Strategic Points Group: Buying Homes: Do new or existing homes offer the most for your money?

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First-time home buyer have two options. Save money by going into an established neighborhood and updating an older home to specifications, or buy a smaller new home. At the very least, your decision will be based largely on compromise -- new home/smaller space versus older home/remodeling costs.

Depending on where you live, a new homes may be very affordable or very difficult to find. In Dallas, where homes are selling more than 10 percent above the previous year's prices, new "starter" homes are at a premium and well above the $100,000 ceiling of the mid-90s. Affordable new homes in a "tight" market can begin at $120,000 to $160,000 in more desirable neighborhoods, placing them well out of reach for many first-time buyers. Add to that the accelerating costs of new materials and the scarcity of labor, and you have new construction at a premium. If a new 2,000-square-foot home generally averages $70 to $80 per square foot, a comparably sized older home in the same neighborhood may cost as much as one-third less. So just what do you get for the difference in money?

According to the National Association of Home Builders, new homes offer many advantages over existing homes, including:

More amenities and convenience
New homes host built-in appliances, including dishwashers, and nearly all have central air and heat. They typically feature more storage, better carpet and extra phone and cable hook-ups. Amenities include vanity cabinets, large mirrors, hardwood floors, medicine cabinets, whirlpool tubs, and easy-to-clean plastic tub enclosures.

Safety
Occupants of new homes are almost six times less likely to die from fire than occupants of older homes. Many new homes come equipped with hard-wired smoke detectors in several places, complete with battery back-up should the power go out. Fires are diminished due to the lack of need for space heaters and because of more efficient heating systems and better insulation. Electrical power systems in new homes are properly sized for the heavier electrical demands of today's modern world, and wiring systems are less likely to cause fires. Circuit breakers have replaced fuse boxes, ground fault interrupters for bathrooms, kitchens, and outside receptacles reduce the chance of fire and electrocution. Today's glass in tub enclosures and patio doors in new homes must be tempered so that it will crumble if broken instead of shattering into large jagged pieces.

Health
The building industry now utilizes products that make new homes better for your health. Asbestos, which can increase the risk of respiratory disease, has been eliminated from insulation, shingles, pipe, cement board, roof tar, floor tiles, and ceiling tiles. Lead is no longer used as an ingredient in paint or as solder for plumbing. Formaldehyde emissions from particle board and plywood have been greatly reduced in new homes. And urea-formaldehyde finishes on most kitchen cabinets are now baked or cured to minimize any emissions. Builders are now installing systems to control radon gas. Older homes frequently have no gravel in which to collect the gas, no polyethylene film to retard movement of the gas through the slab, and no vent pipes. Mitigating radon from an existing home is generally far more expensive than building techniques used to prevent it.

Energy efficiency
Because of more efficient windows, heating and cooling equipment, better control of air infiltration, and greater use of insulation, new homes consume half as much energy as homes built prior to 1980. Older homes tend to be drafty and less comfortable, and frost and condensation are more likely to appear on windows, drip down, and cause deterioration of wood trim and walls.

Lower maintenance
New homes require less maintenance and upkeep. New homes are available with rock, brick, siding, windows, and trim that never need painting. Wood decks are typically built to last with pressure-treated lumber resistant to rot and insects. Pressure-treated wood is also used where wood comes in contact with concrete.

Obtain one or more bids
Choose a builder for the construction of your new home. You might decide to obtain one or more formal bids for building your home. The bidding builders will assemble subcontractors' bids, suppliers' proposals and other estimates into a formal cost analysis based on complete written specifications for your home.

Finance your home
At this point in the process, you should be ready to arrange the short-term construction financing and the long-term residential mortgage for your home. It's often wise to pre-qualify in the early stages.

Obtain permits
Obtain construction-related permits and approvals. Before construction can begin, you'll need official sign-offs from governing authorities such as the building department, utility services and the architectural control board or committee, if any, that has jurisdiction over your site.

Build your home
If your plan has been well-executed, the construction of your new home could be the easiest part of the process. You want to avoid any construction delays by being prepared.

Completion
Closing and completion of all final work. After your home is built, the lender will fund your residential mortgage and the builder will make any repairs necessary. New home owners should do a walk through with the builder to make sure everything is up to expectations.

Try these other related FAQ sections:


			New Mortgage

			Refinance

			Home Equity

			Debt Consolidation

			Construction

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Information and interactive calculators are made available to you as self-help tools for your independent use. We can not and do not guarantee their accuracy or their applicability to your circumstances. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.

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