Should you Buy or Build? How the Process can Impact Your Twin Cities Purchase
How does the process of buying an existing home differ from building new?
At many buyer consultations lately I’ve asked buyers if they are interested in existing homes or new construction. More often than not, they reply, “we’re open to both!”
As a realtor who's sold over 80 new construction homes (and built my own Lakeville home!), I've guided countless Twin Cities families through both paths. Today, I'm breaking down the key differences to help you decide which journey makes sense for your family.
Three Paths to Homeownership
Before diving in, let's clarify that there are actually three common scenarios:
Existing Home - A previously owned property
Inventory/Spec Home - New construction that's complete or nearly complete
Full Build - Starting from lot selection, deciding on a floor plan, to a finished home
Let's explore how each process works and what you can expect.
Process Comparison:
Existing Home Purchase
-Initial Process: Traditional house hunting with property showings
-Timeline: Typically 30-60 days from accepted offer to closing
-Financial: Standard earnest money (1-2% of purchase price)
-Inspections: Option to craft offer with full inspection contingency with repair negotiations
-Site Visits: Initial showing, inspection (if applicable), and final walk-through only
Inventory/Spec Home Purchase
-Initial Process: Tour model homes and select from available inventory
-Timeline: Usually 30-90 days from contract to closing
-Financial: Slightly higher earnest money ($10k, $30k, and even $75k are common in the Twin Cities market)
-Inspections: Inspection available but only code issues typically addressed
-Site Visits: Initial showing, inspection, blue tape walk with the builder, and re-meet prior to closing
Custom Build Process
-Initial Process: Lot selection, floor plan decisions, and design meetings
-Timeline: 6-12 months from contract to closing
-Financial: Substantial earnest money (3-5%) and likely utilizing construction loan
-Inspections: Pre-drywall inspection and final inspection
-Site Visits: Multiple progress checks throughout construction, electrical and pre-drywall walks, blue tape walk with the builder, and re-meet prior to closing
The Financial Differences
One of the biggest differences between these paths is how they're financed.
Existing Home Financing
With an existing home, the financial process is straightforward: you'll secure a traditional mortgage with a standard earnest money deposit (typically 1-2% of the purchase price in the Twin Cities market).
Inventory Home Financing
For an inventory or spec home, financing works similarly to an existing home purchase, though your earnest money deposit may be slightly higher. You'll still use a traditional mortgage because the home is complete or nearly complete.
Custom Build Financing
This is where things get interesting. When building from scratch:
-Higher Earnest Money: Builders typically require more substantial earnest money because they are creating a product that is customized to your preferences.
-Construction Loan: Some builds require a construction-to-permanent loan
-Draw Schedule: If using a construction loan, payments to the builder happen in stages
-Selection Additions: Budget for upgrades beyond the base price (they add up quickly!).
Inspection Differences
The inspection process varies significantly between these paths:
Existing Home Inspections
-You have the option to include an inspection contingency in your offer. This is a great buyer protection. Depending on if the inspection is written with additional language, you may or may not be able to negotiate repairs or concessions.
-Ability to walk away if major issues are found or buyer and seller cannot agree in negotiations
Inventory Home Inspections
-Inspection available but with limited negotiation power
-Builder typically only required to address code violations
-City also performs inspections through the build process
-Warranty coverage for future issues (typically 1-year comprehensive)
Custom Build Inspections
-Pre-drywall inspection (crucial for seeing what's behind the walls!)
-Final inspection before closing
-Multiple informal progress checks throughout construction
-City also performs inspections through the build process
-Same warranty coverage as inventory homes
Timeline Expectations
Perhaps the most significant difference is the timeline:
Existing Home: The Sprint
From offer acceptance to closing, expect 30-60 days. Perfect for families needing to move quickly due to job changes or school timelines.
Inventory Home: The Middle Ground
With most finishes selected and construction complete or nearly complete, you're typically looking at 30-90 days from contract to keys.
Custom Build: The Marathon
This is the longest path at 6-12 months from contract to closing. In the Twin Cities market, seasonal factors can extend timelines (winter builds often take longer).
The Emotional Journey
Beyond the practical differences, each path offers a distinct emotional experience:
Existing Home Purchase
-Immediate gratification
-What-you-see-is-what-you-get
-Established neighborhood atmosphere
Inventory Home Purchase
-New home without the long wait
-Limited ability to customize
-Clean slate with no previous owners
-Builder warranty protection
Custom Build Process
-Complete personalization
-Emotional investment in creation process
-Excitement of watching your home take shape
-Pride of first ownership
Which Path Is Right For Your Twin Cities Family?
Consider these factors when deciding:
Consider an Existing Home If:
-You need to move within 1-2 months
-You value established neighborhoods with mature landscaping
-You're comfortable with potential future renovations
-You prefer negotiation flexibility
Consider an Inventory Home If:
-You want new construction without the long wait
-You're comfortable with limited customization options
-You value warranty coverage and modern features
-You prefer a move-in ready experience
Consider a Custom Build If:
-You have specific design requirements
-Your timeline is flexible (6-12 months)
-You want to be involved in every decision
-You value being the first owner
South Metro New Construction Insights
For my Twin Cities families considering new construction in the south metro (Lakeville, Apple Valley, Prior Lake, Eagan, Rosemount), here are some local insights:
-Lot Premiums: Expect higher premiums for walkout lots and those with private backyards
-Winter Considerations: Winter builds in Minnesota typically add 1-3 months to timelines. Some builders also include winter dig premiums since the cost of excavation is higher when there is a frost line to work in.
-Builder Differences: National builders offer different base inclusions than local custom builders. Touring the model homes and inventory homes will give you a good feel for the level of finish and quality of products used.
Final Thoughts
There's no universally "better" path—just the right path for your family's specific needs. As someone who's helped dozens of Twin Cities families with both new construction and existing home purchases (and who's been through both processes personally), I can tell you that understanding these differences early makes all the difference.
Ready to explore which path might be right for your family? Let's talk! I'm here to help you navigate all three options with education-led guidance that puts your family's needs first.
Looking to Start Your Home Search? Let’s Chat!
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