Would you rather own a new car or a used car? At first blush, the choice would seem like a no-brainer — tilted strongly toward the shiny new model, right off the assembly line. Go for the fresh, the thinking goes, the reliable.
But price tag aside, if you were to make it a choice between, say, a new, budget-level Ford Focus vs. the same company’s 1966 Mustang — well, many car lovers instantly would gravitate toward the oldie but goodie.
Ah, but the price tag isn’t merely an aside — it’s a huge influence, as any buyer would testify. After you sort out such intangibles as vintage architecture and established neighborhoods and mature trees, the resale versus new construction debate may boil down to dollars and cents.
Generally speaking, new construction is going to carry a bigger price tag than resale, but the cost distinctions aren’t always cut-and-dried, according to real estate agents who have experience helping consumers buy both categories of homes.
“It comes down to five or six items,” said Dean Glascock, a real estate agent with F.C. Tucker Co. in Indianapolis and a former custom homebuilder. “There’s no clear priority. It’s a level of importance for each buyer.”
Possibly the biggest draw for many new construction buyers is the chance to have a house where everything is new-new-new and just as the buyer wants it to be, rather than compromising and accepting a previous owner’s tastes and a certain amount of wear and tear. There’s also the green factor: new homes are built to more stringent building codes that make them more energy efficient than a home built just five years ago and often meet or exceed Energy Star and WaterSense standards.
But the money issue cannot be overstated, agents said. In an apples-to-apples comparison of new homes/resale homes, the new one is going to be pricier, owing to modern construction costs, they said. “For the same dollar, you will get a smaller (new) house than with resale,” said Mary Beth Eisenhard, an agent with Long & Foster Real Estate, who sells both types of housing in northern Virginia and also has worked in real estate in California and Alabama. “How much more (cost) will depend on the area, of course, but I would say 10 percent to 20 percent more,” she said.
So, how to choose between a new home and a resale home?
What’s the real price? Resale home buying inherently offers the chance to get a lower price by haggling with the seller. But consumers expecting to wrestle with a builder in order to negotiate a lower purchase price might not get far — a builder is pricing the home based on construction and material costs, not on appraisal values, nor are they adding costs based on sentimental reasons. You’re basically getting market value.
“I tell the buyers, don’t think you can negotiate with the builder,” Eisenhard said. “He’s in the business to make money, and he knows what he has put into the house. Plus, he doesn’t want to make the other buyers in the neighborhood mad by giving you a huge discount on a house when he couldn’t give a discount to them.”
New homes have a distinct financial plus: most will come with a warranty, which can provide financial peace of mind.Not that new construction buyers can’t get a good deal, said Glascock. “I tell (homebuyer) prospects, when we sit down with the builder, the goal isn’t necessarily to get a lower price — it’s to get as many things in the home as are in your budget,” he said.
“Often, you’ll see builders offering promotions that are good for a limited time, such as a full basement versus a partial basement,” he said. “Or, if you buy a house above a certain price — say $300,000 — he’ll give you $15,000 in upgrades. Or if you work with the builder’s preferred lender, he might pay your closing costs.”
Another consideration — which can vary regionally — is that new construction buyers essentially are competing against no one else to buy a given home. “Our inventory (of homes for sale locally) is low, and though it may not cause a bidding war on resale homes, it may result in multiple offers,” Eisenhard said. “But with new construction, the seller is in the driver’s seat. You’re not competing against anyone else. That’s crucial in our market. Recently, I’ve been involved where one buyer has made four offers (on resale properties) and has been beaten out each time by multiple offers.”
Other cost factors can be less obvious but merit factoring into a purchase budget, according to Eisenhard. Take, for example, window treatments. “People might say, gee, that’s not a big deal,” she said. “But if you go to price out blinds or plantation shutters on 52 new windows, that can be pricey.”
Or landscaping — the owner of a newly built home might want to invest in additional shrubs, trees and ground covers in order to achieve a certain level of maturity among the plantings on the lot, she said.
On the other hand, new homes can have some distinct financial pluses, according to Glascock. Most will come with a warranty, which can provide financial peace of mind. This also can be the case with some resale homes where sellers offer a warranty that they’ve purchased independently. The agents point out, however, that new appliances, furnaces, etc., in newly built homes offer an extra margin of protection.
Glascock said that many new communities have an unwritten, de facto home-value escalation clause for those who are concerned about resale value. “In new construction, you’re basically paying retail for a home,” he said. “The flip side is that, locally, that retail price might be a good price down the road, because prices continue to go up” as new “phases” and developed areas are opened in a subdivision. Those new areas’ prices seldom go down, compared to the earlier development areas.
Regarding insurance concerns: “A new home is safer and may have more modern electrical service that may pay off in lower insurance premiums,” Glascock said.
“Then there’s maintenance,” he added. “I grew up with a father who had a full set of tools and he taught me about drywall, painting, etc. I personally don’t mind playing around with all of that, but with the younger folks, they say, ‘I don’t even own a screwdriver,’ so new construction might be a better option for them.”