When almost anyone begins to think about a new home, there are always a lot of decisions to be made. Typically, the biggest of those decisions is whether to build a house or buy an existing home. And that’s usually not an easy decision because there are some definite pros and cons to each. Then, of course, everyone has a different set of priorities, which makes giving blanket advice almost impossible. So let’s see if we can arrive at an answer to this question: Should you build a house in Chicago or buy an existing home?
In trying to determine whether the build a house in Chicago or buy an existing home, the initial cost should be an important consideration. So which one is cheaper?
“[T]he median sales price of previously owned houses in December 2020,” according to the NAR, “was $309,800. The U.S. Census Bureau, alternatively, reported a median price of $355,900 for newly constructed homes sold at the end of 2020.”
That’s a difference of just over $46,000. And depending on your mortgage terms and rate, that can mean significant savings over the life of your loan (in addition to the amount you save on the purchase price). Also, if you opt to buy an existing home rather than build a house in Chicago, “there is a greater opportunity for negotiations when purchasing an existing property, which can often result in an even lower sticker price (an option that is rarely available with new construction).
And keep in mind, too, that “building a house includes separate expenses that are already part of an existing home. If you build a home, you’ll need to purchase the land, obtain a construction loan, pay an architect to create blueprints, landscape the property, and more. The costs can add up quickly.”
Ultimately, then, for most buyers, buying an existing home is cheaper at the outset. (This is in part market-dependent, though, so be sure to consult your Chicago agent at (630) 984-0000.)
Ease of Buying
Another important consideration for those deciding whether to build a house in Chicago or to buy an existing home is (or should be) the ease-of-buying factor. That is, how easy will it be to qualify for a mortgage?
The tightened lending requirements and restrictions following the financial crisis of 2008 are beginning to loosen a bit. Still,“[w]whether buying a new home or a resale property, buyers should expect to jump through a few hoops before qualifying for a mortgage. As always, a strong credit score and sizable down payment is the best way to secure a home loan from a traditional lender at the most favorable terms.”
One thing to note is that it’s “often easier to purchase a newly constructed home through the builder’s own financing department. After all, it is in their best interest to place families in homes, so they are much more likely to approve a mortgage than a more traditional lender. However, that doesn’t necessarily mean that buyers are getting the best deal possible, and you may pay a premium for the ease with which you qualify for the purchase of a newly constructed home should you obtain your mortgage via builder financing.”
That All-Important Location
And then there’s location – perhaps the most important real estate factor whether your aim is to build a house in Chicago or purchase an existing home. Many times, the existing home will offer more when it comes to location. Here’s why . . .
“While a newly built home may offer state-of-the-art amenities, you may be forced to make some concessions in order to enjoy those luxuries. For example, a new home is likely to be built in a developing community, meaning that you will be living with ongoing construction in the neighborhood for some time to come. It’s also more likely that a newly built home will be in an underdeveloped community, with limited access to schools, shopping centers, and places of worship. Moreover, new housing developments tend to be fairly far removed from major city centers, meaning your work commute may be substantially greater than you might like.”
And don’t forget property values, which is another aspect of the location. With an existing home, you can “review the history of the property’s value, tracking its rise and fall and determining if it is a wise investment. New builds are dependent on future construction, and the influx of new buyers, to establish property values, and that can be an unknown quantity.”
Summary of Pros and Cons
While the considerations listed above are perhaps the most important ones, there are still a lot more things to consider when deciding either to build a house in Chicago or to buy an existing one. So let’s look at the pros and cons of each.
The pros include:
- “Brand new construction with active warranties
- Customizable floor plans
- Cost of upgraded features and appliances can be folded into the mortgage
- Green appliances for better energy efficiency
- Financing available through the builder, making it easier to qualify for a mortgage
- Fewer maintenance costs associated with repairs or renovations”
And the cons are:
- “More expensive than resale properties
- Location may not be ideal (lack of schools and shopping opportunities, possible longer commute)
- Property values are unknown and possibly more volatile
- Lacking character – cookie-cutter design
- Ongoing construction in the neighborhood
- Greater tax burden”
The pros here are as follows:
- “Typically less expensive, with more opportunity to negotiate the price
- More desirable locations
- Known neighborhood dynamics
- Proximity to schools, shopping, and places of worship
- Older houses tend to have more character as compared to modern designs
- Property values can be determined before purchase
- Lower tax profile”
And the cons for existing homes are:
- “Smaller inventory of acceptable properties
- May require extensive repairs and/or renovations
- Fewer amenities/older appliances
- Financing can be more difficult
- Competition from competing buyers
- Neighborhood may be in decline”
The Need for a Chicago Agent
So should you build a house in Chicago or buy an existing home? In trying to decide, consider not only that it will be a major financial decision, but that it will also be an investment in your and your family’s future. So besides factors like purchase price and property values, you also absolutely must look at how the home you’re considering will fit with and enhance your lifestyle.
So, yes, it’s a tough decision. But an experienced local agent can help guide you through the process to the right answer. So if you’re on the fence about whether to build a house in Chicago or buy an existing one, contact us today at (630) 984-0000.