With the only alternative left being custom home construction, house-hunters may mistakenly believe that their budgets won’t allow for the dream home they deserve. It may come as a surprise to learn that building a custom home is as financially feasible as buying a home through the traditional market. In fact, at times, it can even be cheaper!
Financial Factors of Buying an Existing Home
Most people understand that buying a home is a costly, time-consuming process. There are many different financial factors that can end up radically changing the total cost of your investment along the way:
Real Estate Agents & Lawyers
When purchasing an existing home through the real estate market, you’ll need to enlist the help of a real estate agent. While some states do not require this by law, others do, so it’s important to research the regulations associated with real estate agents in the area in which you wish to live. Real estate agents take a commission of the total purchase price from the seller and typically only charge the seller fees associated with the home sale.
Just because you won’t have to pay a real estate agent as a homebuyer doesn’t mean you’re off the hook financially: You’ll still need the help of a real estate attorney to facilitate the details of the sale. From clearing the title on the property to managing closing proceedings and payments, real estate lawyers are deeply involved in the homebuying process. Depending on the complexity of your sale, you could end up paying thousands of dollars just for your real estate attorney alone.
It’s standard practice for homebuyers to stipulate a sale contingent upon home inspection. If you’ve placed a conditional offer on a home such as this, you’ll need to hire a home inspector to evaluate the condition of your desired property. This is usually the responsibility of the homebuyer, and costs vary significantly depending on the inspector you choose and the type of inspection you wish them to perform. The following are the average costs associated with specific types of inspection services:
- Termite Inspections: $50 – $280
- Asbestos Testing: $228 – $795
- Mold Testing: $296 – $1,004
- Lead Testing: $224 – $420
- Foundation Inspection: $350 – $1,000
Closing costs are the total costs involved in the transfer of ownership for your property. These costs may include loan origination fees, discount points, appraisal fees, title searches, title insurance, surveys, taxes, deed recording fees, and credit report shortages. This, of course, is in addition to the total down payment you agree to pay at closing. For the average $200,000 home, buyers can expect to pay anywhere between $6,000 and $8,000 for their closing costs depending on their specific situation.
Unexpected Repairs & Renovations
When you buy an existing home, you’re inheriting all of its issues — even the ones you didn’t see when you first took a tour of the property. Sudden septic failures, insufficient roofing, and mold remediation are just some of the nightmarish repairs and renovations you may need to financially support to make your new space livable. Depending on the severity and complexity of your home repair and renovation needs, you could very well be looking at a price tag well into the tens of thousands.
Financial Factors of Building a Custom Home
When it comes to building a custom home, financing your dream is a lot more achievable than you might think. The following are some of the factors you’ll need to weigh when deciding whether or not to build a custom home:
Custom Home Design
One of the main things you’ll need to pay for during your custom home build is the design and construction expertise of a knowledgeable builder. These professionals will work with you every step of the way to ensure your unique vision comes to life exactly as you dreamt it would. As such, it’s common for home builders to charge anywhere between 6% and 25% of the estimated construction cost of the home for their services.
Custom home building is unique in that it allows you to set the price point through material and feature selection. Only the materials and features you choose to include in your home design will be included, meaning you can essentially choose the cost of your build. Unlike buying a home on the market, this allows for more flexibility in creating a space that meets your individual stylistic and functional preferences.
In addition to designing, planning, and constructing your custom home, your builder may offer additional services, such as land acquisition or financing assistance. If that’s the case, there may be fees associated with these services. Be sure to discuss these additional costs with your home builder to set realistic expectations for the total price of your project.
Which is Cheaper — Buying or Building?
The short answer: It depends on your specific situation. Buying an existing home can be more cost-effective — especially if the property in question is a “fixer-upper.” But most homebuyers aren’t looking to dive right into a DIY project, immediately adding onto the total cost of their investment. If that’s the case, building a custom home may be the better choice. By building a custom home, you control the cost of your investment by actively participating in material selection for your project. You’ll also eliminate the need for costly inspections, title search, and other costs typically associated with buying a home through the standard market.
Discover Your Financial Options with Lee Builders!
If you’re interested in learning more about financing a custom home build, trust the professionals at Lee Builders to help you find the solutions you need. Our team has years of experience helping South Carolina residents bring their dream homes to life, providing them the financial guidance they need to afford the cost of their build. Contact our custom home builders to get started with your project today!