A ready-built home or one from scratch?

With the ongoing recovery in the housing market, you may face a decision of whether to buy a ready-built house or build one from scratch. Well, reach for a pencil.

Figure out how much space you need, how you want the floor plan laid out, and how much money you can spend.

Go over the ideas with your family to see what features you're looking for in a house. Maybe you need more bedrooms than the average family, or you'd like to have a darkroom, built-on greenhouse, or workshop. Chances are you won't find everything you're looking for in a ready-built house, but you can modify an existing house to accommodate your plans.

There are several good reasons to look for an existing house rather than attempt to build a new one.

First of all, it's easier. Building takes a lot of work on your part, even if you've hired a builder and an architect. There are hundreds of decisions only you can make. In buying a ready-built house, you can see exactly what you're getting. Building projects often call for compromises and substitutions.

One of the best reasons to search for a ready-built house is that prices are far easier to compare. Often, too, you can run across a bargain in an existing house. Maybe it's being auctioned, or the owners are moving out of state and are willing to lower the price to sell it quickly.

Also, if you're looking for a traditional design, older houses will give you good choices for less money than if you attempted to duplicate a traditional style in a new home.

The advantages of building a house look good on paper, but the numerous details that are involved are basically for those who have plenty of time to spend on planning. Building allows you to be creative, choose better building materials, put in more built-in conveniences, and have a custom-built home with the rooms laid out the way you want them.

If you're talented enough to act as your own general contractor, you can save some money as well.

When you build from scratch, you can take advantage of new ideas for insulating your home and using better heating and cooling systems to make it more energy-efficient.

With new building materials, you can design your house to be practically maintenance-free. Kitchen and bathroom fixtures in the latest styles can be installed.

What it all boils down to for most of us, though, is the money involved. If you build your own house, you can probably count on the final dollar figure to be far more than you planned. Ask anyone who has built a house how many times along the way he has had to increase the budget.

The cost of labor and building materials continues to rise. Your builder will not absorb these higher costs, since he won't add on his fee until the end of the project.

It's a rare builder who will quote you a flat rate at the beginning of a project.

On mortgage interest rates, you'll at least know what percentage you'll be paying from the start. That's because you'll have to apply for a construction loan which will be converted to a long-term mortgage loan. There's only one set of closing costs for both loans.

Long-term rates now are running around 14 percent.

Let's say that you could theoretically build a house for $75,000, above the cost of the lot, if you contracted out the work yourself. If you hire a builder to do the job, you can figure on 10 to 12 percent as an average fee. That would make your $75,000 house cost, say, $82,500 to $84,000. In some parts of the United States it would be far higher.

If you want an architect to design the house, his fee would be approximately another 10 percent, but it could be more, making the house cost another $7,500 and up.

To many people, an architect is a luxury they can't afford.

Unless you can act as your own general contractor, which would be the cheapest way, although there are a lot of pitfalls, you'll have to hire a builder. Be absolutely sure to check out a builder's credentials, ask for references (and check them out thoroughly), and be very wary before signing a contract.

The lending institution in back of your construction loan may refuse to release money if the building is poor. All of the money isn't released at once. It's usually released a third at a time as progress is checked by an inspector from the lender.

Having a house built sounds discouraging at first, yet after checking with many people who built their own home, most of them admitted they were glad they did. Despite all the problems that had to be solved, the result was worth it, according to the homeowners.

When asked if they would do it again, most of them said yes, but the next time they'd be better informed about the pitfalls.

New homes cost $35 or more a square foot to build, not counting the cost of the lot and landscaping. Again, it depends on where you live. Older homes are usally appraised at about $22 to $25 a square foot, not counting the lot and detached buildings, such as a garage.

If you have less than $75,000 to spend on a house, it would probably be better to see what you can find in a ready-built house, but even that may be hard to find.