For most people the purchase of a home is going to be the single biggest investment they ever make in their lives and so purchase price is often the largest factor. But to base a decision like this solely on purchase price would be a costly mistake. Instead it is important to look at the overall Total Cost of Ownership (TCO) of a new home vs. a used one.
TCO describes the ongoing long term and often complex, inter-related costs that, when combined, make up the total cost of owning your home, be it new or used. You need to consider maintenance, energy efficiency/usage and cost of replacement for numerous items throughout the home. A 20-year-old used home may not seem that old, but if nothing has been replaced in that time then you have zero warranty coverage.
A good home builder will offer a comprehensive warranty on your new home. They will be a member of a recognized program such as Manitoba’s New Home Warranty Program, which offers a five-year warranty on major structural defects. Such warranty programs protect a new home buyer from very costly surprises.
The average length of stay in a single-family home is approximately 12 years, according to the New Home Builders Association. Over that period of time, in a 20-year-old used home you can expect to spend as much as $60,000 on items such as roof replacement, appliance replacement, wood floor refinishing, water heater replacement, carpet replacement, heating and cooling replacement etc. Over that same period in a new home these are costs not likely to be incurred.
It is important to consider the fact that most used homes available in your area will be even older than 20 years. Consider Morden for example. Based on permit numbers only 10 percent of the approximately 4,000 homes are less than 20 years old. The older the home is, the greater the unknowns that can lead to increased cost. It becomes more difficult to answer questions related to maintenance such as:
- Who built the home?
- Are they still in business?
- How was the home wired? Plumbed?
- How energy efficient are the materials in the home?
- What kind of materials were used?
Another factor to consider is that the average homeowner may finance replacements and renovations through personal loans and credit cards at a substantially higher rate of interest (thus cost) than the interest rate on mortgages. Even something as basic as home insurance can be more costly on a used home due to unknowns and older construction materials and methods which leads to greater perceived risk by the insurer.
Additionally, there can be concerns associated with used homes due to the lack of energy efficient technology and construction materials, which leads to increased costs of heating and cooling a home. With updated building codes and standards, new materials, Energy Star homes, R-2000, and the trend toward Net Zero construction, the energy saving options available to new home owners are enormous. Some new homes are built so efficiently the owners are able to generate extra energy to sell back to the grid.
Ultimately the choice is up to you as a buyer, but it is important to understand the total cost of ownership of any home you choose.
For more information on building your own new home, give us a call or send us a note. We’d love to talk to you more about modern construction methodology and energy efficiencies.