Buying vs Building:
You have the savings, and now you’re not sure if you want to build or buy?! This vlog is for you! Mo Money, Mo Problems as Biggie said.
After you’ve spent all your time saving you now have a chance to think about your options. Often this is between buying an established home or building your first home.
There are a few things you need to know about first, so let’s dive in! Pros and Cons of buying vs building You have the savings, and now you’re not sure if you want to build or buy?! This vlog is for you! Mo Money, Mo Problems as Biggie said.
- Building Cons
- Building Pros
- Buying Cons
- Buying Pros
- First Home Buyer Guide by Abodey_Jo
Building Cons – in detail:
- I attended a webinar for CoreLogic, where they talked about the current economic state and its impact on the property market, particularly when you’re building. They are predicting the timeline to build a home will extend to potentially 2 years. This is something to consider and ensure you’re getting this information from your builders.
- There is so much unpredictability with recent supply shortages, labour shortages and import and export limitations and delays. This means that the builders can’t always stick to the timeline they give you. This isn’t their fault; however, they should be realistic with you from the start, to cover this issue.
- This can leave you feeling stressed and a bit deflated. I know it did for me and my Fiancée. There were so many highs and lows – TBH though, I would do it all over again because the result was so rewarding at the end of the day.
- When you attend display homes, make sure you gel with the agent you’re dealing with and don’t be afraid to ask for another one if you’re not happy.
- The agent we had when we built, didn’t submit paperwork, missed things and ultimately it ended up delaying us by 7 months. So don’t be like us, we knew something was wrong and we escalated to the supervisor but the damage had already been done and now we just had to wait.
- Check productreviews.com! – Research your builder, look at the comments and reviews and make sure that they are good!
- Productreviews.com is great because it tells you if the review was incentivized or not, so you’re seeing the good, the bad & the ugly.
- Essentially, be prepared to wait for your build, the positive to this is you have more time to continue saving. This will give you a nice buffer when you move in, and it’s less stress on the hip pocket if unexpected costs come up.
#2 Unexpected delays
- Echoing much of the above here!
- It’s 2022 – the interest rates are continuing to increase; inflation is up around 8/9% when it should be around 2/3% and as a result, the costs of building materials/supplies have gone up. The Covid pandemic is still ongoing and builders are facing labor shortages.
- In Victoria over 150 builders have shut shop – this has left a lot of people halfway through builds, with no funding to continue the build and in a terrible situation. So, whoever you choose to go with, make sure they’re a big company and reputable one who isn’t going to put you through the above.
- Some smaller builders are great however, in this climate there is a lot of uncertainty around their ongoing operations.
#3 Site costs
- Site costs happen with every build. It’s a fee that you’re charged when the builders go out to the block and conduct a soil test and drill into the ground to find any issues with the block. Essentially, they are making sure it’s okay to build on, if it’s not in a good condition you are charged ‘site costs.
- Some builders offer “fixed site costs” – if they don’t, you can ask for it but you might not always get it.
- Having fixed site costs means that no matter what the builder finds on your block (like rocks or uneven surfaces etc.) – that you’ll be charged the fixed site cost rate e.g., $5,000K. Even if the site costs came out to $20,000K – you would still only be charged the $5,000K.
- If you don’t have fixed site costs, this means that whatever they find on your block, you have to pay to fix. This can be ANYTHING, I’ve had friends that copped $70,000K extra for site costs before. You cannot control it; it is what it is. The only thing you can do is try and find a relatively flat block so there aren’t any additional issues. Again, that doesn’t mean there isn’t crap underneath the surface that will impact you.
- What you can do (and we did this) – is add a ‘provisional sum’ for site costs. We had a provisional sum of $12,000K – which they ended up taking the whole lot. However, this didn’t impact us as hard because when we applied for the home loan, the provisional sum was included in our loan amount. If the builders don’t need to take that whole amount, then they won’t draw that whole lot down from the loan. They’ll just take the portion they need e.g., $6,000K.
- Note: Provisional sums can be done for anything you’re unsure about or haven’t made a final decision on. We did this with the concrete, they wanted to charge $8,000K for just the driveway. We had it in our contract as a provisional cost, when it came time to do the concrete, we told them we didn’t want it. So, they didn’t draw it down from the loan. We did it ourselves, including the side of our house and it cost us just under $5,000K (this is where friends/fam who are builders/concreters helped us out a lot!). Use your networks!
Building pros – in detail
#1. Custom designed
- It’s your own home and you get to pick all the colors, the layout, the size of certain rooms, and the frontage. It’s all the fun stuff!
- We even changed our layout! We flipped the back of the house so we could have the sun shining into our alfresco instead of having it on the other side where it was shady and cold. You may have heard the term “north-facing” – this is to catch the sun!
- There are some costs involved and they’re not a whole heap of money, sometimes extending the lounge room to be bigger could cost $150 as an example.
#2. It’s Brand New
- I can’t say much other than the fact it’s brand new!
- You’re the first owners, you can make this home your own from the start.
- You might have a lot of work to do – but it’s fun and when you see it all come to life it’s so fun.
- Once you move in, you get to see what you were trying to imagine, come to life! It’s really rewarding, not to say buying established isn’t. However, watching it gradually build over time and seeing it at every stage like a newborn baby, it’s a different feeling.
- This is a massive peace of mind.
- When you buy established, generally houses are older or are past the 5 -7-year mark. Because that’s when everyone who built their homes, generally starts to sell because there is no warranty left on the house.
- When you build, you’re given 5 – 7 years of a warranty (all builders are different).
- After you move in, you also have a 3-month inspection. The 3-month inspection is where you fill out a checklist of all the defects in the home that have happened in the last 3 months, the builder then comes back and repairs them for free!
Buying cons – in detail:
#1. No cleaning clause.
- Vendors do not expect to clean the property before it’s given to you.
- If you look up the REIV or consumer affairs there is nothing in the contracts or on their website to say that vendors need to clean it. They just need to leave it to the best possible ability and in the same state as you saw it at the open for inspection.
- Also vendors need to make sure that all the subject-to clauses are met, fittings and fixtures included and if you asked for the pool table to be left behind and the vendor agreed. Make sure that’s in the home at your final inspection.
- You can always request after you attend your final inspection (if the house still has crap in it) to your conveyancer to see if the vendor will remove it. However, they don’t have to agree and there is nothing in the contract enforcing them to do so unless it’s in an unlivable state.
- Essentially, if this happens to you, there isn’t anything you can do if the vendor doesn’t agree to get rid of all the little crap that’s left over.
- Happened to a friend of mine, the backyard was full of rubbish and toys that were left behind. She and her partner had to clean up and then call a hard-rubbish. It sucks!
- It’s a highly emotional process!
- When you’re placing offers on homes, you lose some and then you win some.
- Often, when you’re buying a home to live in, you’re buying with your heart. It’s your dream home, the one you made on the sims when you were 6 years old (or 30 if you’re me) and it can be a real letdown when you don’t win it.
- Other times you end up overpaying to beat our other buyers who are also offering at the same time as you. In the end, that can leave you feeling a bit duped.
- You’re also relying on the agent to present your offer and try and convince the owners to take the offer. This is in their best interest but when you have multiple offers on a property, you lose control of that situation and hope that the agent is doing all they can to ensure you secure the home. At the end of the day, it’s not up to them, but the vendor.
- That loss of control over the situation can drive you nuts!
- Try and keep a calm head, and know that sometimes it’s not meant to be. I truly believe in the saying “if it’s meant to be, it’ll be” – there is always a reason you don’t get that first home so don’t be too devastated, there are plenty of other homes around!
#3. No warranty
- I mentioned earlier when you’re buying established you’re usually buying a home that’s 5+ years old. This means that a lot of the time they don’t have a builders warranty on it anymore.
- So when you move in, this is when you find out about all the crap that’s not working.
- This often happens with heating, cooling and appliances.
- If the vendors haven’t fixed them before they moved, or maybe vendors didn’t know it was a problem and then after a month of you living there, something breaks down.
- When I was an agent, this happened from time to time and we had the new owners call us to see if we could do anything but we couldn’t. Because it’s your home and this is just the reality of homeownership.
Buying pros – in detail:
#1. Move-in dates & other dates!
- When you buy established, the process is filled with deadlines. This is to ensure that everything runs as smooth as possible and it’s great for planning!
- You have the choice to choose your settlement date (30,60,90-day settlement period or whatever you and the vendor agree on) and then you can move in on that date!
- You can arrange time off work, and set up your gas, power and other supplies for a specific date.
- Arrange moving vans or friends and fam to come and help. It’s one of the best things during an already stressful/exciting time.
- When you build, you don’t get that, you just have to wait and see and arrange last-minute time off with your workplace and hope to god they let you have it.
- Once you’ve signed your contract all your dates are set out for you.
- There is a 3-day cooling-off period.
- 14 days to have unconditional finance approval (or whatever date is outlined in your contract, this is negotiated between you and the agent).
- There is a final inspection date set 7 days before your settlement date – this is where you check out the home to make sure it’s in the same condition as you saw it when you first attended the open.
- Then, of course, your settlement day!
- This makes it easy for you to plan and move in accordingly and arrange all your furniture to be delivered.
#2. No hidden costs
- Once you sign your contracts and the vendor agrees to your offer. That’s it. There are no other hidden costs involved. You’ll know your stamp duty and other costs all upfront.
- You only have 1 contract and 1 interest rate. When you build, because you have to buy land and then the home – you have 2 loans (a land loan and a construction loan) which means 2 interest rates. Yeah… it sucks. You can refinance down the track and combine everything, seek advice from a mortgage broker to see if that route works for you when the time comes!
- The only “hidden costs” could be your conveyancer fees, they range from $1,000 – $3,000 depending on who you go with and what they offer. Do your research.
- Essentially, you don’t have many big hidden costs as you do with the building where you could cop site costs.
#3. Potentially cheaper
- What I mean by this, is if you’re planning to renovate you could buy a run-down home for cheap, with decent land and then opt to fix it up over time.
- With building, you pay for all of that upfront.
- This means you have time to fix it up or renovate (if you want to) to turn it into the house you want and you don’t have to spend the money all at once.
- You also get a better bang for your buck when it comes to land size. Blocks these days, unless you’re planning to spend half a mil, are around 300/400m2.
- If you’re someone who likes land or the idea of having a backyard then buying established could be a cheaper route for you.
- Often the price to build with a smaller block could mean that you have a slightly smaller house but the land size will be nearly double if not a bit more!
- Here are just a few of my pros and cons.
- Do your own pros and cons and set out your goals to get an idea of what you want to do!
- Here is the first home buyers guide you can DL, it comes with activities, tools and a guide to the buying process which might help you make your decision!
- Please drop a comment or some feedback below if you have any questions and I’d be happy to help!
- Thanks for tuning in and I’ll catch you next time!