Cost of Building a House vs. Buying
When you’re ready to make your dream of home ownership a reality, there are hundreds of thoughts flying around your head! One of the biggest questions on your mind is “how much is this going to cost me?” Of course it is; we all think of the bottom line when it comes to this very significant investment. You may also be wondering about the cost of building a house vs. buying. Again, another very good question! The answer is…
We know that this is a frustrating answer as you’re saving for a down payment, closing costs, and all of these great fixtures and finishing touches that you’ve had your eye on. But the fact of the matter is that your costs will depend on a great many factors, including the area, the size of the house and the lot, the complexity of the design, the materials you choose, and more. That said, you can get a good idea of the ballpark you’re going to be playing in. Let’s dig in.
Building vs. Buying Your Home
First, it is important to weigh the pros and cons of both building and buying. For example, when you buy a pre-existing home, it is finished. You don’t have to worry about construction, working with contractors, making endless decisions, etc. On the other hand, depending on the age and condition of the home, you may be looking at some repair and maintenance issues. Is the roof sound? Are there any issues with the heating, cooling, and/or plumbing systems? Will you have to replace wiring? A thorough home inspection is a must so you can properly anticipate your costs.
Building a home does help you avoid age- and condition-related problems. Everything is new! But you do have to be a lot more involved in the process in terms of making decisions - and waiting!
The right choice for you depends on your specific situation - and, of course, your budget.
The Average Cost to Build a House
According to the National Association of Home Builders, the average cost of building a home is about $85.65 per square foot. The average home size in the US is about 2700 square feet, so that would bring your costs to the neighborhood of $231,255.
Remember, though, this is a wide average. Your costs will slide up or down depending on your location, your designs, and other factors. It will also depend on whether or not you have a lot on which to build. In general, of the approximately $231,000 your home will cost, the land accounts for 25%. But this is not true of a vacant lot. You must also consider:
- The cost of the land. Expect about $3000 per acre (again, depending on the area and the makeup of the land).
- Whether or not you need to have utilities installed. Does the lot have existing water, sewer, and power lines? If not, you will also need to secure the appropriate permits.
- Excavation of the land. You should have a soil/land inspection to ensure that the lot is suitable for building. For example, will there be drainage issues?
Again, it is impossible to say that buying land and building a house costs $X. There are a lot of factors that can raise and lower your costs.
The Average Cost to Buy a House
Bet you know what’s coming… It depends! The average cost in the US is about $238,000, but this can be much higher in many markets (the average in Florida is $285,000, for example). You will need to prepare for:
- Closings Costs. These are usually 2 - 5% of the purchase price.
- Real Estate Commission. Here’s another 6%, which is typically divided between the buyer’s and seller’s agents.
- Property Taxes and Homeowners’ Insurance. These also vary widely based on the area in which your home is located. (Of course, you will also be responsible for these expenses on a home you build too.)
Don’t forget to add in expenses related to repairs and maintenance. This can be as simple as giving everything a fresh coat of paint - or as extensive as putting on a new roof or repairing the foundation.
When it comes to the cost of building a house vs buying, there are many factors that influence how much you will actually pay. The best place to start is with an honest assessment of your financial situation and your goals as a homeowner. Next, visit Homes & Land for all of the resources you need to take the next steps, including connecting with an experienced real estate professional.
Starting your journey towards homeownership is exciting and, ultimately, very rewarding! Take the first steps with expert resources from Homes & Land’s trusted network of real estate professionals in your area!