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Building or buying?

BEA DOTTIN, [email protected]

Building or buying?

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Consider the young couple Trevor and Miranda seeking to own a home. For the past five years, they lived in a rented apartment acquiring furniture, appliances and basic household items bit by bit.
Trevor and Miranda had saved steadily from the day they were engaged. When they got married eight months later, they had discussed housing and agreed to rent an apartment for the time being.
Yet, they made a commitment eventually to acquire a home. So, they continued saving.
They had managed to accumulate just over $30 000 in their credit union accounts. Trevor had just been advised by the loans officer that they would qualify for the level of mortgage they had in mind.
Trevor and Miranda were considering a home costing about $300 000. They would need to pay over the $30 000 and borrow the balance. They had saved another $5 000 on their bank account that was expected to cover legal fees and other closing costs.
The young family were fully committed to proceeding; the question was: should we build or buy?   
They had observed advertisements in the Nation for the construction of homes of different designs on varying lot sizes. They were now in a position to choose from a number of affordable designs. Trevor found that the contractual arrangements for the construction of the homes were tight. Deadlines were clearly defined, and penalties were spelt out for missing deadlines.  
The materials to be used and the finishes for the house were specified in detail. The builder estimated an eight-month period to construct the house. During that construction phase, Trevor and Miranda would need a bridging loan.
For good order, Trevor decided to investigate the option of buying an existing house. He browsed the Nation and identified three interesting homes.
Well, Miranda fell in love with the second property that they visited. It was a family home that was 12 years old in a middle-class neighbourhood. Miranda liked the layout of the rooms and the lead-in from the patio to the drawing room.
She pointed to the already established gardens. The kitchen was ample in size and suited her style, and the bathrooms, fully tiled, were all in good working order. She noted that the main repair needed was repainting.
The asking price was $270 000 and the current owners were moving to live in a more upmarket area. Trevor’s interest in purchasing the property increased.  
Trevor and Miranda decided to have a firm of architects/engineers survey the property and give them an independent opinion and valuation. The company confirmed that the property was free of termites, that the roof was sound, that the drainage systems were adequate and that there were no structural problems.
The painting needed guided Trevor and Miranda in negotiating a final price of $260 000. And so it was that they decided to purchase the existing home avoiding the risks of building – the risks of construction deadlines not being met, the risks of additional costs, and the risks that when the building was complete, the house did not live up to their imaginings.  The additional cost of the bridging loan was also avoided.  
For the picky home dwellers who may wish their living quarters to be special, the answer may be just the opposite. In such cases, cost and savings may not be the major issue. Rather, the important goal may just be to get exactly what you want within reason.