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robotropolis

Another thread: premium on build vs buy

robo (z6a)
9 years ago

Hi all! You may have recalled that I asked some questions about building a cottage about a year ago. Since that time we have bought neither lot nor a cottage but the hunt is still on.

Father in law wants to get a cottage mostly for MIL. We'll use it and take care of it for them (they already have a few places and don't want the hassle).

The problem: nothing has come up that they like. Location is important and not a lot comes up in the target area.

So now they're back to thinking about building.

I'd like to advise them that building comes with a premium over buying the same quality house, same land "used" - but what kind of premium should I ballpark for them? 30%?

In some ways cost isn't a problem, but OTOH they don't want to overspend on something they're not going to use that much.

Any words of advice would be welcome! My personal opinion is that building is going to be more of a hassle than they want unless they really loosen up on the chequebook, but there's a possibility they could go with a package builder for convenience. (Also, it would be pretty ungracious to suggest they loosen up the chequebook on something that I'm going to benefit from. :)

On renting: they want to put some money somewhere.

On using a realtor: they should and will. But the realtor they'll use basically works for FIL and he doesn't want to take advantage until he knows what he wants. So we're stuck with the legwork. But...I don't mind shopping with other people's money. :)

This post was edited by robotropolis on Thu, May 15, 14 at 13:02

Comments (6)

  • Annie Deighnaugh
    9 years ago

    I'm not sure how to monetize new vs. existing .... there are stats on median home price new vs. existing, but there can be strong regional influences and it also depends on the part of the housing cycle. When house prices were crashing, you could actually buy a new house for less than you could an existing home.

    However, I think more than money, the emotional costs are extremely high when doing a custom build. There are numerous stressors in the process including making a zillion decisions, never knowing if they are right or not, dealing with contractors and subs, some of whom will or will not do a good job, errors in the job due to miscommunication, being given conflicting information from various subs as they each are approaching a situation from their narrow POV, cost overruns, unexpecteds, delays due to weather and other things, risk of injury in the build process, financing issues, and potential living issues if the new house isn't ready on time. We also had a lot of extra stress from dealing with the zoning appeals and wetlands, not knowing if we could even build our dream home or not...

  • patriceny
    9 years ago

    Annie's message almost ignited the PTSD I sustained from when we built our new home 2 years ago. I'd repressed most of it. :)

    Building our new house was some of the most stressful months of my life. You're spending hundreds of thousands of dollars, and unless you are the most mellow person in the world, the never-ending problems, cost over-runs, unknowns that always pop up, etc., get to you after awhile.

    But to answer your question, I'm guessing we paid about 30% more to build our house than to buy a similar existing one. And that figure includes my spouse doing a lot of the work too. I shudder to think how much higher than figure would have been without his "free" labor.....which has been ongoing for the past 2 years!

  • robo (z6a)
    Original Author
    9 years ago

    I completely agree about the stress. Cost wouldn't be a concern so much but I just can't picture them putting much thought into it. Then again that might be what I'm for...

  • mrspete
    9 years ago

    Just to be argumentative, I don't think I can compare for the house we're planning -- the whole reason we're building is that we can't find a house with the features we want! Thus, the comparison would be between custom-just-for-me vs. almost-what-I-want.

  • pnbrown
    9 years ago

    Depends on the local market.

    In central florida, for example, in the low to mid-range, buying a lot and building new is at least twice the cost of existing, and often 3 to 4 times.

    Here in the northeast the premium is much less, probably more like that 30-40%.

  • DreamingoftheUP
    9 years ago

    Same experience looking for a second home. First considered building but then saw the price of existing, which is about 50% less since the crash. However, depending on the condition and remodeling after purchase, the difference becomes less. Also, have not found what I really want yet, without major remodeling/reconstruction. Am now leaning again towards building new, but with distractions, the entire search has been on hold.

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