Buying vs. Building a Home: Pros and Cons

When it comes to finding the perfect home, you have two basic choices: Search the market for a home that’s perfect (or close enough) or build your perfect home from scratch to your exact specifications.

Both approaches have their upsides and downsides, and your choice will depend on what you really need out of your next home as well as your budget. Let’s take a deep dive into each approach and go over the pros and cons of buying vs. building a home.

Building your dream home

Building a new home

Building a home can cost as little as $100 per square foot, or even less, though costs can go as high as $500 per square foot (or higher) if you opt for luxury finishes, or you’re building in a high-density, expensive city such as New York or San Francisco. The median price per square foot for an existing home averages around $123, so if you keep costs down, you could actually build for cheaper than you can buy.

Pros of building a home


This one is a no-brainer. Building your own home means you get to customize everything from the floor plan to the bathroom faucets. You can build a huge mansion or a cozy tiny house. Your dream home can literally be a dream come true.

Environmentally friendly

Many old homes are built with materials that are hazardous or toxic — lead pipes or paint, asbestos tile or glue, and heavy metals are just a few of the hazards that could be lurking in that picturesque Victorian.

Building a new home means you’re using the safest, most modern materials on the market. On top of that, you can put in efficient plumbing and heating systems, green/Energy Star-rated appliances, solar panels, or an electric car charging station. An efficient, green home is better for the environment — and easier on your wallet.

Higher resale value

New construction holds value very well and is generally more appealing to buyers than an old home, for all the reasons we touched on above.


Builders typically won’t start work until the purchase agreement is signed, which means that your new home is actually increasing in value as it’s being built. You’ll have built-up equity before you even step foot in the door.

A sure(r) thing

If your new home is being built as part of a development, it can be a big advantage if you’re one of the last ones in. Developers will often be eager to sell the last few lots in the development and will cut the price to move it fast. And being one of the last ones into an existing development not only means that you’ve skipped the noise and inconvenience of the early construction period but also that you can see what kind of culture you’re moving into. You can meet the neighbors, check out the amenities, and get a feel for the development’s vibe before you put down an offer

Cons of building a home

High costs

There are so many moving parts when you’re building a house from scratch that it’s easy for costs to spiral out of control. Labor is around 40% of the cost of building a home, so try to work with a reputable contractor to keep things on schedule and under budget.

Ask your contractor for a “lump sum” contract, which specifies a concrete number for the whole project, instead of a “cost-plus” contract, which puts any budget overruns on the owner.

Longer timeframe

If you buy an existing home, you could move in in a matter of weeks. Building a house from the ground up can take up to 18 months — longer, if you run into delays.

High potential for problems/delays

It’s going to be up to your builder to stay on schedule, and if they run into staffing problems, or necessary materials are scarce, your project could stretch weeks or months past your target date. And many of these potential problems are beyond your builder’s control — pandemic-related supply chain issues have doubled the price of steel and many other building materials, and manpower shortages have tripled build times in some areas of the country.

Surrounding construction

Many new homes are being built as part of a large development. If you’re one of the first ones in, you can expect to live with a high level of ongoing construction, with all the small inconveniences that entails, including noise, heavy vehicle traffic, and air quality.

The upside to this is that developers often price the first few properties lower to make up for these inconveniences. Still, it can be lonely being one of the first homes built in a larger development, with no neighbors for the first couple years except the construction crew.


If you’re building a new home that’s part of a development, your home value may get depressed by oversupply as dozens or hundreds of similar homes sprout up in the area. Before you build, look into how many other people are building in the immediate area, and make sure you’re considering that information when you’re projecting your new home’s appreciation.

Construction loans

If you’re building the home yourself, you’re probably not paying out of pocket. That means you’ll need to get a construction loan, which comes with a higher interest rate than a conventional home mortgage. This can be doubly troublesome if you run into delays.

Buying your dream home

Selling a house

Building a home takes months or years, and costs can far exceed your initial budget. Buying an existing home, on the other hand, is simple and straightforward, though you’ll have to make some compromises.

Pros of buying a home

Fast move-in

As we touched on above, building a new home typically takes 6 to 18 months. If you buy an existing home, you could be moving in within weeks of putting in your offer. If you’re on a tight schedule because of a new job or the start of a school year, you may simply not have time to build a home.

Cost certainty

When you’re buying an existing house, you know exactly what you’re paying. There might be some extra closing costs tacked on at the end, but even those are predictable — and you can get your closing costs reduced quite a bit if you find the right real estate agent.

New construction, on the other hand, very commonly exceeds the initial budget. According to one study, 85% of all construction projects go over budget, exceeding initial cost estimates by 28%.

Deals are out there

An open secret about the market is that there are no objective values — there’s only what people are willing to buy or sell for. If you find a highly motivated seller, you could get a home for far below market value.

Cons of buying a home

No customization

When you buy an existing home, what you see is what you get. If a home has nine of the 10 features you’re looking for, you’re either going to have to give up that last feature, or keep looking — and if you do find your exact dream home, there’s always the possibility that you’ll be outbid for it. Buying an existing home is almost always going to mean settling for “good enough.”

Low energy efficiency/outdated materials

As we touched on above, many old houses were built with materials that are hazardous to your health. Although they can be removed, that’s a very expensive process.

Even features that aren’t technically hazardous can cost you in the long run. Many old houses are poorly insulated and have appliances and major systems that are inefficient. That means higher heating/cooling and electricity bills, which can add up over time.


Although newer homes don’t require much maintenance at all for the first several years, an existing home will require maintenance from the day you walk in the door, especially if it’s quite old. Keeping up with an old house’s maintenance demands can be psychologically demanding, not to mention expensive.

High competition

Most of the U.S. is currently in a strong seller’s market, so buying a home, especially if it’s a desirable property, is going to take deep pockets, determination, thick skin, and a little luck. You may lose bidding wars on your dream home and three or four backups before you finally find a seller that’ll accept your offer.

Buying vs. building a home: Choose the right approach for you

When choosing between building a home or buying a home, there is no one-size-fits-all answer. Some people would benefit most from building a home, while others should buy a home.

Make a pro/con list of your needs and go from there.

Information provided by the Money Pit

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