Building a custom home may seem like a long-off goal, but most home buyers end up finding it saves them money.
Between building a new home and buying an existing one, both methods offer some great benefits. However, determining which option is right for you often comes down to understanding the costs associated with the process and the value it brings to the table.
Benefits of Building a Custom Home
When you build a custom home, you gain a number of key benefits you cannot achieve with buying a pre-built property.
For example, the most obvious is being able to make the home your own from the ground up. You get to design every detail and bring together the features you want and need in a space. You never have to settle for something that does not work for you.
There is also the benefit of being able to choose where you build from the city and neighborhood to a location on a lot. This gives you flexibility, again, to achieve your long-term goals.
Factors Affecting Cost to Build a Custom Home
Some people mistakenly believe they must have a significant amount of money tucked away to allow them to build a home. Truthfully, you do not necessarily need to have more money.
So, how much does it really cost to build a custom home? Here is a closer look at some of the common costs involved in building a custom home as well as buying a traditional home.
Real Estate Fees
Most sales tack on many fees. If you were to buy a pre-built home, you have to pay a significant amount of fees for the sale including things like transaction fees and taxes.
On the other hand, real estate fees for building a custom home are typically nothing.
Land Costs
You may think it is very expensive to purchase an actual parcel of land that has never been built on or is otherwise vacant. Several factors play a role in the cost of land.
For example, location and size matter. The cost of land for a custom home will range from $52,000 up to $70,000. The same layout and location could cost you well over $105,000 if you buy a home that is already built.
Financing Costs
Financing costs depend on the loan you obtain and the overall type of home you build.
Generally speaking, financing costs on a pre-built home are likely to cost about $14,000 while those for a custom built home are only half as much.
When you add up the savings in real estate fees, land and financing costs, you can expect to save between 8 and 25 percent by building a custom home.
Other Elements That Play Into The Cost to Build a Custom Home
What you get for your money plays a huge role. It’s possible you may pay more to build a custom home, but comparatively, you should consider the additional investments involved in buying a pre-built home that is not part of the upfront cost.
Renovations & Remodeling
Are you likely to spend $10,000 or more on renovations to a pre-built home before you move in?
Many homeowners feel compelled to do this in order to make the home their own. Keep in mind, extensive renovations can be significantly more expensive making it less beneficial to buy than to build a custom home.
Home Inspection Repairs
When buying an existing home, you must consider what can result from a home inspection.
Your inspector will do his or her best to carefully look for signs of risks, but problems can still exist beneath the surface. Some of the biggest risks, such as structural damage to the home or foundation damage, may not be something your inspector can spot.
If a problem develops with a custom built home, you have a builder responsible for making repairs. Of course, you also know the home is new from the ground up, and less likely to have such structural concerns. There are far fewer unknowns when building a custom home.
Maintenance Costs
How much money will you put into an existing home? How much does maintenance cost on a custom home?
When custom building, your home builder will work with you to ensure you are investing in a tight building design that reduces energy consumption. This includes installing highly efficient systems which are backed by home warranties.
For example, if something goes wrong in the first few years with your furnace or air conditioner, there is a warranty to help you pay for the repairs or replacement costs.
This is not the case with an existing home. Most warranties are no longer applicable. You may find existing home maintenance is overall more expensive since you’re likely to be playing catch up initially.
Deciding Between Building a Custom Home and Buying an Existing Home
Determining whether you should build or buy is a decision only you can make once you’ve become well-informed on the cost differences.
If there’s one important piece of advice it’s to not overlook the fact that most people can afford to build a custom home. In doing so, you may actually be able to increase your home’s worth in the long term. New homes tend to hold their value well for years to come, making reselling easier.
While interest rates are low and construction costs remain moderate, now is the time to consider the value in building what you really want and desire.
