Is it better to buy a move-in-ready home, build new, or to buy a place with “potential” and renovate it? This is a question I’m often asked by clients – and it’s one I have asked myself when I was shopping for my own house.
For this blog, I am going to focus on building new or the fixer upper. Some people are accustomed to thinking that newer is always better, but when it comes to home buying, both new and old houses have their own unique characteristics, obstacles, and perks. You may be surprised by just what type of home you land on. It may be that diamond-in-the-rough fixer-upper or the safer, albeit more expensive, new home development.
Purchasing a brand-new home or a fixer upper is a matter of personal choice and weighing the advantages and disadvantages of each choice may help simplify the decision.
There are without a doubt some serious benefits of building a new home.
Brand new homes are ideal for the homebuyer looking for a property in a new neighborhood that is ready to move into.
New homes that have been professionally built offer many other advantages:
- Buyer customization. The buyer can select from a variety of flooring choices and interior wall colors.
- Structurally sound. Foundation, flooring, walls, roofing, etc.
- Reliable and functional wiring and plumbing. There will be ample outlets, closet lighting and practical number of bathrooms.
- Benefit of those modern-day discoveries. Particularly, there is no risk of asbestos, lead-based paint, or other unsafe materials that were used in the construction of pre-70’s homes.
- Built to new code regulations. Typically resulting in a “safer” home – For example, windows that can withstand higher sustained winds, and certain outlets being ground fault circuit protected.
- A new home warranty. A home in the process of being built by a Licensed Residential Builder is covered by home warranty insurance as required by legislation in B.C.
The idea of a brand-new house seems idyllic and problem-free, but they too have their own drawbacks, a brand-new home does come with several disadvantages that could be a deal breaker for potential homebuyers:
- Cost. Probably the biggest deterrent for new home construction is cost. A newly built house is expensive, even when compared to the renovation costs of most fixer-upper projects.
- Lacking in charm. “Cookie cutter” and therefore lack the unique charm of older homes.
- Immature landscaping. Many people have trouble with the amount of time it takes to landscape. Your house may be move in ready, but the yard and surrounding houses may not be; you could spend the first few months surrounded by noisy construction while seated on a dusty, dirt lot.
- Location. Developments are not always in your desired neighborhood, which may lengthen a commute to school or work. The homebuyer’s price range may preclude them from purchasing a new home in their dream neighborhood.
Buying a Fixer-Upper
There is a lot of hard work that goes into renovating a home, but like all hard work, it breeds reward.
Fixer-uppers come in all shapes, sizes and conditions, and it pays to do a little homework before signing any contracts. If you are interested in purchasing a fixer-upper, be sure to have the home professionally inspected for serious structural damage, such as a rotting foundation or a leaky roof.
Another question you will want to ask yourself is “How handy am I?” If you can pitch in with things like demolition, painting, or installing floors, you will save yourself some money. If you aren’t handy at all, that’s okay – just know that you’ll pay for everything you don’t do yourself.
- Lower initial cost. You are paying less for the property initially, although of course you’ll have to weigh the initial savings against a realistic estimate of what you’re going to spend on renovations.
- You add value. You aren’t paying for the work someone else did to improve their home. You are adding the value to the property and making it worth more. Hopefully more than you spent on the renovations!
- Finished product is exactly what you want. The right fixer-uppers allow for much more creativity, and you can really make the home plans your own creation that includes everything on your dream checklist. You get to pick finishes, fixtures, colours, and everything else. Your home will be to your tastes and not someone else’s.
- Charm – that good-old classic look. Contemporary is nice, but sometimes nothing beats the classic looks of arched doorways, iron-wrought gates, original hardwood floors, exposed beams and claw-foot tubs. More creativity for the ambitious homeowner through remodel/renovation choices.
- More desirable neighbourhood. There may be a fixer-upper waiting to be discovered and restored in your dream neighbourhood.
The bottom line when it comes to fixer-uppers is pride. Tackling an ambitious remodel can be a very rewarding process The Cons
Of course, there are drawbacks to purchasing a fixer-upper. Most of them start with money. Unfortunately, the extent of any damage may not be totally unveiled until after the papers are signed, even with an inspection. Budgeting a renovation can be tough work, especially when there could be unforeseen problems brewing beneath the surface of the house, including structural problems, sinking foundations, faulty wiring, etc. Like peeling back, the layers of an onion, one repair could lead to others that were not immediately visible. Even the most motivated, renovated-oriented homeowner can become disenchanted by costly repairs.
- Can you live in a reno zone? One of the biggest frustrations with fixer-uppers is maintaining a normal life while someone is in your home working. Depending on the size of the renovation project, it could take a lot of time, and if you do not have off-site housing arranged, you will be living in your own construction site!
- You might have to pay a mortgage and rent. If you need to move out and don’t have somewhere to stay for free, you’ll be paying rent as well as your mortgage while the reno is happening.
- Renovating costs money. It can cost a lot of money. Many renovations come with costs that people who haven’t done this before might not know about, including land surveys, architectural drawings, engineering reports, building permits, disposal fees and more. If you don’t have the cash, you may be able to use a Purchase Plus improvement program to get a mortgage that includes money to put toward the renovations you want.
- You’ll probably spend more than you expect. What starts out as a modest reno can quickly snowball into something much bigger. This can happen when you decide to add more features to your original plan, but it can also happen for reasons beyond your control. For example, the City may require that something like your current stairs will also need to be redone if they don’t meet requirements in the current building code. This can easily bump your renovation cost up by $10,000, depending on the scope of the work.
- “Invisible repairs”. Expensive repairs, like replacing the wiring, that will not add much to the resale price of an investment property because buyers can’t see the repair.
- Evolution. As previously mentioned, homes prior to the 70s were built with potentially dangerous materials, like lead-based paint or asbestos, which can be a large concern, especially for families with small children.
- Neighbourhood restraints. For resale purposes, it is recommended that the renovations and/or remodel not increase the home’s value significantly beyond the surrounding homes’ values.
There is no right or wrong answer. There are benefits and drawbacks to both home plans. Some house hunters are willing to get their hands dirty and roll the dice on the busted-up Victorian or the colonial cottage with the garden. Others, on the other hand, prefer the amenities, comfort, and low-risk involved in building a new home. After all, everyone’s dream home is different.
If you are really torn between these two options, then hopefully this comparison analysis between building new or fixing up old has helped you make your decision and allowed you to move on to the next stage of finding a new home.
Finally, when you’re deciding what’s right for you, listen to your heart – but also to your head.