Typically, a new home will cost a bit more than a used home. The reason? The new home is built with newer technology, newer materials which cost slightly more than was previously paid for the materials in the used home. When evaluating which is the better value, consider the "Hidden Cost of Ownership" test.
Here's one scenario. After shopping new and used homes, a Realtor's client was excited about the prospect of purchasing a new home that would be built to their exact specifications, with exactly the selections, colors and features that they required. But there was a used house that they had found in a distressed situation that was significantly less expensive. However, it would require numerous updates and modifications.
Their Realtor helped them make a list of items that they would need to modify, change or replace.
Granite Countertops $7,000
New Kitchen Sink 700
New Cabinets 9,000
New Carpet 5,500
New Hardwood Flooring 11,000
New Ceramic Tile 2,000
New Shower Surrounds 1,500
New Faucets 1,200
Total Repairs: $37,900
Their Realtor totaled the cost of the modifications. She then calculated the lower monthly payment of the lower priced used home. The lower priced home yielded a $350 lower monthly payment each month. Then she asked a surprising question. "How long do you see yourselves in this home?" Her clients weren't quite sure how to answer. She then proceeded to advise them by pointing out that in our market, the average stay in a home is actually between 5 and 7 years, regardless of nearly every homeowner indicating at the time of purchase that they will be in the home for a much longer time frame. She pointed out the reality is that jobs change, incomes change, there is the birth of additional children, adult children leaving the nest, physical limitations and a myriad of other factors that come into play shortening the time that most people actually occupy the home.
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