Updated 2024
Obtaining a new home is always an exciting milestone, whether it’s your first purchase or your fifth. However, it does open up a long list of questions and decisions.
One of the most significant choices you will face is whether to purchase a resale home that has already been on the market or a brand-new home that has never been lived in.
While building your own house may seem like a tantalizing idea, it requires good sense and some consideration of the financial resources you will need. In this post, we’ll provide a list of guidelines to help you choose the best course of action for your lifestyle.
Consider the Costs
New Builds
Whether you buy a new build or a resale home, there are additional costs beyond the purchase price you should be ready for. A new build’s sticker price only includes the basic construction. Once you start adding upgrades, the final cost can be significantly higher than the base.
Many prospective buyers are shocked at how many features you see in the model home are actually upgrades available at an extra cost. Everything from ceiling lamps and modifying doors to different flooring styles can add to your bottom line. The fancier you get, the higher your final price will be.
In addition, there is typically very little room for negotiation when buying brand new. As far as the builder is concerned, the price is the price.
Resale Homes
Unless it’s a highly competitive seller’s market, resale homes are typically less expensive than a brand-new build. Even so, there could be hidden costs to factor in.
Nearly every buyer wants to make some changes or renovations to their new home. It might be next month or a few years from now, but you should account for these upgrades when looking at potential homes. If substantial repairs are required, such as replacing the roof or furnace, these additional costs may be more expensive than you realize.
The upside is that the price of purchasing a resale home can be more flexible depending on the market. During balanced or buyer’s markets, you’ll have some negotiation power.
You might be able to get a concession on the price to account for the home improvement projects you want. Alternatively, your offer could be contingent on inclusions, such as appliances, window coverings, outdoor furniture, indoor furniture, lawn mower etc. If the seller is downsizing, they may even give you these items for free as an incentive.
No matter where you are on your home-buying journey, it never hurts to brush up on how the process works in the current market. If you’re getting ready for a move, you may enjoy the related reading below:
- The Ultimate Guide for First-Time Buyers in Guelph
- Can You Buy or Sell a Home Using an App?
- Buying an Older Home? Here Are The Red Flags To Watch Out For
The Down Payment
The down payment structure for resale versus new builds is also different. The deposit on resale varies depending on the purchase price.
- For all homes $500,000 or less, you’ll need 5% upfront.
- Add an extra 10% on any amounts between $500,000 to $1 million.
- You will need 20% on anything above and beyond $1 million.
For a new build, you typically have different installment payments at various phases of construction. In the end, this could amount to as much as 25% before your home is built. That’s $125,000 on a $500,000 dollar home, which is five times more than what you would pay upfront for a resale property.
Location
When buying resale, you have nearly unlimited options in regards to your location. Houses are available in pretty much any type of neighbourhood, from the suburbs and the downtown core to peaceful rural areas.
If your heart is set on a new build, your options are more limited. You buy where the developer is building, usually in a suburban area where there may not be as many amenities. Your other alternative is to purchase a vacant lot in your desired location and have your home custom-built for you.
This is a fabulous option–if your budget allows for it. Even then, we don’t have an unlimited supply of vacant lots, so you will still need to be strategic about your location.
These are all critical factors to consider, especially if there’s a chance you’ll want to cash in on your equity by selling your home in the future. Properties in highly sought-after neighbourhoods with great schools have a better chance of selling at a higher price.
Taxes
Taxes are another factor that may affect your choice. Fortunately, resale homes are not subjected to GST or HST at this time. However, new builds are a different story. Though most builders include the 13% tax, this does add a substantial amount to your purchase price.
You will have to pay GST/HST on the sale price of a new build. On $450,000, that adds $58,500, bringing the total to $508,500. If you qualify for the GST/HST new housing rebate, you can reclaim the GST portion of the taxes on a new or substantially renovated property.
What Is Your Timeline?
Choosing a resale home is almost always better when moving with a deadline. Unlike new construction, you’ll have a definite closing date, and interference with the transfer of ownership is rare.
Once again, new builds are a different story. The builder may give you a “move-in date,” but those are never set in stone. Delays are common, and can happen several times.
This will cause an incredible amount of stress and frustration if you need to move in a hurry. On the other hand, resale homes are generally available quickly unless you plan to do significant remodelling.
Who Is Buying What?
A builder will generally target a neighbourhood towards specific demographics. Many are focusing on young families as there are often children around the same age who can become friends and play together. Some will zero in on adult living, and others will even target students.
Resale homes in mature neighbourhoods will attract a wider mix of buyers of all ages, including young professionals, young families, mature families, and empty nesters. If you prefer to live in a neighbourhood where there is more diversity, a resale home might be for you.
Frequently Overlooked Considerations
Anyone can find it challenging to decide when buying their next home. First-time buyers especially can get caught up in the process only to be blindsided by the unexpected.
For example, buying a new-build can seem glamorous until you realize that you will be living in construction for months or even years. The landscaping is undeveloped, which can mean a backyard full of muck at first. Getting a paved driveway may also require a wait, which is not fun for snow removal in the winter.
Buying a resale home seems less glamorous in comparison, but there are many perks to be aware of. Mature neighbourhoods can have more character, beautifully treed streets, and properties with gorgeous perennial gardens.
You often can find a home where the landscaping has been completely done before you even move in. If you want a pool in your backyard, it’s nearly always more cost-effective to buy an existing home that already has one.
Otherwise, choosing and installing a new pool can be very expensive without much value to show for it. If you’re lucky, you might get 25 cents to 50 cents on the dollar when you go to sell.
Are you planning to use your new home as an investment? The posts below will be invaluable resources:
- Negotiating With Tenants as a Guelph Real Estate Investor
- The Go Wylde Guide to House Flipping
- How to Generate Passive Income From Your Primary Residence
Style
To a large extent, your decision between a resale or newly constructed home will come down to personal taste. Some people love the character and design of old architecture and mature landscaping. There is no one-size-fits-all advice when it comes to style and design.
Older architecture can be challenging to recreate – and more expensive. If this is your preference, finding an older, resale home is likely your best bet.
Other people prefer the modern style and crisp lines of newer construction. They also love the idea of being the first one to live in their brand-new home.
Other advantages are that you get to pick everything, the model of the home, the flooring, the kitchen cupboards, and more. Everything is new, and all high-ticket items like the furnace, roof, and windows have many years of life.
The Final Product
Buying a resale home allows you to physically see the house before you commit to purchasing it. For the most part, you know what you are getting, and can even see who your neighbours will be beforehand.
With a new build, you often have to work from a blueprint to imagine the finished product. That said, buying a newly constructed property can be a fantastic option. Just be sure to research your builder thoroughly.
In either case, working with an experienced real estate team can help you get the best results. They will know what questions to ask and what hidden problems to watch out for. Best of all, they can keep an eye out for available listings in the neighbourhood and style of your choice.
Whether you’re buying old or new, the experts at GoWylde Real Estate are here to help every step of the way. Reach out to info@gowylde.ca or call 519-826-7109 to begin a conversation.
