New Home vs. Existing Home: Which Should You Buy?

If you're in the market for a home right now, it's understandable that you need to act fast to win the home you want. But, as with so many purchases, it's important to heed the creed of buyer beware. If the home you are considering is an older house, it's important to be aware of both the benefits and pitfalls of buying it. Note: a home is typically considered older if it was built 50 or more years ago.

That said, buying a new home has both advantages and disadvantages. So, what's a home buyer like you to do? If you are still in house-hunting mode, this is the right time to think about purchasing a new or old house — before you are ready to start bidding. When you have a better idea of what you want and don't want, your house hunting will be more effective. (Read: you'll spend less time looking at homes you know don't fit your bill.)

Take a few minutes to review these new home vs. old home pros and cons, as well as comparisons between old homes and different types of “new” homes. When you are clear about the issues that may come with buying an older or newer home, you'll be better able to make the right purchase for your needs. These tips are helpful whether you are about to bid on a home or are still looking.

Related: 7 House Hunting Tips for First-Time Home Buyers

New Home vs. Old Home: Early Considerations

Buying a home may be one of life's biggest investments. After all, it involves building your credit score, calculating your ability to make loan payments, and researching average home prices in different areas. And big life events tend to be things we think about... a lot! So, you may well know the answers to the following questions when it comes to a home purchase. However, it's still a good idea to consider this list of factors, as they can impact whether you decide that buying a new home vs. an old home makes more sense for you:

1. Do you want a big backyard?
2. Do you like new things?
3. Do you want to be able to walk to town?
4. Is square footage important?
5. How much do you have saved for a home purchase?
6. Are you in need of a lot of storage space?
7. Is the kitchen a significant factor for you?
8. Are you handy?
9. Does architecture make you happy?

While not an exhaustive list, your answers to these questions directly relate to the issues that can come into play.

Related: What to Look for When Buying a House: 10 Unusual Tips

Types of New Homes

Before diving into the details that will help you decide whether a new or old house is right for you, it's important to note that not every new home is the same. We'll discuss the pros and cons of three types of "new" homes in this guide, and knowing the differences will help you decide.

• New home: Most homebuyers and contractors consider a new home built in the past few years but can include houses built in the last 20 years. However, this definition implies that a new home wasn't necessarily just finished being built or that nobody has lived in it before. Contractors and developers may also temporarily live in homes as they continue to develop the area or work on selling other homes in the neighborhood. However, there won't be many differences between a 20-year-old home vs. a new home apart from the age of home systems, design aesthetics, and some amenities.
• New-construction home: This term refers to houses that have just been built and have not been lived in yet. It can include custom-built homes constructed explicitly for a single homebuyer or those built as part of a development. Even if the home's architecture isn't custom, there's typically room for input from homebuyers about the features built into the house. Sometimes, new construction homes are sold before they are fully completed, meaning they're not always move-in ready.
• Spec home: Also called feature or showcase homes, these houses are typically built faster than new-construction homes and have features and designs solely chosen by the builder. From the builder's perspective, the goal is to build these quickly and for a tidy profit. There's no room for customization by the homebuyer, but spec homes are move-in ready. These houses showcase modern designs and amenities that entice prospective buyers.

Buying an Old Home

Pros:

• Want a big backyard? You'll have more luck with an older home. You'll find that older homes typically have larger lots while newer construction favors building larger homes on smaller lots.
• Older homes tend to have been built in town or just on the outskirts, making it easier to get around on foot. If being in or near town is important, choosing an older home may be better for you.
• If cost is a factor, older homes tend to be less expensive, especially when considering an old home vs. a new construction home. Research shows that the U.S. median price for a newer home can be as much as $100,000 more than for an older home.
• Older homes often have more charming, special architectural touches and a less cookie-cutter look overall. If you enjoy architecture, you may find that the delight you feel when you get home more than offsets the added upkeep an older home requires.
• Older homes often have certain intangibles, like mature trees and landscaping on the property, locations in appealing, established neighborhoods, and a long history of appreciation that, while not indicative of future success, can provide a sense of confidence that the home will be a good investment long-term.

Cons:

• Older homes often were built with smaller bedrooms and little closet space. A newer home may be a better bet if you want some extra elbow room or need a lot of storage space. Many older homes were built with single-car garages, making storage space a potentially bigger issue.
• Square footage can sometimes be less than desirable in older homes. Many homes were built with two to three bedrooms and one to two baths, which may not be enough house for your needs.
• If you are uncomfortable with DIY jobs or don't have the time or money to spend on upkeep, an older home may not be for you. Older homes often need more maintenance, including sometimes expensive repairs to roofs and foundations or upgrades to plumbing and electrical. One of the most significant financial factors in deciding on a new or old house is maintenance needs.
• Kitchens and bathrooms in older homes may also need remodeling, and flooring may be another issue. Styles change, and if you don't want to spend the time or money to remodel, focus on newer homes for sale.
• Older homes can be more susceptible to leaks, poor air circulation, and other issues that can lead to mold and musty smells. These issues are fixable, but they are a consideration, nonetheless. Energy efficiency is another con, as many older homes have poor insulation, windows, and heating systems. Heating older homes can be expensive, and it can be even more costly if you need to upgrade an old furnace or boiler.

Buying a New Home

Pros:

• A new or newer home usually offers the latest construction advances, plumbing and electrical systems, and, often, smart home features.
• Energy efficiency may be the biggest factor when deciding on a new home vs. an old home. While you pay more upfront for a new or newer home, you can recover much of that expense over time in savings on heating and cooling costs.
• A brand-new home can also offer you more confidence around big-ticket repairs. You will begin your homeownership life with a new HVAC system, water heater, flooring or carpeting, roof, windows, and so on. This means you may not need to repair or replace these items for five to ten years or more typically, especially if you perform basic upkeep.
• Homeowner's insurance is often less expensive with new or newer homes because they were built with the most current standards.

Cons:

• As you probably guessed, all the contemporary systems and features mean you'll pay more for a new home vs. an old home. You'll also need to pay higher property taxes on a new home.
• Developers are constantly searching for new areas to build new homes, and locations aren't always ideal for homeowners — at first. It can take a while for shopping centers, more conveniently located schools, and connections to major freeways to develop around new neighborhoods.
• If you're hoping to move into a house with a lush, cultivated garden, a new home may not be right for you. Plants take a while to grow and mature, and you'll have to help them along more than you would in an established garden.

Buying a New Construction Home

Pros:

• All home systems are at the very start of their lifespans, and construction materials are brand new. This means you won't have to pay for repairs and replacements outside of your homeowners insurance.
• New-construction homes allow you to work with an architect and contractor to create a customized living space with every feature and amenity you want.
• There's no need to negotiate with a home seller or real estate agent professional. You'll know exactly what you'll pay for the house at every step of the construction process.

Cons:

• Because they're built from scratch, you must wait longer to move into these houses.
• And because new construction homes take a while to complete, there's always the risk of construction delays. Weather, material shortages, and permit issues can slow down building longer than expected.
• The more you customize your new home with top-of-the-line features and materials, the more it will cost. A good contractor will keep you updated with cost estimates throughout the process, but it can still be easy for your tastes to exceed your budget.
• If you're buying a new construction home from a short-term resident or a builder, they're looking to recoup their costs. A long-term resident may be willing to negotiate because they're confident in the equity they've built and the profit they'll make. However, those other sellers often have a fixed price they need to receive to make a profit.

Buying a Spec Home

Pros:

• Because it benefits the builder, spec homes are typically built much faster than traditional new construction homes.
• Another difference between spec homes and new construction homes is that spec homes are move-in ready when you purchase them.
• Choosing and buying a spec home is simple. You either love the home design and want to pay (roughly) the asking price, or you don't and keep looking for the right house for you. Negotiating and decision-making aren't significant factors in buying a spec home.
• The builder typically chooses modern and attractive features to entice more homebuyers.

Cons:

• There may be one or two decisions you get to make regarding features in a spec home, but they're not customizable.
• Because they're not customizable, you may pay for features and amenities you don't want and won't use.
• Like with an old home vs. new construction home, you typically don't get to choose the plot of land on which the spec house is built.

If you're still having trouble deciding how old of a house you should buy, compare the pros and cons of these specific home categories:

• Old home vs. new construction
• New construction vs. spec home
• Spec home vs. custom home
• 20-year-old home vs. old home

Whether you buy a new or old house, protect your home systems and appliances with home warranty coverage. These items may not be at the end of their life spans, but not knowing how much regular maintenance has been performed on them leaves your budget at risk if and when breakdowns occur.

The contents of this article are provided for general guidance only. First American Home Warranty does not assume any responsibility for losses or damages as a result of using this information.