The real estate market around the country has be shaken by the financial instability of the economy, as well as the banking debacle that occurred during the last decade. Financial issues, and out of control lending, caused the inflation of the real estate market, overshadowing any rational thinking that home buyers may have possessed as rationale human beings. The axiom that real estate would never go down, became the rallying cry of countless homebuyers and homeowners. New construction was making builders rich, and the tide just seemed to be never ending real estate prosperity. Little did anyone realize that the real estate disaster that jolted the nation into reality, would eventually offer the type of real estate that was moderately priced as well as consistent with the values of new construction and renovation that we see today. Gone are the days of building a new home for a total of $250,000.00 and selling it, for double the money, with buyers forming a line to present offers. The real estate market has shifted into a marketplace that now provides exceptional existing homes, for reasonable and moderate numbers.
This is the reason why this discussion is entitled, Reasons to buy an existing home.
In most locations, and in most buyers positions, the purchase of an existing home is substantially more economical and practical than the construction of a new home. I am sure that there are several contractors reading this discussion that would like to tar and feather me, however, I will make the point within this discussion, that unless you have a special reason to construct a new home, such as handicap requirements, special waterfront or another type of special location, the purchase of an existing home makes more logical and economic sense.
1.) Location / As we have noted within this website, over and over again, the location of a home is the most influential criteria supporting the home’s real estate value. The same home, in one section of the state, really doesn’t matter what state, can be double the value from one location to another. The location of the home is so important to the value of the home, that it is the one characteristic that cannot be modified. An existing home’s location is a constant and cannot be changed or improved upon.
Therefore, if location is the most important factor in buying a home, where are the existing homes? Normally the existing homes are in the most desirable locations. If there is no home on the land, then in most instances, this was not a prime location for a home. Granted, there are exceptions, such as family land, open land that hasn’t been developed or sub divided, etc., but in general, an existing home is normally constructed on a prime piece of real estate, or at least a better piece of property than can be found to locate your anticipated new home.
If location is important, and the majority of the prime locations have been build upon, then the purchase of an existing home is more than likely to be located on a favorable piece of property, in a favorable location.
2.) Price / The construction of a new home is expensive. Especially, if the home is being built by a contractor for a purchaser. If the purchaser happens to be a builder themselves, then this argument is somewhat diluted. However, if the purchaser is a normal homeowner, without the abilities of a contractor, then the value of a new home will be expensive and the price will inflate as the project moves forward. As I have stated in the past within this website, the price will NEVER go down as the project moves along. It will always go UP!
The purchase of an existing home allows the purchaser to negotiate the price. In addition, and based upon the history of the real estate market in the past, the value of homes has dropped considerably, and has now reached very moderate levels. It would be next to impossible, to list the actual items within an existing home up against the items that will be needed in a new comparable home, and have them financially equal. It is impossible to provide all the amenities within a new home at the cost of an existing home. The more amenities that the existing home offers, the more difficult to match the costs, existing verses new.
3.) Quality / Although a cliche, they don’t build them the way they used to . Granted the windows, doors, siding, insulation, etc. have advanced and will continue to advance. However the finishes of plaster, heavy moldings, even masonry, are not being applied to the residential home, in the same manner as homes constructed several years ago. If the quality of yesteryear were to be duplicated in today’s home building industry, the difference in value and cost would not be close. You will not obtain the same quality and the detail in a newly constructed home that exists in the many existing homes on the market. Of course, if price is no object, and your budget is limitless, then the quality and the detailing can be achieved. Very few purchasers have an unlimited budget.
What qualities am I specifically referencing?
a.) Barrel tile or wood shake roofs compared to asphalt or fiberglass shingles.
b.) Plaster walls compared to drywall construction.
c.) Heavy embellished trims and interior finishes compared to typical colonial or sanitary moldings.
d.) Original masonry fireplaces with authentic surrounds and mantels compared to gas fireplaces and prefabricated mantels surrounds.
e.) Original heavy cast iron radiators with embellished radiator covers compared to standard perimeter baseboard heating with metal covers.
f.) Original black iron exterior electrical fixtures compared to fiberglass or plastic reproductions of the original heavy black iron fixtures.
g.) Real authentic masonry surfaces for walls and floors compared to poured in place concrete surfaces or imitation stone facades.
h.) Copper gutters and leaders compared to aluminum or vinyl gutters and leaders.
i.) Authentic stone walls and masonry exterior retaining structures in comparison to block retaining structures or landscape ties.
The list can go on. The bottom line is that the residential construction of today, does not compare to the quality of the residential construction within the last century.
4.) Amenities / The purchase of an existing home is a purchase of all the amenities that have been added to the home, since it was constructed. There are countless items and conveniences that, in many cases, are included in the existing homes purchase, that you as the purchaser, will find it necessary to purchase, if you were to build a new home. Amenities such as;
a.) Window trims, blinds and shades
b.) Mature landscaping, shrubbery, ground covers, etc.
c.) Driveway, patio, walkway construction.
d.) Porch and deck construction
e.) Interior and exterior speaker and sound systems.
f.) Fireplace accessories
g.) Security alarms as well as data and WIFI service.
h.) Sub pumps and basement waterproofing systems
i.) Interior custom painting, wall coverings and other customization finishes.
j.) Special fencing, sprinkler systems, dog kennels, etc.
This list can go on forever, however the point of the discussion is that when constructing a new home, all the amenities and accessories have to be purchased and installed. In many situations this is not required in an existing home, they are already in place.
5.) Maintenance / In the purchase of an existing home, yes, you are purchasing the homes problems but you are also purchasing the homes solutions. This home has existed for a number of years with inhabitants. These inhabitants have probably already solved some of the key issues within the home. If a pipe was located too close to the exterior wall and it froze, they have resolved this issue. If the roof leaked at the chimney flashings and there is no evidence of this problem, they have probably solved this issue. In other words, the trouble shooting of the home has already been painfully completed. Every new home will have issues, do not let the builder indicate otherwise. These issues will require phone calls, follow up and finalization to resolve them. You as the purchaser of the new home will be responsible for this.
6.) Specialties / What I am referring to regarding specialties is the lawn cutting service, the snow plowing service, the maintenance of the water conditioning equipment, the pool service, etc. When constructing a new home, all the services must be investigated and managed initially by you, the purchaser of the home. When purchasing a new home, all the services that the seller has in place can be shifted to your own account. Granted they may not be the quality or the most qualified service providers, however, they are a start, and can be hired and fired at your own discretion. The existence of an existing home indicates that competent systems of maintenance have already been established, these can be simply assumed by the new purchaser.
7.) Home warranty / In some cases, the existing home may come with a home warranty that will warranty miscellaneous issues during the initial occupancy of the home.
Based upon the value of existing homes and the amount of additional items that will have to be financed, if the purchaser decides to construct a new home as well as the addition of all the amenities that an existing home already has, it is very difficult to achieve any economical benefits of constructing a new home and deciding not to benefit by the real estate market’s current moderate pricing levels.
I was touring an existing home this weekend and the real estate agent, knowing I was a builder, asked me if it were possible to construct a new home with the same amenities, quality and detail of the home we were touring. The answer was a very resounding, impossible. It would be impossible to duplicate the home for the value that the home was presently being offered. I answered this question without hesitation and without any type of uncertainty. The comparison of what I would have to charge to make any type of profit on the home as well as supply the supervision to construct the home would be over 35% greater than what the sale price of the existing home was.
Again, if budget is no object and the sky is the limit, find your location, construct your castle and live happily ever after! If you are not in this elite group of purchasers, then look for an existing home that will satisfy your needs. This is the sensible solution to purchasing a home that will be more economical and practical for the average home buyer.
Look at what is out there, make a deal and enjoy your new home!