To build or to buy, this is the question.
Jupiter REALTOR®, Nicole Stanbra, explains the elements of buying a house vs. building one.
We are often asked, “Would it make more sense to just build a new construction home or to purchase a resale property?” There are several decisions that go into making this choice. Let’s break it down together.
What is a resale property?
A resale property is simply a property that is currently owned by one or more homeowners, and is being sold. They could be the original homeowners, who purchased it from the builder when the home was first constructed, or they can be the homeowners several times removed. Either way, you are purchasing a home from a homeowner versus directly from a builder. Resale properties are generally move-in ready – meaning you can close and take ownership of the home in as little as 30 days.
What is considered new construction?
New construction home can be split into a few categories. For the purposes of this blog, I will highlight two types of new construction. The first is a new construction custom home, and the second is a tract or spec home. There’s a huge difference in terms of custom versus spec homes, both in cost and timeline.
To keep things simple, a custom home is when you build a home from ground up, customizing every aspect of it. Your builder would first be responsible for acquiring the land and making sure that the lot is build-able for the type of home you plan to build. You would hire an architect, a general contractor, and an engineering company to create your own custom specifications of the property. These are typically two separate transactions that occur. The entire process of hiring an architect, developing floor plans and drawings, hiring a general contractor, permitting, site work, finishes, landscaping, and interior design/decor, etc. is lengthy to say the least. It will also be costly as it is a long process and overtime the cost of materials may increase from when you first budgeted the project until the end. It would be important to have reserve funds for contingencies. A custom home is absolutely a labor of love, but at the end of the day you can put your personal mark on it and be proud of the masterpiece that you created!
A spec home on the other hand, is home that a builder has a predetermined floor plan and model home already specified. The builders typically reuse the same model home and that they can replicate over and over. A buyer would be working directly with the builder. There is no need for an architect, as the builder would already have their floor plans design and drawings complete upon breaking ground. Depending on the builder, there may be very little customization that a buyer can make to a spec home. Sometimes a builder will allow the buyer to chose some of the finishes, like paint color, appliance packages, and backsplash tile. Builders sell the spec home to include the land as a total cost, which takes the effort of finding property off your hands completely. Drive around any community and you will see new construction homes pop up on neighborhood blocks. Typically these would be spec homes, where the builder purchased the property, demolished the existing building, and built a new home to meet today’s standards and codes.
Another example of new construction spec homes is purchasing a home in a tract development. This is more and more common in master developments that are popping up typically west, where there is more land to build upon. These types of developments typically feature multiple builders and subdivisions within the master development. There is usually an assortment of styles of single-family homes – anywhere from three to six different types or models – as well as townhomes and condos. The builder has specified models that they can replicate throughout the community to keep the aesthetic consistent to meet the style of the overall development. These are usually larger national builders who have big pockets and established subcontractors and crews, who can turn new construction projects very quickly. With the shortage of inventory here in 2021, these types of homes are in very high demand. In the past, a builder would have inventory available and ready for move-in or available just in a few months. However, in today’s market even the spec homes have a long lead time and process to obtain. Depending on the builder, they may require a deposit just to be on a waiting list in the hopes of a new lot becoming available. Once your number is picked, then you have to come up with another deposit for the builder to actually begin construction on that lot. This construction can still take anywhere from nine to 18 months, depending on the builder, property type, and community.
Let’s talk about the cost of construction.
Due to the increased cost of building materials, many builders are now including escalation contingencies as part of their builders contract. For example, should the cost of materials and supplies increase during the home’s construction, the buyer would be required to pay the difference in cost. These contracts have evolved over the last year or two, so it is even more important to have a professional REALTOR to represent you as the buyer instead of working directly with the builders sales office. Just a friendly reminder that the community sales office represents the builder not you!
And the ever-increasing existing home prices…
According to Zillow, Florida home prices have increased more than 20% over the last year. This is another reason you really must have a trusted real estate professional on your team. In this seller’s market, it has never been more important to approach your potential home purchase with a REALTOR, who knows how to negotiate the choppy waters of writing a top-notch offer.