Is It Better to Buy New or Old in Today’s Market and Which is Better for Me?

One of the very first steps of buying a house is sitting down and weighing out whether buying a new build or a resale home is a better investment for you personally.  At the end of the day the choice is going to come down to preference, but there are a number of things that should be considered along the way.  When it comes to vintage vs. modern design, you are always going to have a give and take, including the quality of the build itself, energy efficiency, attention to detail, and tradition vs. modern amenities–but the truth of the matter is it’s hard to find a property that has it all (aside from doing a complete demo/renovation on a resale.  But that’s a topic for another day. When deciding between buying new or old, it’s best to look at four primary factors as to what makes one a better investment over another—including affordability, overall maintenance, overall investment, and style.  Looking into the advantages and disadvantages for both new and old in each category can help to narrow down what option works best for you, your budget, and your needs.

Affordability

Affordability tends to to be one of the most imperative factors to consider when buying a home.  What you can pay and what you should pay speak to the type of investment you are looking to make.  The money factor manifests in a handful of ways you may not think about aside from the base price of a home.  Here are some of the factors to consider when looking whether a new build or a resale will be more affordable for you:

New Build

• Advantages:
  • Energy efficiency is a major factor to consider between buying new and a resale.  Newly built homes are required to fulfill much tougher national standards than the homes that were built years ago.  Between windows and doors, insulation, and even appliances, builders today have to ensure everything is to code, as well as hitting national requirements for conserving energy.
  • Mortgages are a huge part of buying a home.  While we will get into the national average cost to buy a newly built home in the next section, it’s important to point out the leverage you have as a buyer when purchasing new.  Most builders and the companies they represent have their own built-in mortgage divisions.  It is much easier to get a loan via a builder’s mortgage division than it is a traditional bank or credit agency.
• Disadvantages
  • As is the case with most things in life, paying for something brand new means you’re going to pay a bit more than if you were to pay resale value.  Estimates show that the national median cost to buy new is 30% more than buying an older home–but, as we will cover in the “maintenance” section, buying new means there will most definitely be less issues with overall, as most homes comes with a minimum of a ten year warranty on almost all appliances, finishes, and features.

Resale Homes

• Advantages
  • The base price of a resale home tends to be lower than a new build (in most cases), with a national median cost of $240,500–nearly 30% less than buying new.
  • As a buyer, you are paying for quality.  Older homes are built with care and a kind of craftsmanship that, frankly, rarely exists anymore.  In historically old homes, a buyer can find moldings and hand-crafted built-ins that you just will not find in a new construction property.
  • Most older homes were built to be centralized and in close proximity to their nearby cities and downtown areas.  This means that with an older home you will likely end up with a larger property, closer to the center of town, with a far better commute.
• Disadvantages
  • Overall, it tends to be harder to get approved for a loan for an older home.  Passing the inspection is the first hurdle but ensuring everything is up to code and won’t cost an arm and a leg to replace is a whole other monster to battle.  Many banks don’t want to take on the risk, or they are more than willing, but at a much lesser cost.
  • While the base price of an older home may be lower, the updates and improvements that need to be invested in add up.  When it comes to replacing outdated essentials, like windows and doors, an extra cost often pops up as the buyer has to consider new regulations in regard to energy efficiency.

The affordability factor is important to consider before choosing between old and new because different buyers have different goals.  Some are looking for a lower cost home with good bones to renovate.  Some are looking for an older home that has been slightly updated but fits their financial requirements.  And some just love the idea of having everything in the home that surrounds them come brand-spanking-new—knowing they will have no major worries about repairs and replacements for at least a decade.  Affordability to one person can be completely different than affordability to another.  Weigh out your needs, wants, and goals before searching for a mortgage to figure out what affordability means to you.

Investment

Buying a home is one of the biggest investments we make in our lives.  It’s not just a willy-nilly decision made on a whim, but a well thought out process in which the return on the investment is often just as important as the investment itself.  Buyers need to know they are not investing in a money pit that will never show them a return.  Most buyer want to go into their investment knowing they will come out, at the very least, even.  Here are a few things to consider when thinking about one of the biggest financial undertakings of your life:

New Build

• Advantages
  • New homes are virtually always more energy efficient by nature.  There is more thought put into modern regulations in terms of how energy can be saved and where.  Most newly built homes come with certifications and warranties that cover the roof, walls, windows, doors, and appliances.  This means that not only will your necessities be covered for X-amount of time, but your bills will likely be much lower as well.
  • Builders put a lot of emphasis on air quality in today’s market too.  By adding better filtration systems to the air and water, a certain level of quality is added to the home as a whole that is, frankly, better for our overall heat
• Disadvantages
  • Purchasing a newly constructed home with a return on investment in mind can be a bit of a gamble/risk.  It’s very hard to predict how certain neighborhoods will do in an established market.  The price could skyrocket if the appeal for the neighborhood is there–but if not, the price could drop in comparison to what you paid.
  • New construction neighborhoods tend to be in slightly less desirable and more suburban areas that offer smaller and smaller lot sizes.  A tried and true return on investment will always include the proximity a property has to the centralized area of the city or town.  With many new construction neighborhoods having to be built up outside of the desired boundaries of a city, it is likely that the neighborhood will be less desirable to those who love the vibrancy of the central part of a city.

Resale Home

• Advantages
  • With a resale home, there tends to be a clear and concise history of appreciation or depreciation over the years.  A buyer can find a clear layout of how the home has fluctuated in price over time, and furthermore, how the comps in the area of fluctuated as well.
  • If renovation is your thing, buying an older home tends to be much more desirable because the buyer is investing mainly in the bones of the home.  If the investment of replacing windows, doors, and appliances is no object, an older home can provide a certain level of craftsmanship and resale value that a new build just won’t have.
• Disadvantage
  • A major downfall of buying a resale home is the investment in energy costs.  Most older homes do not come with energy efficient finishes, including windows and doors–thus, the overall price of running the home tends to be more expensive.  A lot of the efficiency with windows and doors comes down to construction, so a simple replacement doesn’t always equate to equal efficiency.
  • There is an unadvertised cost that comes along with a new home, in that much of the time, a buyer will have to replace household failures at an unforeseen cost.  From furnaces to air conditioning units, and refrigerators to washers and dryers, there are many things that could begin to break once the new owner moves in.
  • It’s important to keep in mind that older homes were built with different layouts too.  Many floor plans and blueprint layouts are outdated and cannot account for modern wiring and plumbing.  A great deal of work often has to be done when the interiors of the house start to falter.

The overall investment you get out of a property should eventually override what you put in.  It is imperative to think about how your personal investment will play out.  Whether you want to put money into updating an older home to see a major return on investment, or you want to buy new to ensure you can put very little into the property but still see a sizeable return, there are many factors that need to be considered before taking the dive.

Maintenance

Maintaining a home is really important if you want to see a return on the investment you made in it.  Letting things crumble and dilapidate is going to ensure you have to pay out more to fix the issue later.  Keeping a steady stream of maintenance going at all times is the best way to go about it.  There are quite a few factors to consider when thinking about the maintenance a property will entail—here are a few:

New Build

• Advantages
  • Theoretically, there will be a good 8-10 years before any major repairs or replacements pop up in a new build.  Buyers can go into the purchase with a peace of mind knowing their investment in buying new will come with warranties and contracts ensuring the life of the finishes and appliances that came included with the purchase.  A builder’s warranty is usually required to cover at least ten years beyond the purchase date.
  • New homes also come with the peace of mind that everything in the home in untouched and completely clean.  When you buy a home with brand new appliances, windows, doors, moldings, and cabinetry, you know everything is as sturdy as the day it was installed.
• Disadvantages
  • With energy efficiency comes maintenance and repair.  Many newer homes come with solar panels and other green energy installations that cut down on overall costs of energy but can require major repair at some point in the future.  The good news is, there is a good lifespan on most green energy, and the overall amount of money you save on energy costs can help to counterbalance any repairs that might come up.
  • Many new homes come with smart technology capabilities as well.  We are definitely living in the future in terms of how we can equip our homes to respond to our needs, but many of these technologies come with a required subscription in order to use them to their full advantage.  This is a cost that might not be considered upon purchase but becomes very real when it’s a constant extra bill to be paid each month.

Resale Home

• Advantages
  • Obviously, an older home is going to have less advantages than a new build when it comes to general maintenance.  There are going to be built in issues that come up unbeknownst to the new buyer.  Keeping up with general maintenance after purchase can make all the difference in the world.
  • Giving great attention to maintaining an older home can have its own benefits.  Ensuring the work is put into an old home to maintain its historic influence can qualify a home to be on the national registry of historic homes–better yet, it can quality the owner for a number of tax breaks!
• Disadvantages
  • With an older house comes repairs on older items.  It’s just the way of life.  Many resales will have been slightly or fully renovated, but there may still be underlying issues that are impossible to foresee until a problem arises.
  • In many cases, if a problem arises, the solution can be more expensive than one would expect.  The wiring and piping in older homes didn’t account for how wiring and piping would change as time went on, and frankly, in extremely old homes, wiring wasn’t even a thought.  This means when something goes awry in those cases, the cost might end up a bit higher than an owner might account for.

The issue of maintenance comes easier with newer builds because the interiors, appliances, and window and door units are all modern enough to ensure major overhauls won’t be necessary if anything breaks.  The maintenance of an older home will always be a bit more difficult for a time than with a new construction property—it’s just nature.

Style

Style is a vital component to choosing a house.  Even if all the other marks are checked off, and you find a property that feels like the right investment, at the most affordable price, with the right amount of maintenance, it can still feel off because it doesn’t match your personal style.  There are a handful of finishes that are common in older builds that would never be thought of in new construction—here are a few common examples of what sets resale styles apart from new construction:

New Build

• Advantages
  • A new construction home will usually come with more built-in conveniences than an older resale.  It is standard in today’s age for a new build to come equipped with dishwashers, built-in microwaves, and large stainless-steel refrigerators.
  • On top of the modern appliances coming standard, most new properties are also designed with larger, multi-purpose rooms.  Most modern homes are planned with rooms that are purposefully designed to make modern life a little more luxurious.  From master suites to media rooms and finished basements to solariums, the modern floor plan is vastly different than that of those just 20 years ago.
• Disadvantages
  • New construction homes rarely offer the uniqueness that you’ll find with a resale.  Most new homes have similar floor plans with little to no variety.  While the homes may come with larger and more spacious rooms, there will be very little variation from one home to the next in a new construction neighborhood.  Meaning the comps around the property have little individuality.
  • The finishes in a new home will be beautiful but will likely not be created or built with the quality you would find once upon a time.  Modernized kitchens are all the rage, but many new cabinets are not the same solid wood you would find in an older home.  The quality of the building materials will always be a little less when it comes to newer builds.
  • The plant life around a new home will be less mature, or often non-existent.  Landscaping may come included, but in some cases, a new construction home will not even have mature grass.  That means there will be a necessary investment in sod, if you are not willing to wait for the grass to grow naturally.

Resale Home

• Advantages
  • The quality you find in older homes is unbeatable.  Homes built decades, and even centuries ago tend to have a meticulous attention to detail that you are very unlikely to find in a modern build.  Historic resale homes will often come with gems like stained glass windows, hand carved moldings, and sturdy hardwoods.
  • Location!  Many older homes will sit on slightly larger lots that are close to the central part of town.  More often than not these homes will be in established neighborhoods with a clear-cut comp system in place that allows for owners to see how a property has appreciated or depreciated.
  • The overall style of a property is a major draw too.  Older homes tend to have very unique exterior structures.  Resales come in styles ranging from Victorian to Greek Revival to English Tudors and Colonials.  The unique exteriors are often jaw dropping in terms of detail and offer a style you just don’t often find in new construction.
• Disadvantages
  • The biggest drawback in terms of style when it comes to resale homes tends to be the size of the rooms, closets, and bathrooms.  Renovations can help expand the sizes of these downfalls, but at a massive cost.  Most older homes just don’t have the closet space that a new build will have, and closets are a vital part of modern life.  The bathrooms can be difficult too as it takes a major amount of renovation to create anything close to a modern-day bathroom with a soaking tub, shower, and toilet space.

Style will always come down to personal preference, and at the end of the day, that’s what a potential buyer will have to consider before taking the leap on a new or old home.  Does the style fit the personality?  Your home is your sanctuary and it should match your eccentricities—or lack thereof. The reality of buying a home is that there are always going to be hard decisions to make—even from the very beginning.  There will be pros and cons of buying new and buying resale, but they will be different for every single buyer.  While one buyer may love the idea of spending a little more to get a property that is brand new in all ways, move-in ready, full of new technology, and easier to finance, a new construction build is the choice for you!  But if spending less money up front, a centralized location, unique style, and better quality overall is more your thing, a resale is probably your better choice!  It really comes down to the individual, which is why you should follow your gut when it comes to these decisions. Don’t let anyone else try to sway you away from your choice if you know it is what’s best for you.   Buying a home is one of the biggest investments you’ll ever make, so make it worth your while!

What is an HOA?

In the very simplest of terms, an HOA, or Home Owners Association, is an organization founded by real estate developers as a means to manage a community of homes, townhouses, and condos.

According to the Community Associations Institute, over 26 million homes in the U.S. are governed by HOAs and are “given the authority to enforce the covenants, conditions, and restrictions as well as manage the common elements of a development.”

Many buyers are resistant to the idea of an HOA having control over the way they manage and showcase their home, but many are flocking to the idea of having the added amenities and full-time maintenance that come along with such an arrangement.  HOAs take in fees in order to help maintain the common areas and community services, and often come with access to things like community pools, community centers, and even tennis courts.  While homeowners must pay dues when living in an HOA community, there is an added advantage that the payment can be figured in to the mortgage lender’s assessment.

HOA fees can range anywhere between $100/year up to $1,000/month, depending on the community the home is in.  Higher-end communities are likely to have higher dues but come with more amenities—as HOA fees are put in place to protect property value, it makes sense that the higher the property value, the higher the HOA fee.  Regulations are put in place in these communities to ensure cohesiveness and unity, so the neighborhood always looks presentable and pleasant.  Many higher-end homes on the market will fall under this category—with an HOA being even more prevalent in gated communities.

So, are there any downsides to an HOA?

There are pros and cons when it comes to almost anything in life that involves a decision—so certainly there are many downsides alongside the upsides when it comes to considering a property with an HOA.

An HOA sets the standards for homes in a community, so the association is responsible for determining what is acceptable in terms of a home’s appearance.  A community HOA can create rules and regulations for elements of a home including:

• Paint color
• Parking
• Lawn maintenance
• Landscaping
• Exterior alterations
• Exterior decorations
• Add-ons—like sheds, pools, spas, etc.

Along with these regulations comes a recurring fee—a mandatory membership fee that’s required monthly or annually, depending on the lender/association.  Fees tied to an HOA can fluctuate, but a board must vote on any changes before they are made.  These regulations and fees can be a deterrent for potential buyers off the bat, as many people would rather have full control over their private property and save themselves the fees that come with feeling so restricted.

If a buyer comes to the conclusion that they don’t mind the fees and regulations, there are still a few other problems that might come up as more is learned about what an HOA entails.

For instance, an HOA can be quite overbearing, leaving the owner to feel as though their autonomy as a homeowner has been taken.  HOAs often have heavily mandated restrictions on above-ground pools, renting, and even pets.  There is a very good chance that an owner would be restricted from having a dog if an HOA decided pets who spend times outdoors are not permitted.

Because an HOA takes in fees to keep up the physical appearance of a community, owners within the HOA will likely see a lot of red tape when it comes to any type of modification to the exterior of the home.  Even something as simple as a swing set can go against the rules put in place by the HOA.  This red tape can extend itself to more than just exterior updates and modifications, it can extend to financial prospects too.  An HOA has every right to limit an owner from renting out the property—but even if renting is allowed, the added price of the HOA fee to the rental fee can be a major deterrent.

One of the biggest issues buyers tend to have with HOAs is the financial burden of knowing that when the HOA has a problem, it becomes the homeowner’s problem too.  If legal problems should come up, or budgetary initiatives, the cost of representation is passed to the homeowners of the community.  An HOA can freely throw assessments at homeowners if it needs money to cover expenditures or to make up for lost money.  To top it off, if an HOA is infiltrated by bad management practices, it can be a really difficult problem to reverse.  Replace a member of an HOA board can take a lot of time and a lot money, but if problems persist, it’s an important step to take to redirect the success of the association.

So, is there anything good about an HOA?

You might be freaking out after reading about the negative aspects that could arise with an HOA—but fear not!  There are tons of positives that come along with an HOA too!

First off, the amenities can be unbelievable.  Many communities with an HOA offer special conveniences beyond simple maintenance.  These amenities can include (but are not limited to):

• Tennis courts
• Pool
• Community center
• Fitness centers
• Gardens

The fees taken in by an HOA help to manage these common areas and properties within the community.  The preservation on the amenities alone can cost a lot and can include everything from landscaping to pool supplies, and even front gates and tennis court needs—but HOA dues also help pay for the general upkeep and appearance of the neighborhood.  There are rules in place to prevent property neglect by neighbors, ensuring no overgrowth or unsightly items in yards.  In turn, with a good HOA and proper diligence, the property values in the community will remain intact.

Another major benefit to having an HOA is the streamlined appearance the neighborhood will gain from it.  Since the HOA makes the rules pertaining to paint colors, add-ons, parking, and landscaping, it’s a fair bet that the community will appear well preserved and uniform.  A streamlined look throughout a community is a huge selling point and could act as a huge benefit in a future resale.  Property values are essentially maintained because the neighborhood always looks good.  Add to that the focus on maintaining a modernized and streamline look builds a much deeper sense of community because there is an awareness that everyone plays a role in the success of an HOA.  Having the perspective that everyone is “in this together” ensures everyone works towards a common goal, and in the process, a community is created.

However, for those moments when someone in the community might be lacking, there are safeguards put in place by the association to guarantee homeowners do not have to personally address the issue.  An HOA will help handle disputes with neighbors who might be going against the rules of the association.  Whether it be a noisy dog, loud parties, or eyesores in a yard, a representative from an HOA will take the lead in addressing the concern without the homeowner having to lift a finger.

An HOA will be there to represent a homeowner in the best and worst of times.  It will ensure that your concerns are addressed, as they pertain to the neighborhood—but it will also give homeowners a sense of security that their investment will be fruitful when the time comes to sell.

It is completely reasonable why a homeowner would struggle with the idea that they would pay an organization to have control over the property they themselves own.  It can be hard to wrap the mind around not having complete autonomy when it comes to making changes to a massive investment, like a home, without the okay from an outside source—but for many people it’s a blessing.

As it is laid out above, there are some concessions a homeowner must make (if they are involved in an HOA) that many buyers may see as a disadvantage.  On the other side of that, there are buyers who love the idea of giving authority over to an outside source if it means their property value will remain high and the community they live within will be streamlined and pleasant in appearance.

Really, at the core of it all, whether an HOA is a plus or a minus is up to the buyer’s personal preference.  It all boils down to what the buyer sees as beneficial to their own investment.  Managing a property can be tough, but with the right foundation of knowledge, and a better understanding of what comes along with an HOA, a buyer can make an educated decision as to what works best for their own lifestyle—and isn’t a peace of mind something we could all use?