Ask A Realtor: Should I buy or build?
Dear Sara and Derek,
My wife and I have had our eye on Summit County for many years and are looking to relocate. I have read and heard about the limited inventory and wondering if it makes sense to build or should we stay focused on buying? What would you advise and what are the pros and cons for buying or building in a seller’s market?
Buy or Build
Dear Buy or Build,
Choosing between building and buying an existing home are conversations we have several times a year with buyers. It comes down to a decision of cost vs. finding a home that fulfills most of your needs. Even in today’s market of low inventory and increasing sales prices, it is still less expensive to buy an existing home over building.
Many buyers initially think building might present a cost savings, but once they start looking for land to build on and realize the cost, coupled with construction costs and delays that are even more common than in years past, they more often than decide to buy an existing or spec home.
We encourage anyone who is considering building to meet with an architect and a builder first, as well as an experienced realtor in land sales and construction, to get a realistic idea of what it will cost to build. Then add on the cost of the land, permit fees, tap fees, delays etc., all of which will come into play. Take that number as a starting point and then see if you can find an existing home that fulfills your needs for less than that price. Also factor in that even in a tight market, you are more likely to find a home and close before construction even begins.
All this being said, your home is a very personal matter and choice. To further assist you in determining which might be the best option, following are some pros and cons for both building and buying.
Move-in ready once you close, and no waiting to build, deal with construction delays or surprises. Most neighborhoods throughout Summit County also have mature landscaping on the streets, offering existing shade and screening from other homes. With new construction you will often be waiting several years before your landscaping has the desired effect.
Other benefits include immediate move-in after closing, which is happening much more quickly than in the past, particularly if it is a cash deal. You also eliminate extra costs associated with building such as rent, moving multiple times, storage unit costs, schools for kids, etc.
Historically, Summit County sees increased inventory every summer and we are noticing this continued trend. There are also several new developments, including Storm King in Frisco, Après Shores and Fish Hawk in Silverthorne and Kindred in Keystone that are being built, which will help improve available inventory. That being said, with demand still high, these residences are likely to sell out quickly.
Right now, the biggest challenge is lack of inventory, which also equates to higher prices. With a limited number of homes on the market, buyers are having to compete for every new listing that comes up. While buyer demand is showing signs of easing up and more inventory coming to market, it is still more difficult to find a house with all of the items on your wish list. With the price of homes and current demand, it’s important you come in with an open mind and be willing to compromise on some things such as location, home layout, and other amenities in order to meet your budget and what’s available.
Having a custom home that suits your needs and lifestyle, including having something new and most likely more energy efficient, is always appealing. Most re-sale homes tend to have some outdated finishes, appliances and flooring. So, you may end up having to upgrade anyway. Having a newly built home means brand new appliances, clean new carpeting and a current finish level.
Cost. The cost of building never went down during past recessions and with the current low inventory levels, most builders are very busy. If anything, the cost of labor has gone up. The cost of materials is also very high as we struggle to get caught up after the pandemic shutdowns. Every year we come across clients who bought land with the hopes of building their dream home, only to find the actual cost of building is much higher than they anticipated. These people often try to sell the land they bought just to recoup the costs they put into it with architecture, engineering and permits. By the time they realize it is cost prohibitive they are already $50,000 into it.
The first step is to find land in a location and at the price you can afford which should also include finding a realtor who has experience with how developer contracts and warranties work. As previously noted, it is more expensive to build than buy right now and depending on the final product, you can expect to pay 20 percent or more compared to buying a comparable home. This is before all the other factors such as renting, delays, storage, etc. Also remember the cost to build doesn’t include the purchase of land. If you can get a good deal on the land, that will make a huge difference in the overall cost of your new home.
Good luck with your decision.
Sara & Derek
Sara Gambino and Derek Gamburg are broker associates with Berkshire Hathaway HomeServices Colorado Properties, bringing up to 21 years of experience to buyers and sellers in the Summit County region. They are well-respected ambassadors for the mountain lifestyle, having lived in the area for 35 to 24 years respectively, and are actively involved in the community. Sara is also part of the Nelson Gambino Team, which includes broker associates Larry Nelson, Cindy Nelson, and Carlo Gambino.