rewrite this title Buy, Build or Fix: Pros and Cons for Home Buyers – NerdWallet

Hoping to buy a home in 2025?

You’re not alone: According to a survey commissioned by NerdWallet and conducted online by The Harris Poll in November 2024, 15% of Americans plan to buy a home in the next 12 months. That is the highest share since we first asked that question in 2019 — it works out to about 39 million people.

Not all of those plans will pan out. In 2024, 4.06 million existing homes sold, according to the National Association of Realtors — the lowest number of sales since 1995. That number doesn’t include new construction. Per the U.S. Census, in 2024 about 1.63 million new homes were built. If inventory remains at around 6 million this year, there could be more than six interested buyers for each home for sale.

With so much demand for so few listings, home buyers are wise to make their home searches as broad as possible. “It’s crucial to focus on what truly matters if you are searching in a market with limited inventory,” explains Jenna Stauffer, real estate broker with Ocean Sotheby’s International Realty in Key West, Florida. “Define your non-negotiables — location, number of bedrooms and bathrooms, square footage, and key features — then be flexible on the rest.”

Condition is one area where you might be flexible. NAR statistics show that in 2024, 23% of home buyers compromised on condition. While that calls to mind homes that need work, you could also consider new construction versus existing homes. There are pros and cons to fixer-uppers versus turnkey properties, or to whether you buy or build a house. Here’s what you should know about each as you decide on the scope of your home search.

UPSIDES: All you need to do is move your stuff in — after, of course, going through the entire homebuying process of making a successful offer, getting a mortgage and closing on the home. A turnkey home also allows for the widest variety of financing options. Since you won’t need to look for a niche loan type, you’ll be able to comparison shop more mortgage lenders and focus on finding the best loan offer.

DOWNSIDES: With so little inventory on the market, existing homes that are in tip-top shape go fast. You’re more likely to face competition or possibly even a bidding war, and unlikely to get a deal. In 2024, a third of homes sold went for their asking price — and 23% sold for above asking, according to the NAR.

PRO TIPS: To snag a turnkey home, act decisively. “If a property checks your must-have boxes and you’re financially ready, be prepared to make an offer quickly,” Stauffer says. Have a mortgage preapproval in hand, and make sure that your real estate agent knows your budget as well as any contingencies you’d be willing to offer a seller. If homes are regularly selling above the listing price in your area, focus your search on properties priced slightly below what you’re actually looking to spend.

UPSIDES: A new home built for you skips some steps in the buying process, since you’re likely looking at a much shorter search and way less competition. If you’re working with an independent contractor, you’ll get to choose every last detail — and even if you’re buying in a development, you might make the call on layout, surfaces and more. Another perk of new developments: The builder may offer incentives, like upgraded amenities or even an interest rate buydown, helping your budget go further.

DOWNSIDES: The timeline for new construction can get derailed if there are issues with finding material or labor, so you may need to be flexible on your move date. Whether it costs more to buy or build a house is also an open question. Buying in a development may be relatively economical — or at least comparable to buying an existing home — but could limit your location options. Buying land and starting from the ground up may mean extra costs for securing access to water, electricity and other utilities. In December 2024, the median price for a new construction home was $427,000, according to the National Association of Home Builders. The median price for an existing home, per the NAR, was $404,000.

PRO TIPS: Understand your financing options. If you’re building the home, you’ll need a construction loan to finance both the building phase and the completed home. Construction loans can require higher down payments, and depending on the loan type, your lender may need to approve your builder or even have some level of oversight on the project. Financing a home in a development is simpler, since the builder’s covering construction costs. But you may have to pay a builder’s deposit in addition to your down payment. The builder may offer you financing, but you’ll want to compare their interest rate and terms with other lenders.

UPSIDES: Buying a home that needs some work could potentially help you afford a property that’s larger or in a more desirable neighborhood than your budget would otherwise allow. “This is a moment where the fixer upper is where you’re probably going to find the most opportunity, as long as you know your numbers,” says Kirsten Jordan, broker and team leader at Douglas Elliman Real Estate in New York City. Renovating a home also gives you the chance to customize it to your needs and style, make energy-efficient upgrades or preserve the home’s unique charm and character.

DOWNSIDES: Renovations are a lot tougher — and messier, and more time-consuming — than they look on TV. Whether you’re hiring pros or doing the work yourself, you’ll likely be spending considerable time and money after closing day. “One of the main things that’s important to note is, okay, how much is it really going to cost to do the work to get this home to the level I’d like it to be,” Jordan says. “Can I do most of the renovation before I move in, or is this something I’m going to do over time?” You may need to hold down multiple housing situations if the home can’t be lived in; even if it can, you could endure inconveniences or discomfort as you wait for projects to wrap up.

PRO TIPS: Know what you’re getting into. Work with an experienced home inspector to determine what needs to be addressed. You may also want to do a walk-through with a contractor, which could give you a more concrete idea of the scope of the work and the potential cost. Most contractors will charge a consultation fee that’s refunded if they’re hired. You might consider financing the purchase with a renovation loan, which is a mortgage that covers the costs of repairs as well as the home’s price.