Posts
For most people their home is the most expensive purchase they will make and the statistics show 85% of the time the purchase is for a used house. Which is better? To purchase a new house…..or a used house
First we need to analyze the reason someone purchases used products. In almost all cases it is price induced. A two year old car has depreciated and is less than a newer model. A 10 year old computer or cell phone is outdated and can be purchased for very little. The reason is simple. With the rapid advancements in technology and material development, the new models are more efficient than their older counterparts. This is the same in building construction.
Newer homes utilize PEX instead of copper water lines. They operate with LED and CFL lighting instead of the expensive Incandescent bulbs. The new homes have lined crawlspaces instead of ones with vents. The HVAC units have higher EER and AFUE ratings resulting in greater energy efficiency. The better homes have ICF exterior walls instead of wood framing.
So one would assume the reason so many used homes are purchased is the significant price savings. Hmmm…..did someone just state “What price savings”?
Maybe the question should be “Why are new houses priced around the same as used houses”? One would expect to realize a significant savings when purchasing used with the additional maintenance and operating expenses.
Let’s also look at the issue of equity!
When a used home is financed an appraisal is done to insure the house is worth the purchase price. This appraisal will reflect the purchase price resulting in the seller realizing all equity gains. The only equity the purchaser will have is what they have placed as their down payment.
When a new home is financed an appraisal is done based on the land, the house plans and the specific construction materials being utilized. Overwhelmingly, the majority of the time this is higher than the actual costs to the purchaser for the land and construction of their new residence. This results in the purchaser realizing the additional equity in addition to their down payment.
In conclusion I ponder would I spend the same amount of money to purchase:
- A 486 computer compared to the latest version?
- A rotary telephone or a touch tone?
- An original cell phone with a case verse the latest IPhone?
- DOS operating language or Windows or VISTA?
- A 14.4 modem or broadband?
- An older home or a new energy efficient green home?
