The Pros and Cons of Buying a New vs Pre-Owned Home

Buying a home is a decision that can be exhilarating and scary at the same time. When researching the advantages or disadvantages of buying a new, versus a pre-owned, home, make sure you weigh your personal needs first. Some buyers have had several homes before settling on the one home that makes them happy for years to come.  For those buying their first home, what factors into their decisions will vary—and rightly so, as everyone’s situation is a little different. 

Here are a few of the pros and cons of buying new versus pre-owned homes.

Home Warranties

Buying New

Pros include:

• Warranties all begin from the closing date of the home
• Items such as appliances usually have a one-year builder’s warranty
• Appliance manufacturers often offer additional extended warranties on their individual appliances
• Most everything is covered for one, five or even 20 years for items such as structural or roofing systems

Cons include:

• Warranties don’t usually cover wear and tear and improper use of home components

Why it Matters:

This can sometimes get to be a sticky topic if your carpet starts pulling up at the seams but the builder can prove your five dogs and four kids are the culprit.

Buying Pre-Owned

Pros include:

• The seller and buyer can negotiate an extended home warranty on some or all components of the home

Why it Matters:

From appliances to swimming pools to AC to heating systems, extended home warranties give you a piece of mind when purchasing a pre-owned home.

Cons include:

• The “what if” factor—the possibility that, for example, the previous owner had a mold condition and covered it up cosmetically (though sellers are required to sign a pre-existing conditions disclosure stating they aren’t aware of any problems with the home they’re selling)

Out-of-Pocket Costs

Buying New

Pros include:

• Developers often provide incentives to get you to sign on the dotted line—this might include major appliances, upgrades and “bonus cash” to be used toward closing costs or additional upgrades

Cons include:

• Incentives for out-of-pocket expenses may not be as favorable in this recuperating housing market
• Often major appliances, such as refrigerators, dishwashers and washers/dryers, have to be purchased by the homebuyer
• Other possible out-of-pocket expenses could include window coverings, major appliances, lawn irrigation system and ceiling fans

Buying Pre-Owned

Pros include:

• Typically most everything fixed that the previous owner put into the home comes with the home
• The home-seller may even throw in furniture and other amenities beyond major appliances and fixtures
• You are more likely to expect a “move-in-ready” home

Cons include:

• Some items that come with the home may not be in great condition—you could inherit appliances and home systems that may cost you money in updating or keeping in working condition

Why it Matters:

Make sure to hire a home inspector after the seller accepts your offer. A home inspection will unveil issues that are beyond cosmetic. It will also give the home-seller the opportunity to address any outstanding concerns/repairs with the home.

Financing

Buying New

Pros include:

• In a buyer-carried construction loan, the home price may be less expensive as the builder is not adding interest costs to the loan
• The buyer has more control of the money being used for the build and can see how it’s being allocated

Cons include:

• The median price of a new home is almost always higher than that of a pre-owned on in all markets
• The unexpected costs of building a new home can include abiding by community and neighborhood standards, as well as energy policies and building codes

Buying Pre-Owned

Pros include:

• Additional governmental assistance and financing options for purchasing an existing home
• Generally lower overall cost thanks to depreciation of the structure versus the full price of a brand-new construction (think buying a new car versus one that’s been driven off the lot)

Cons include:

• You pay for what you get—there’s much less ability to customize to your individual needs, as it’s buying someone else’s construction decisions

Just Remember

Take your time, and weigh the pros and cons of buying a new versus pre-owned home.  Your decision may change once you find your “dream” home but remember, at the end of the day, new or pre-owned, your home should make you feel comfortable for years to come.