House Hunting: New Home Construction vs. Existing Homes

by Darwin on June 15, 2010

For some time, my wife and I have been mulling over a move.  Honestly, our current house is fine and if we never moved, I think we’d be perfectly happy.  However, there are a few drivers that have us considering a move.  Primarily, we want our kids to have the best school experience (Is Private School Worth It?) and while our district is “good”, there are some better ones in the area and the one my wife used to teach in is a different district than our current one; if she gets a job there after the kids are out of the house, it would be advantageous to have our kids in the same district to match days off, etc.  Aside from that, when we bought our current home, we knew it was kind of a transition home.  We were new parents on a single income with a fair amount of uncertainty as to what was going to happen over the next few years – how expensive were children going to be, how many children, when would my wife return to work, etc.  Now that things are relatively stable (we’re done at 3 kids!) and my income is measurably larger, we feel we can safely make a move.

In looking through the typical large real estate sites like and, we occasionally come across a house that looks perfect, but then there’s always a catch!  I’ve gotta say, using Google Maps to confirm just what’s in the back yard or surrounding community has saved countless hours of wasted drives to communities when I can see a massive retention basin and drainage ditch in the back yard or I can tell that the yard backs to a major highway.  Sellers/Realtors do a great job at masking these small details when they put their homes up for sale.  Since it’s been a few months and there honestly hasn’t been a single house that we just fell in love with, I started thinking about new construction.

New Construction Considerations

  • What’s Available? Since we’re pretty selective on district, location, lot specifics, etc., there just aren’t many communities out there now that even work.  With the real estate bust, there’s no longer a new construction boom and with the few developments in the areas we’re interested in, they’re either already sold out or the only remaining lots show a giant puddle of water in the Google Maps view where the house would be.  Surely, over time, more new developments will pop up, as there is still open space out there, but if we had to move now, we wouldn’t find something we’re satisfied with.  Fortunately, we’re in no rush and we’re in the driver’s seat.
  • Costs? I couldn’t help but laugh today when I saw a new home development advertising a base model in our price range only to find that 75% of the lots have a “lot premium”.  I’m confused, if the majority of the lots cost an extra $35,000, then why be so deceptive about it.  When the majority is priced higher, it’s not really an exception, but the norm.  But that’s marketing.  It works.  You get hooked by the allure of the new home and the picture of a model home, then they reel you in.  Following the lot premium, then there are all the upgrades.  Our friends that have bought new construction usually end up adding 30-50K on upgrades to woodworking, kitchens, and other amenities not offered as standard on the model they bought.  It can really turn into a much more expensive proposition than the sticker price.  If we were to go this route, I’d really need to keep us in check…I know my wife.
  • 1st Phase? I’ve heard in some circles that it’s a great deal to buy new construction since the home’s worth much more by the time it’s built and/or the rest of the community is finished.  I question whether that was simply a sign of the times when all homes were appreciating at 10% per year in hot areas.  In today’s stagnant home market, should you reasonably expect your new construction to be worth 10% in a year?  I personally don’t find that to be plausible in today’s environment.  In our case, capital appreciation isn’t a driver either.  I don’t plan on flipping my house in 2 years.  I want this to be the house our kids grow up in and realistically, the one we retire in.  If it’s too large by the time our kids have moved out for good, then maybe we’ll sell at that time and downsize, but we’re talking 20+ years.  Our key priority is to have the right district, the right lot, the right house – all at the right price.
  • Shoddy Construction? There are horror stories out there on new homeowners encountering trouble once they move in.  In some cases, home builders imported drywall from China that smelled and had hazardous chemicals embedded in the material.  This is where I’d feel at least a bit more comfortable with a builder known for high quality homes and being large and financially solvent helps as well.  There might be a nice looking small community from a local unknown builder, but once you buy and want them to come back and fix settling cracks or deficiencies that arise, you find out they’ve gone belly up and you’re out of luck.  With a larger builder, you can typically take a complaint to the top, file with the Better Business Bureau (or blog about it!) and you tend to have a better chance of success in problem resolution.

Next Steps

This week, we’re looking at a few existing homes that “might work” but we’re still in the early evaluation period.  We actually have to ready our house for sale anyway, so even if we saw something we loved now, we’d probably have to wait some time before submitting a bid anyway since I’d want to at least have ours close to contract prior to negotiating a purchase anyway.

Be sure to follow my RSS for updates on findings, tips and tricks in the negotiating process and of course, mistakes I made, so you don’t have to make the same mistakes later.

{ 2 comments… read them below or add one }

Money Smarts June 16, 2010 at 3:48 pm

My wife and I have bought and built new construction homes twice now – both with the same builder. The first one was a townhome, and the second is our current single family home. We chose new construction just because we like having a newer home that you don't have to worry too much about the problems that exist in older homes. Also, at the time we bought new construction was only slightly more expensive than buying an existing home. For us, it was worth it.

We may end up moving one more time in a few years, and next time we'll be having my in-laws build the home for us. They are custom home builders, building multi-million dollar homes – so they know what they're doing. The last time we built we didn't use them because the large builder we went with could actually build the home cheaper than my in-laws could – because of the cheap prices on materials and labor they were getting.

In the end – my advice – do your research, use the internet to your advantage in your search. Read up on the bulider you're thinking of choosing and read reviews of their work. Also, be aware of what stage the neighborhood you're buying into is in – because if you're not careful there could be construction going on around you for years to come – or that beautiful wetland view you have may go away when the wetlands are drained for a Home Depot. Be careful about adding on extras to your home, the price can quickly balloon to the point you can't afford the home any longer.


Barb Friedberg June 16, 2010 at 9:01 pm

Hi-Found you on Yakezie & glad I did! We have bought 4 new construction and 1 old (from 1928). Lots more updating with a resale than new. But initial costs with new are usually a bit higher (window treatments etc.). Sometimes quality can be better on old, but not always. I think the key is finding the home that fits for you and your family, and which one will have the lowest amount of maintenance. Good luck, Barb
PS Of course, schools and neighborhood is key!


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