Pros and Cons of Buying an Older Home
About 500,000 homes sold this year will be newly built and more than ten times as many, 5.2 million, will be “existing homes.” Since old and new homes are marketed differently, buyers usually decide on one option or the other before they begin house hunting, so it’s a good idea to review the advantages and disadvantages of each type, some of which are obvious, some not.
The typical owner-occupied home was built in 1976—39 years ago. Half the occupied single family homes in America are older than that. The age of an existing home is critical, not just because of maintenance and upkeep, but also because of different materials, lack of insulation and systems like air conditioning and cable wiring that were retrofitted into many old homes after they were built.
Many homes fifty years old, or older, were built with hardwood or old growth wood framing. Most new homes are built with hem-fir, a hemlock fir hybrid wood designed to grow fast. The him-fir material rot quicker as well. Homes built before the 1950s used lathe and plaster rather than drywall to finish interior spaces. Most new homes are better engineered. Shear walls have evolved into an expensive but superior product.
Windows in the past were single pane. Some were single hung some were double hung. . Today’s windows made today in wood, vinyl and metal clad. These new windows seem to hold up and are built to be repaired quickly.
Energy efficient windows are just one of the features that became standard after the first energy crises of 1970. Many very old houses that date before that era may not have added insulation, new windows and doors, energy efficient heating and cooling systems. If you’re considering an old house that needs upgrading to be energy efficient, most of the 30 percent tax credits for basic home repairs have expired. Today, only geothermal heat pumps, wind turbines, solar panels, photovoltaics, for generating electricity and similar equipment qualifies.
Houses were designed very differently 40 years ago. Bathrooms were smaller. Few kitchens featured islands and eat-in areas. Living spaces were opened up, creating large living-dining-family areas without walls. Some older homes have been remodeled to comply with modern tastes but it is a very expensive undertaking to enlarge bathrooms and kitchens.
Locations and Lots
The American suburban landscape has changed significantly in 50 years. Homes that were built adjoining farms now are cheek to jowl with shopping centers. Expressways and subway lines have brought yesterday’s bedroom communities closer to city centers, making it possible to extend the suburban feel even farther. Most new homes are built in developments with a unified style. These developments can be as small as a cul-de-sac, or as massive as a former farm field filled with dozens, if not hundreds of homes.
New single-family construction is sited farther and farther away from workplaces, creating a real advantage to older homes. Not only are older homes often better situated, but they homeowners on larger lots, in an era when land was not as precious as it is today.
Price and Purchase
As a rule of thumb, a new home from a builder might run you 15 percent to 30 percent more than buying a comparable older home in an existing neighborhood. In November 2015, the median price of all existing homes in America was $221,900. The median price of a newly built home was $305,000. However, new home owners will recoup much of the difference because they will enjoy many years of occupancy without the cost of repairs, maintenance and remodeling that an owner of an older home will endure due to the newness of their appliances and systems and the warranties that come with many new homes.
The process of buying old and new homes also is markedly different. New home buyers are well advised to “buy the builder, not the house.” Even with most reputable builders, it’s important to conduct an independent inspection and to include language in the contract making the builder responsible for correcting problems. Buyers can protect themselves with a new house warranty from an independent insurance company as opposed to relying on a warranty that comes directly from the builder.
Many developers advertise houses at comparatively low prices to get you to come out and have a look. Once there, commissioned salespeople show you models loaded with expensive extras such as a spa, fireplace, granite countertops, and giant bathrooms. Buying extras let you semi-custom design your home. However, upgrades often add 5% to 20% to the cost of a new home.
Buying an old home is more complicated. Appraisals that are lower than the contract price can result in lower mortgage approvals that can ruin deals after contracts are signed when buyers can afford to make up the difference. Inspectors can find issues with old houses that end up in negotiation. Closing costs are higher. Title searches are more likely to surface problems that could cloud a title.
There’s a lot to consider when choosing between an old or newly built house. By doing your research before you begin to shop, you’ll be prepared to ask the right questions to help you find the home that’s right for you.
Here’s a checklist summarizing the differences:
- Modern layout and design
- Built to modern codes and standards
- Difficult to negotiate price
- Easier to buy, cheaper and faster to close
- Cheaper to maintain (new appliances = fewer repairs and extended warranties)
- Cheaper to operate (energy-efficient construction)
- Cohesive neighborhood (consistent layout, common areas)
- More expensive than old houses
- Cookie-cutter design
- Smaller lots
- Limited negotiating room on price
- Potential for homeowners’ association dues
- Frequently less character or charm
- Less expensive
- Availability: more properties, locations, styles and sizes to choose from
- Price may be negotiable depending on the market
- Inspection and disclosure documents will reveal issues
- Higher quality construction
- Established neighborhood and possibly better location
- Could offer more charm and character
- Larger lots
- More maintenance
- Less energy-efficient and costlier to operate
- Dated design, older appliances and amenities
- Longer and costlier closing
- Risk of low appraisal and title issues
- It’s not a new house