Updated: Jun 8, 2021
The following article was written by Site Agent, Tommy Sibiga, a Hometown Agent that sold over 200 properties in just 4 years (5x the National Average) and has been consistently ranked among the top 100 agents in Central Virginia.
Did you know that some buyers do not even consider new construction because they believe that they cannot afford it? Certainly a new home should cost more than a resale, but how much more does it cost? How much is too much? Why does it cost more? Is there a tangible value translated to the purchaser by buying new? New construction may be more affordable than you think when all things are considered.
Let’s begin by looking at the actual cost difference. I looked back at the last four months of homes in diversified counties nearby. There were 369 homes that sold (2,500-3,000 square feet). The average year of construction was 1987, average sale price was $315,986, and the average price per square foot was $115.71.
There were 79 newly built homes that sold (2,500-3,000 sq ft) for an average of $351,357 and $127.79 per square foot. New homes sold for approximately 11 percent more than resales within the last four months. The last five years trended anywhere between 5 and 11 percent higher than resales. Each market is unique, but it’s important to note that the difference may be nominal. k
One of the most attractive attributes of new construction is that everything is updated and current. New kitchen, new bathrooms, open floor concept, and more. Any house can be renovated, but it comes with a cost. Remodeling magazine estimates a national average for a complete kitchen remodel is $54,909. It would increase the value of the home by an estimated $40,732 (an estimated loss of $14,177).
A bathroom would cost $16,128 and increase the resale value by $11,688 (an estimated loss of $4,440). A roof would costs $18,913 and increase the resale value by $12,777 (an estimated loss of $6,136). The list goes on and on. An older home can be made new again but it’s important to consider the costs associated with such renovations.
As you’re looking at resales, another important thing to consider is that after you take possession of the home, the cost for renovations/repairs is typically in the form of a lump sum expense. A $50,000 kitchen renovation is one large cost to bear versus spending $50,000 more on a new home with the amount financed and spread over 30 years of mortgage payments.
Speaking of repairs, most buyers are shocked by the expense of home ownership maintenance. Repairs or preventative maintenance can cost one to four percent annually of the home’s value. So a home purchased at $300,000 can cost anywhere from $3,000 to $12,000 per year. Older homes typically require more maintenance than new homes. For a brand new home, a builder’s warranty and manufacturer warranties can eliminate the purchaser’s responsibility for some of those repairs over the first several years.
New construction also offers other annual cost savings. Newly built homes are more energy efficient than ever before. Today’s building standards enable homes to use less electricity and less water. Old refrigerators can waste up to three times as much energy as new ones. An energystar washer can save as much as 7,000 gallons of water a year. Super efficient windows, superior insulation, and better made HVAC systems can cut bills drastically. Up to half of your home’s energy can go towards heating and cooling. For all these reasons and more, buying a new home can mean significant cost savings.
Say you have only considered homes for resale up until this point. It’s not too late to explore a new and perhaps better option. A brand new home, just the way you’ve dreamed of it, with all the updated features, could be within your reach. A small premium on the front end may save you some serious funds and headaches down the road. If you’re curious to see what new homes are going for in your area, be sure to check out www.tommysibiga.com and browse all of your new construction possibilities.
-Tommy Sibiga, Hometown Realty