For buyers who are on the fence between buying a new or existing home, multiple factors should be considered, including which property will maintain the most value.
When you buy a used home, be sure to research home values going back for five to 10 years. While there are no guarantees of future home prices, prices on existing homes in established neighborhoods are often more stable than those in new communities, says Vince Verni, a Realtor with Coldwell Banker Residential Brokerage in Babylon, N.Y.
"When you buy a new home, it's essential to research the reputation of your builder and look at the quality of the materials being used because that will have an impact on how well your home value holds up," says Raylene Lewis, a Realtor with Century 21 Beal in College Station, Texas.
Typically, new homes represent about 15 percent of the housing market, says Walter Malony, spokesman for the National Association of Realtors in Washington, D.C. Although in 2012, just 7 percent of buyers opted for a new home.
It's the same financing process when qualifying for a new or existing home, says Rob Ross, vice president and branch manager of MVB Mortgage in Reston, Va. The loan programs and fees are the same, too.
"The big difference is that you're likely to close a lot later on a new home than a resale," he says. "You can usually lock in your mortgage rate for up to 60 days for free, but if you need to wait six months or a year to close you'll have to decide whether to risk higher rates or pay a large fee to lock in current mortgage rates."
Ross says that some lenders allow you to lock in your rate for as long as a year, but this can cost up to two points, which would be $6,000 on a $300,000 loan. Fees for locking in your rate are usually nonrefundable, he says.
4 reasons to buy new
No. 1: Customization
"A lot of buyers like new homes because they can choose everything from the stain on the hardwood floor to the granite for their counters," says Verni. "Some builders allow you to change the layout and move walls."
Lewis says the amount of customization depends on how expensive the home is.
No. 2: Low maintenance
Buyers like the idea that they won't have to do much maintenance on a new home, says Lewis. Most builders provide warranties that require them to make repairs.
Existing homes typically require more money for upkeep down the road, says Verni.
No. 3: Modern amenities
New homes have to be built to the latest code and most builders use the latest technology, including USB openings on electrical outlets, wireless Internet access and energy-efficient features, says Verni.
No. 4: Modern style
Newly designed homes match today's tastes like an open family room and kitchen, higher ceilings and more storage space, says Verni.
4 reasons to buy used
No. 1: Cost
"The biggest advantage to buying used is the price," says Lewis. "You pay a premium for buying new." In an existing home, you know what you're getting for the price and don't have to worry about builders doing a "bait-and-switch for upgrades that buyers thought were standard."
Homeowners tend to negotiate more than builders, although builders sometimes offer incentives like paid closing costs to help offset the higher price, says Lewis.
No. 2: Waiting time
Existing homes are available on the specified move-in date, whilenew homes can take months to build, says Lewis.
No. 3: Unfinished community
In a used home, you know what amenities are in the community and nearby, while in a new community you don't always know if planned amenities will be built, says Verni.
You can also avoid the noise and mess of living amongst a construction site if you buy used, says Lewis.
No. 4: Landscaping and interior features
A big advantage of existing homes is that they have landscaping already in place, says Lewis.
"Friends of mine who bought new were frustrated when they realized that they had to buy every single hook, curtain and blind for their home," says Verni.
Future home values, your timeline for moving and the costs of new and existing homes in your area should all factor into your new-or-used decision.
Michele Lerner, author of "HOMEBUYING: Tough Times, First Time, Any Time", has been writing about personal finance and real estate for more than two decades for a variety of publications and websites including The Washington Post, The Motley Fool, Investopedia, Insurance.com, HSH.com, SavingsAccount.com, National Real Estate Investor magazine, The Washington Times, Urban Land magazine, NAREIT's REIT magazine and numerous Realtor associations.