Deciding where to live is a huge decision, there are countless factors to be taken into consideration. School districts, costs, housing associations, commute time. For this post I am going to specifically talk about building a house vs buying an existing one.
How we ended up Building a House over Buying
We made a few mistakes buying our first house, nothing major but the list of “projects” was so long we decided to sell instead of take them on. As we were looking though existing homes, all I saw was projects. People do crazy stuff to their homes, which is totally fine, until its time to try and sell your decisions to someone else.
After 8 houses in our price range were deemed “too much work” we decided to look into building a house. We found a lot in our desired location at the higher end of our price range. After we met with the builder, we were sold and promptly started planning.
I am going to walk through our experience step by step and give you some tips and questions to ask along the way:
Step 1: Choose a Location
This step is very similar to selecting a pre-existing house. Select your desired area and look for available lots – they should come up using most search tools. When you are building you also get to select your lot (provided there are more than 1 available). Lot size or location can cost more.
Step 2: Select a Builder and Model
Most new developments have a pool of a few builders that own lots. Walk through their models and keep in mind that you may have to drive to another development to walk through multiple options. Run your builder through the below set of questions before making a decision.
Questions for your builder at this step:
Are you able to work on the house yourself and get credit?
We were cut a check at closing because of all the work we did ourselves! We did all the tile floors, landscaping and wood floors in our house. This is the time to track down friends and family and put their special skills to work.
Laying sod is crazy easy (green side up), case of beer and a few pizzas saved us a lot of money in labor!
What are the “standard” finishes, flooring, etc?
Model homes often have upgrades, ask what costs extra when you are walking through and take notes. Our notes actually saved us later when our building tried to charge for something that was included.
What are the timelines?
Planning move out/move in dates is difficult, get a timeline in writing.
How do they do Financing?
Builders may finance the construction themselves or you will have to get a construction loan. I don’t want to get to far into this section, if you have questions reach out to me in an email or comment.
Energy Efficiency?
Very strict energy rules went into effect in Minnesota, our energy bill is shockingly low. Check out the laws in your state and make adjustments to insulation levels, appliances, light bulbs, etc, to keep costs down.
Allowances for Appliances?
It is common for builders use allowances in the purchase price, if you go over them it adds to the cost.
Can you supply your own materials?
Comes in play when you are selecting appliances, lighting or any work you are doing yourself.
Step 3: Selections and Upgrades
This is the most exciting and potentially costly step. Most builders give you a base price that includes an allowance for appliances and lighting fixtures. They will give you a list of places they work with and encourage you to use their suppliers. Compare their costs to big box stores or Amazon.
A lot of the questions from the previous step come into play here. When you meet with your builder or representative, be upfront about your budget for each area of the house. Always ask for the price before making a selection, the last thing you want to do is fall in love with something before knowing the price.
Few things we learned in this step:
- You can upgrade your upgrade: We decided to install granite counter tops (I know, I know), we don’t have that much counter space so the price was reasonable. When we went to the granite place to select our slab, we quickly found out that the price we were quoted was for the very basic patterns. There were only a few to select from in our range, and we ended up spending way more on a slab we liked.
- Showroom Lighting is Insane: Our lighting allowance would have covered 1/3 of our fixtures if we bought them all at the showroom. We made a trip to Menards/Ikea and bought all of our exterior, closet, laundry, and hallway lights for 1/3 the cheapest showroom price.
Step 4: Watch and Monitor
Thankfully our house was on the way home from the park and ride we use to get to work. We stopped out every few days and checked on the progress. It was very interesting to watch the building process unfold. We also got to do our own mini-quality assurance as the building went up.
You should be provided with a construction schedule, watch it closely and hold your builder accountable. If your builder is behind schedule, you might need to find a place to live.
Planning Ahead:
- Basement Bathroom – We had a bathroom “roughed in” the basement. When we decided to finish the basement all the plumbing is complete. No concrete saws!
- Sprinkler System – We had the plumbing inside the house done to prepare for a sprinkler system. Saved us $4oo-600 when we decide to put one in.
- Tech Tubing – Figure out where your TVs are going to go and have them install tech tubing. It was really cheap to do before the walls go up. If you are not familiar with tech tubing, it allows you to run all of your TV cords inside the wall out of sight.
- Laundry – Put it close to the bedrooms, save yourself a flight of stairs.
- Light Switches/Cable Jacks – Plan where you want TVs and light switches.
Check if this list is included in your purchase price:
- Mailbox
- Window Treatment
- Garage Door Openers
- Mirrors (yes I know of someone who had to buy bathroom mirrors after construction was completed)
Benefits of Building a House
- Brand new appliances
- Warranties
- Energy Efficiency
- Less Projects
- Custom Design
Building a house made a lot of sense for us, if you can build within your budget I would strongly consider it as an option. The up front stress of going through the process melted away as soon as we moved in. Please let me know if you have any more questions – I tried to cover everything but there is a lot to consider. I have been through this process a few times (once with my parents) and am a pro!
Some products that can help you:
Acorns: Acorns is an automation app that collects and invests your spare change when you make a purchase. I connected Acorns to my checking account and my credit card. If you are interested in trying it, you can use my referral code here (both of us will get $5 in our account)
Personal Capital: Personal Capital has a ton of great Free features, you can track your spending, net worth and even analyze your portfolio. It has top notch security and I am able to connect all of my accounts. Saves a ton of time! (I may be compensated if you use this link)
What did you find the price difference to be between building and buying? I’d imagine that you pay a premium for getting to design your own house, but I’d never looked into how much it would be. I think I had just brushed it off as too expensive without doing my research. It’s definitely something I’ll look into now when we start looking, though.
Building is more expensive up front, we could have gotten a larger house for 20-30k lower but would have easily spent the gap changing things or updating over the years.
So we decided to take a brand new smaller house that is exactly how we want it vs a large house that needed some work.
We’ve bought new on three separate homes now, I guess that’s one of the benefits of being 40+! This was a good write-up on the process and the only watch-out I would give people is to make sure and budget for window coverings.
Often if you buy a re-sale (aka used home), lots of the window coverings stay with the house. You might be shocked at two things if you buy a new house. One, how many friggin windows there are and two, how expensive window coverings can be!
Other than that, buying new is awesome. We always loved having the warranty in place and brand new appliances. You are pretty much guaranteed several years of stress free living, which is nice!
Window coverings are a killer! I found a few good deals and installed them myself but we still have quite a few windows without them.
We love our house, and I would build again before inheriting someones else’s mistakes/tastes
As you detailed, there are a lot of benefits of buying new! It may be a bit more work on the front-end, but so worth it when you get to customize your home and have it exactly how you want it. We considered that when we bought our first house 4 years ago, but ended up finding a 12 year old house with one prior owner. And the prior owner was a commercial contractor who did tons of projects and renovations to the house including many new appliances. We felt pretty lucky!
That is an awesome find – If we ever look at existing homes again it will be searching for a house that we know has upgrades.
The up front work is stressful and time consuming, but not having to paint before moving in is pretty awesome
We are seriously considering building our ‘forever home, we’re multi millionaires’ home in our 40s, for all the reasons that you’ve listed and we’ll get exactly what we want. I’m really excited by the idea, if it ever happens, we’ll see!
We watch a lot of property shows where the owner builds themselves (even with paid workers) and saves $100Ks.
Tristan
If you can do it, I wouldn’t hesitate! We love our house and its nice knowing everything is new and under warranty. 10 years on our furnace is peace of mind
This is a terrific post with so much information! I almost built a house once but the sheer number of decisions totally stressed me out (this was many years ago!) I don’t think we will ever build but it’s nice to know all of the details. There are a lot of “hidden” expenses to check on so that the budget doesn’t get busted.
You can take the base price and add anywhere from 15-100K on upgrades or changes. The more in-decisive you are, the more it costs.
We have thought about building, but I think we would like to try be the general contractor as well. It would be a lot more work, so we might have to wait till the kids are a bit older. Right now we have our hands full of project on our house plus rentals. I don’t mind the projects so much: we learn new skills plus it increases our net worth. =)
I think it would be a blast to be the general contractor if you had time to do it. You can save a ton of money if you spend time vetting sub contractors and buying your own materials
I think I’m too much of a pansy to be able to build a house :p but these are great tips to come back to if I ever change my mind whether I want to build or buy. Building definitely adds to the feeling of accomplishment after finishing the project. Great job on being able to figure out the ins and outs of building a house, it sounds like a really complicated project!
Thankfully the builder handles the bulk of the work! appreciate the read and comment!
Unless my girlfriend really wanted new construction, the number of decisions would overwhelm me. I am not a decorator and don’t have an eye for what could be. I’m an improver. My city also has some fairly shoddy new construction.
Gosh! AE you make it sound so easy! It seems a lot is riding on the builder to do a good job; that makes me a tad nervous. I would have hooked up on the top quality granite as well. There are a lot of upgrades you can do to a home but appearance wise – granite counter tops has a high impact on resale. My dream house is basically granite or quartz everywhere…limestone walk-in showers…exposed beams with vaulted ceilings…*drool* someday…I’m all about frugal but this is a HOUSE man! It’s an investment in my time and future.
We’ve been through the process of building a home twice now, and it can be a stressful process. The first time we did it we went with a big builder, Ryland Homes, and it was a decent process. One thing we learned in that process is how important it can be to stay engaged in the home building process. Know what you’re getting for your money, what exactly should be installed in your new home and what the schedule is. Sometimes if you don’t stay on top of the builder, especially larger builders that are working on multiple homes at once – they can get things wrong. If you’re constantly engaged with them you can ensure that they’re not installing the wrong floors, putting on the wrong siding – or forgetting to install included upgrades. Take notes when in meetings, and get things in writing – don’t rely on a conversation you had with a job site foreman.
The second time we built a house my home builder in-laws built our “forever home”, and that allowed us to be super flexible in building the home. We were able to pick the finishes we wanted, add little extras to the plan, etc since the builder (my in-laws) were giving us a huge price break in building the home.
One last thing – while the home is being built – don’t forget to take pictures of all the exposed framed walls – so you can see what’s behind the walls in the future if you plan on cutting into a wall, adding a receptacle, or hanging piece of art and you want to avoid cutting into a water line.
All in all building your own home can be extremely rewarding, as long as you stay engaged in the process and stay on top of things while it’s happening.