used home.

Don't be fooled by the cost of an old home. The asking price is just one piece of the picture. The additions and repairs necessary to get the home in the way you want could add tens or hundreds of thousands of dollars to the cost of that home. Furthermore, you often need to come up with that money "out of pocket." In contrast, the newly built home is in as good of condition as possible, which is built into the asking price, and can be paid for with your mortgage.

Let's look at an example: a new construction in Commack New York that is over 3600 sq.ft. is just over $1 million. The home is in brand-new excellent condition and ready to move-in. A similar "used" house in the neighborhood of the same size may be $950,000. While it may seem that you "saved" $75,000 on a used home, you're purchasing a home that's 20 years old, will last 20 years less, and already has twenty years of wear and tear. Since most homes have a useful life of 60-75 years, you'd be buying a home with less long term value.

With existing houses, you may need to renovate. The kitchen could need to be fixed, bathrooms updated, and serious repairs made. The used house may not be the exact layout you like. This may require structural changes to the home - which could warrant six months of additions while you're living in the house. These remodeling could cost $50-$100,000 and will be money you will need tocome out of pocket. Had you bought the new house for slightly more, you would not need to come up with an additional $75,000 out of pocket, would not need to live free six months of construction, and would have a perfect ready to occupy a house on the day you close.

So does this mean new homes are perfect? No, but they are the better choice. When talking about something this size and the scale of the new house, there may be small issues the day you move in. It is easier to deal with issues with a creditable builder during the construction process than it is to deal with them on your own after you have purchased the home and have no one to turn to. Items such as a leaky faucet or broken tile can easily be repaired or replaced by the builder at no additional cost whereas doing such repairs on your own with the older home needs time and money on your part.