While you may not have a lot of control over the first two, you may be able to relieve some of the anxiety associated with buying a home and moving if you understand your options.
Okay, so you’ve saved a little money and decided it’s time to take the leap into homeownership, eh? Where do you start? You can go out and hire a real estate agent to “find your perfect home,” but what does it look like?
Do you want to replicate the home you grew up in with a full-front porch and intricate architectural details? Or would you prefer one with a rich history with a vivid story to tell? Or perhaps you’d rather have a home that’s a reflection of your own personality and lifestyle?
As you contemplate whether you’d like a new or older home, consider these important factors:
Buying a New Construction Home
When you opt for a brand new home with no previous owner, you’ll have a choice of homes built “On Spec” (meaning they were built without a particular buyer in mind,) production-built homes (you select from a variety of pre-determined floor plans with some modifications allowed,) or a custom-built home (you work with an architect to decide on the layout and all components.)
Benefits of Buying a New Construction Home:
- Select Design/Floor Plan—you decide if you want a ranch-style, two-story, single-family detached, semi-detached, or a townhouse. Modern, predetermined open floor plans often include three or four bedrooms, two and a half baths, first-floor laundry room, great room, and flex space. Builders often follow national trends to meet the growing needs of potential buyers.
- Allows Personalization—the level of personalization allowed will be dependent on the builder’s flexibility, but most will allow selection of interior and exterior colours, siding and roofing materials, lighting, plumbing fixtures, cabinets, countertops, flooring, and a variety of other items.
- Less Maintenance/Repair Work—you can anticipate monthly expenditures as breakdowns are less likely with new components. According to the Canadian Home Builders’ Association, a third-party warranty is required in Ontario, Quebec, British Columbia, Alberta, and Manitoba, so any material and workmanship defects should also be covered.
- Improved Energy Efficiency—provincial building code standards are continually changing to enhance the energy efficiency, so you can expect your new-build to cut both heat loss and operating costs. Many builders are already exceeding codes with Energy Star certification. Your new home will be more comfortable than an existing home and more environmentally friendly too with new components and materials like:
- Windows and Doors
- HVAC System
- Water Heater
- Gas Fireplace
- CFL/LED Light Fixtures
- Water-saver Plumbing Fixtures
- New Technologies Built-in—new homes incorporate “Smart” technology options so you’ll be able to connect and access the internet, surround sound, cable, wireless equipment, a security system, and even appliances.
- Green Construction and Materials—today’s buyers are demanding that homes be built using more environmentally friendly methods and products. You’ll notice new homes will include SFI-approved lumber, low- or zero-VOC paints and building materials, bamboo or cork flooring, natural granite or quartz countertops, tankless water heaters, and in some cases, solar arrays or geothermal heating and cooling systems for improved air quality and efficiency.
- Fire and Carbon Monoxide Safety Features—new homes provide improved fire protection with fire-retardant carpeting and insulation, hard-wired smoke and carbon monoxide detectors. Battery back-up devices are usually included in case of a power outage.
- No Bidding Wars Over the Same House—when you build a new home, you avoid competitive offers over the same property, so you can take your time in deciding what you want to build, where you want to build it, and the timeframe to start construction.
- Pricing Concessions/Financing Options—many builders are willing to offer incentives for customers who sign a non-contingent contract. They may be available as a cash discount, option upgrades or special financing options.
Disadvantages of Buying a New Construction Home:
- Construction Loan—with the cost of new homes continually increasing, it costs a lot to build a home. While some builders may only require a small percentage of the entire home sale as a deposit (with no additional payment until closing), a majority of builders require the customer to obtain a construction loan before starting the home. Draws are given at various stages to complete the next phase.
- Length of Time to Build—the new home construction process can take anywhere from four to eight months (more if custom.) Mortgage rates may increase before you can lock in the lowest percentage. Coordinating the sale and closing of your existing home may be difficult to coordinate.
- Location—while you’ll be able to select the perfect lot for your home, many new home communities are located in the second-tier ring of suburbs, making daily commutes long. Even if you plan to build on a small urban lot, yard space will be limited. Mature trees may be difficult to find in the builder’s lot inventory as they may have been cleared to make way for the community infrastructure, roads and house footprint.
- More Expensive—if you haven’t been house shopping recently, be prepared for sticker shock. According to Forbes Magazine, building a new home can cost up to 20 percent more than a comparable existing home for the basic house. Add in extra expenses for upgrades, window treatments, landscaping, a deck or patio, and fencing and the price rises significantly. Don’t forget you’ll need to pay GST/HST on the final selling price at closing. Property taxes may also be higher than an existing home as the amount is based on the selling price at closing.
Buying an Existing Home
While it may be challenging to find just the right fit from an inventory of existing or used homes, there can be many advantages to buying a home that has already been lived in. As you search, remember that decorator colours and styles are generally cosmetic and easily changed, so don’t let them deter you from making an offer if everything else seems right.
Benefits of Buying an Existing Home:
- Less Expensive—depending on the age of the home, it’s likely it was built with materials and labour that cost significantly less than today’s new construction. This home can provide more value for the price. In addition, sellers may be more motivated to negotiate the price if they’re anxious to facilitate a fast sale.
- Buy Cheap and Renovate—flipping houses can be a lucrative way to make money in real estate. If you’re a capable DIYer, look for opportunities to buy an inexpensive existing home that is in major need of TLC. Do some renovation work and then sell it for a profit.
- Location—unlike new construction, existing home communities were built many years ago and their neighbourhoods and school districts are well-established. You’ll understand the appraised value of homes in the area, so you don’t overpay. You’ll also know what the neighbouring properties look like and if the beautiful trees behind the home are at risk of being bulldozed by a future commercial business.
- Architectural Design Features—if you like the charming curb appeal of decades-old homes, you’d definitely want to consider a used home. While some characteristics of vintage architecture are being incorporated into new designs, they can’t compare to the styling of homes built in the 1800s or early-1900s.
- Sturdier Construction—you’ve probably heard the saying, “They don’t build things like they used to.” In some ways, “they” might be right. Older homes included full-width lumber, actual stone and brick instead of veneers, and products meant to last a lifetime. Newer homes are built with components that have a significantly shorter lifespan than used homes.
- A Complete Package—when comparing new and used, these items are generally included as part of the package when buying a used home:
- Window Treatments
- Faster Closing—there’s no worry about completing the home on time or waiting to lock in a mortgage rate, so many used homes can close within 30 to 60 days.
Disadvantages of Buying an Existing Home:
- Fewer Homes to Choose From—while the existing home market is constantly changing, currently there is a shortage of desirable homes in reasonable price ranges. This means it’s a seller’s market where inventory sells fast and bidding wars between purchasers vying for the same house will push the price higher.
- Maintenance Issues/Surprise Repairs—not all provincial regulations require sellers to disclose any hidden defects. Even if everything runs perfectly, the older the home gets, the more likely something is going to break down, such as:
- Electrical Wiring
- Plumbing Pipes and Fixtures
- Sewer Systems
- Roof Leaks
- Foundation Cracks/Flooding
- Less Energy Efficient—existing homes will experience more heat loss due to leaking windows, compacted/insufficient insulation, and older technologies. This will make the home less comfortable and heating and cooling bills more expensive.
- More Difficult to Incorporate Technologies—older existing homes will be wired with older cables that may make it impossible to run newer televisions, computers, and other high-tech products. Running new lines to accommodate your equipment may be difficult and costly.
Deciding to buy a new or existing home is a personal choice that may require some additional research. With most home listings now available online, you’ll be able to filter your searches and compare options more quickly than ever.
Before you hire a real estate agent or start visiting open houses, use this guide to determine what’s important and create a wish list to help you find your perfect home.