I am trying to figure out whether it is more cost effective to buy an existing home or have one built. Are there any objective savings, or is it too variable to say for certain?
We’re in a situation where there is ample land available at a good price, and we want to have the floor plan to have some customizations that aren’t normally found in American homes.
AFAIK, IMHO and all that, it’s not so much a cost advantage as a “get what you want advantage.”
There can be specific cost advantages in specific cases, but you have to factor in “cost of building” vs. “cost of buying and refitting.”
And of course the costs aren’t the same if you’re unable to do any housebuilding yourself and anything the contractors say sounds like Martian pronounced by a Venusian, or if you’re a carpenter. But this applies to both building and "re"building.
And then there’s the timing… how long will it take to build, how long to buy and fix, are the fixes something that can be done while in the house or not.
If you absolutely want THIS plan and no other and it’s GOT to be that color and that many plugs… well, buying would pretty much turn the “fix” into “complete rebuild”, so it’s much more expensive. If your tastes run to what already exists in the area, then buying will probably be cheaper.
Consider that the land you are building on will be mud / dirt / plain grass for 6-12 months after construction has finished. Even after that it will be a while before you get nice established trees with plenty of shade.
More than a few thousand dollars will go into the landscaping around your property. Assuming you do that yourself too, you will save a significant amount.
Remember that when you buy an established home you are also buying care and attention that went into the landscaping.
Anecdotally (I live in Melbourne, Australia, so this won’t apply specifically to you), we built our house (well, we had someone build it). We paid the builder $173,000. The land was $59,000. Total $232,000.
In a recent valuation of the property it was valued at $460,000. That was only 2 years after we built. So in 2 years, we’ve effectively doubled the value of the property.
We have outlayed a couple of thousand for plants and grass, but that’s insignificant as a comparison to what you would pay if you were buying established.
So, yes, I think there is a cost advantage in building your home, especially when you take into account the additional cost savings by not buying an established garden.
I think it depends on the area in which you live. In Northern Virginia (where I live), if you could find an undeveloped piece of land, it would probably be more cost-effective to to have it built. However, in some areas where the economy hasn’t been as generous as others, you can often buy a house for a lot less than it would take to build it - a friend of mine owns a 3 floor, 3-5 bedroom (depending on what you count) house, and they paid about 2/3 what my mortgage company estimates it would cost to rebuild my 1 floor, 2-3 bedroom.
I meant to say…the friend is in Pittsburgh, which is a city that has fewer people than it did 40 years ago, but much of the housing stock is still there.
I think the general answer would be, depends on whether you can find something that’s already standing that’s ‘close enough’ to what you really want. Of course you didn’t give a lot of details, so this is general.
You’d have to factor in how far out of town this vacant land is; if it’s in town, there’s probably already utilities to serve the property - else, might not be close. With vacant land, there’s maybe more opportunity to move the building around so that you can get the landscaping and driveways and such more to your tastes - but the land itself, and planning and building codes, will dictate some of this. Um, these new parcels - do they have frontage on any public highway? Is this spelled out anywhere? Probably so, but there are horror stories; needs to be checked. What needs to be cleared from the site before you can build? No buried surprizes, are there?
‘Vacant land’ gives you more freedoms, but also other things to watch out for. These are some things I can think of, may not be a complete list.
Another thing to factor in is the value of your time and how you would otherwise spend it. One interesting observation from “The Millionaire Mind” was that these folks very rarely had a home built. They shopped for what they wanted. The author ascribed this to these folks understanding how much work and time went into having a home built, and realized their time was much better spent building their business, doing billable work for clients, etc.
You also should at least consider if this is going to be the home of your dreams and you’re going to live there forever, because the floor plans you just love and the customizations that you want could make it harder to find a buyer down the line. It’s a small factor, but if it’s just a financial question you’re asking, then I believe that this should go into the equation.