When looking for a home, buyers face an important decision: Should you purchase a newly built home or a resale property? Both have advantages and people may simply prefer one over the other. However, if you’re sitting on the fence, these are some of the factors to take into consideration.
Existing homes typically cost less per square foot than homes that are newly built or still under construction. In addition, if the vendor of a resale home is extremely motivated, you may be able to negotiate a price below the asking price.
If you’re buying a newly constructed home, the price will be set by the builder. If it’s a good location and the builder has a well-established reputation, the price tag may be non-negotiable. New homes are subject to GST or HST, although this may be partially refundable depending on location. In addition, closing costs may be higher because of utility hookups, metre installations, etc.
Resale homes are generally in established neighbourhoods with mature trees and well-established infrastructure. New housing tends to be concentrated either within metropolitan areas slated for refurbishing or on the edge of developed areas.
When you purchase a new home, you usually have a choice of your floor layouts to choose from, which can be customized to your specifications. The degree of customization will depend on the builder, but many will allow you to choose not only your floor plans, but also colour schemes, fixtures, flooring, cabinetry, and more.
With a resale, what you see is what you get. If you want to redecorate or renovate, you’ll have to wait until after you take possession.
With a new home, as long as the construction is finished, you can move in right away. If you purchase before completion, there can be delays if the builder is running behind schedule.
Most resale homes have closing dates of 30, 60, or 90 days, and the date is negotiable with the vendor.
New homes are built with the latest technology and must meet building codes. As a result, they are typically much more energy-efficient than resales. Bringing an older home up-to-date with insulation, heating, and energy-efficient doors and windows can be time-consuming and costly.
Similarly, new homes are generally maintenance-free, for at least the first few years. On the downside, you may need to add your own finishing touches, such as trees, landscaping, patio, driveway, and finished basement.
With a resale home, the level of maintenance required will depend largely on how well the previous owner kept up the property.
With the exception of Nunavut and the Northwest Territories, all provinces and territories have new-home warranty programs. Program specifics vary, but typically cover defects in materials and workmanship, construction delays, and faulty electrical or heating systems.
Resale homes have a "buyer beware" caveat with no guarantees, but many lenders, like First National, offer a free home-warranty program, which is free for your first year.
Whether you’re buying a newly constructed home or a resale, a professional home inspection is recommended. A qualified home inspector may be able to spot areas that might need attention within the next few years.
New homes are typically financed by the builder, who may be able to offer advantageous terms to qualified buyers.
Resale homes have the advantage of flexibility. You may be able to “port” your existing mortgage, assume the current owner’s mortgage, or negotiate with the lender for more advantageous terms.
Whether you’re buying a newly constructed home, one under construction, or a resale, help is available. Call your mortgage broker or First National to discuss your financing options.
© 2010 First National Financial LP.