Old Homes vs. New Homes: Cost-Benefit Analysis

old-home-new-home-comparisonSome people know immediately whether they want an older home or a newer one … or at least they think they do. Vintage houses have charm and history, but are sometimes plagued with issues. Those constructed recently are typically outfitted with modern systems and materials, but price per square foot tends to be more expensive due to the increased cost of land. For those of us in New Jersey, there is plenty of both old and new to choose from, making the decision all the more difficult. To help you choose, here are some of the key factors to consider.

Age

The year a home is built remains an important factor, but not as much as one might think. If you are considering a house circa 1960, and everything from the roof to the plumbing has been updated in the last decade, age may not be an issue. Alternatively, a new home can be built with low-quality or even faulty material.

Location

New construction tends to be larger, located in suburbs, and surrounded by sparse landscaping that may take years to mature. Older homes often rest in an established neighborhood with mature landscaping and a sense of community. Another consideration is the proximity of the home to your office, school, or other frequented spots. Commuting costs can add up fast!

Condition

You might assume an older house is synonymous with “fixer upper” or “money pit.” This is a definite possibility; however, systems may have recently been upgraded. On the other hand, new homes are equipped with newer appliances and materials. This may mean they are in good condition, but don’t discount the possibility of hidden problems.

Regardless of the house you want to call home, it is crucial to have it inspected before the closing. If you have any doubts about something not covered in the initial look-see, hire a specialist. For the fairly nominal cost of inspections—a few hundred dollars—you can end up saving a lot of money in the long run. Additionally, if any problems pop up during this stage, you can ask for a repair or replacement allowance from the homeowner.

Uncover Hidden Costs

Here are a few questions you can ask to help determine costs that could otherwise be hidden:

When were the major components last replaced or upgraded? If they are older than experts recommend they be for optimal performance, buyers should factor replacement, repair or upgrade cost into their home-buying decision.
Is the foundation solid? Foundation issues can be quite costly to fix so this is one of the first things you should check. Any cracks or signs of shifting in the basement are indicators of a potential problem.

What is the age of the electric wiring?

Many older homes have the original knob and tube wiring, which can pose a fire hazard. If a home’s electrical system is outdated, consider the cost of updating it. Get a few quotes so you have an idea of the total expense.

How is the house heated?

Most homes use natural gas but if you’re considering a house that burns oil, carefully analyze how much you’ll need for the winter. From 2007-2012, the average U.S. household spent more than $1,700 on oil each year for home heating compared to just $700 for natural gas. If the home has central heat, check the age of the furnace; replacing one doesn’t come cheap.

Every situation is unique, but here are some of the pros and cons associated with older and newer homes.

Older Homes

NVE-chart1

Newer Homes

NVE-chart2

According to a 2013 Home Listing Report, the average listing price of a four-bedroom, two-bathroom home in 2013 was $301,414. In New Jersey, that same house was $421,108. So, New Jersey residents really need to do their research to make sure whatever home they purchase—old or new—is the best for them!

We also advise doing an equal amount of homework when selecting a mortgage, as you can save money at closing and on your monthly payments. Let our Mortgage Loan Relationship Manager help you choose the mortgage product that fits your needs.

For information about our mortgage options, contact NVE’s Mortgage Loan Relationship Manager at 201-816-2800, ext. 1230. You can also visit the NVE website, one of our convenient neighborhood branches in Bergen County, or call 1-866-NVE BANK to learn more.

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Sources:

http://www.realestate.com/advice/should-i-buy-a-new-house-or-a-10-year-old-home-15321/

http://www.zillow.com/home-buying-guide/buying-a-new-home/

http://www.bankrate.com/finance/real-estate/should-you-buy-an-old-or-new-home-1.aspx

http://money.usnews.com/money/blogs/my-money/2011/04/14/5-questions-to-ask-before-buying-an-old-house

http://abcnews.go.com/Business/10-expensive-10-affordable-housing-markets/story?id=17826391

http://energy.gov/articles/energy-saver-101-infographic-home-heating

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About NVE Bank

The NVE Blog should not be used for banking purposes relating to NVE Bank. Please do not disclose any personal or business banking information on this site. NVE is an Equal Opportunity Lender, Equal Housing and Member FDIC. NVE Bank, established in 1887, offers an extensive range of personal and business products and services. The Bank maintains 12 offices conveniently located throughout Bergen County. For more information, please call our toll-free number 1-866-NVE-Bank (683-2265) or visit our website.
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One Response to Old Homes vs. New Homes: Cost-Benefit Analysis

  1. Alex and Jen says:

    Reblogged this on boken2bergen and commented:
    #home #buyers #realestate

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