Buy or Build?

For various reasons, the current weakness in the housing market has chased away many would-be buyers and investors. But due to the basic tenet of supply and demand, more and more deal-seekers will eventually begin trickling back into the marketplace. And, make no mistake, existing homeowners as well as home builders will certainly be glad to see them.

If you're thinking about buying a home, making the basic decision to purchase is just the beginning. You'll also need to consider which option is best for you: having your new home built from the ground up, or purchasing an already existing property. Listed below are a few points to consider as you progress through the process toward your final decision.

To begin with, choosing the right home is an important step. After all, this is an item that you'll (typically) have for a long time. Moreover, a home mortgage is one of the biggest expenses that you will ever incur in your lifetime. We all want to get the best home loan rates available, but we also want to get the most house that we can (and the house that best suits our needs and tastes) for the money that we'll have available to spend.

This leads us back to the choices of building or buying. Some rationales for one over the other may be personal and even illogical, such as being the first person or family to use the bathrooms or walk barefoot on the carpeting. Or perhaps we just don't want to get stuck with that hideous wallpaper that was popular fifteen years ago. Such reasons may not necessarily be as frivolous as they first seem. Each of these things and countless others could add up to thousands of dollars in expenses after you've purchased the house. For example, the carpets might hide problems with the underlying wood; the toilets could have hairline cracks that cause problems six months down the road.

Be sure to consider the age of any existing house you're looking at. Most original home warranties are good for ten- to fifteen years, so a house that's approaching that age could be a prime candidate for extensive home repairs that you didn't count on. It takes careful inspection and research to purchase an existing home and not get burned with hidden expenses.

Initially, building a house sounds like a great idea and a lot of fun. Pouring over plans and swatches is exciting, but don't forget that this is an expensive venture, no less expensive than buying an existing structure. Unlike an existing house, however, the vast majority of your costs and potential problems will arise on the front end.

If you do choose to build, there are a few ways that you can go about it. You can build in a new development. In today's weakened housing market, builders are routinely offering perks to new homebuyers that build in their planned neighborhoods, throwing in upgrades that normally cost $10,000 or more at a steep discount or even for free. On the other hand, if you own some land that you'd like to build on, you'll need to find an independent builder, but do your homework here. Not all builders are reliable, and what's contracted to be a six-month project could turn into a year or more. Be sure to check all builders and contractors through the Better Business Bureau.

Additionally, you'll have to pay for plans, inspectors, surveys, and changes in the price of materials. If it costs the builder more, the extra expense will be passed on to you. Furthermore, some lenders may require that a significant portion of the mortgage (if any) for your land be paid off before securing a loan for the building. This could mean an even longer wait and expense for your new home.

Consider all aspects carefully when deciding whether to buy or build. There are pros and cons for each choice. Taking your time in the beginning to make the best decision will pay off in the long run, ensuring that your family will get the right house, in the right location and at the right price.