Buying a Lot Before Consulting a Builder: Pros and Cons
When you’re planning to build your dream home, locating the right lot is key. Selecting the ideal site for your dream home is one of the most important decisions you’ll make throughout the entire construction process. Lay the best foundation for the homeowner experience of your dreams by making the right choice, because once you do, there’s no going back. Here are some pros and cons of buying a lot before consulting with a builder, as well as a few tips and things to keep in mind when building your custom home.
PRO: Better Terms On Your Custom Home Loan
Once your land is purchased and you’re in the process of getting a loan, you may be able to secure a loan that fully covers building costs. This is because you have already made the commitment once you purchased the land.
Another advantage to building opposed to buying is that the home will be worked on over an extended period of time, resulting in further loan leveraging. Consulting with an attorney, bank, or loan officer prior to buying land is a good idea. This will ensure you’re completely aware of how construction and land loans operate, as well as any permits necessary prior to buying and/or building on land.
CON: You Pay More Upfront
In order to purchase land and hire a custom builder, you’re going to need to have more funds upfront. Some banks will not issue a construction loan if you don’t have 20-30% of solid equity invested in the project/property. Some things you’ll need to consider:
The lot size and if it’s conforming or not?
Are there any restrictions to building on your purchased lot?
Will you need variances for the type and size of the dream home you want to build?
If there is already a home on the property, can it be fully demolished?
These are all questions that your custom builder would easily answer and guide you through when choosing your perfect lot and building your custom dream home.
PRO: You’re In Charge
When you have done extensive amounts of market research, found the perfect location for your new dream home, and purchased the land to build your home on, it’s a great feeling knowing that ultimately you are in charge. The location for your new home is truly yours and you have successfully completed the first step to building. Now you can begin designing the home of your dreams with your builder.
CON: Could Be Risky If You Don’t Have a Good Lawyer
You want a builder with a fair contract and good insurance. If you choose a builder that will build on land you own, make sure they’re properly insured for workers compensation and liability (be sure it’s for both). You should also make sure payouts to the company are going through a third party escrow company or a title company. This ensures the workers employed by your builder are actually being paid, although this may vary from state to state.
PRO: Take Your Time on Your Custom Home
You can choose the lot you want and take as much time as you need to pick the right builder, find the right plans, and workout all the details without andy time sensitivities. Having ample time for these decisions makes the process of designing your dream home even more enjoyable.
Although it’s nice to feel no pressure to make quick decisions, it’s good to keep in mind that the building process itself is very time-consuming. The average time taken to come up with a personalized production plan is typically 3 months, while the average time to actually build a custom home is 10-12 months depending on size, the permit process, and finishes. So be patient and prepare yourself for the amount of time that you won’t be living in your home while it’s being built. It’s a long procedure but will be completely worth it once you set eyes on your beautiful customized dream home.
CON: Issues with the Property
Sometimes the property itself will have physical issues. It’s very important that you’re clear on the situation with sewer, septic, water, and road access. Some things to avoid are flat lots due to water runoff issues, which can eventually destroy lawns and landscapes through erosion.
With some mountain properties, steeply graded land can be very difficult to build on, so you want to be sure you aren’t making any plans for a structure your foundation won’t be able to hold up over a long period of time.
Other Things to Keep in Mind When Building Your Custom Home:
Get to Know the Area: Before making your final decision and purchasing the land, explore the surrounding area. Research the school districts and crime rates, as well as take some time to drive around the neighborhood and check out the surrounding area. Find all the local hotspots, schools, restaurants, and shopping.
Carefully Select Your Custom Builder: Prior to hiring your builder, get a look at some of their previous work. If you can, drive by homes they have built, do your research, check what people have to say about the builder. You should also check the relationship between the builder, subcontractors, and the supply house – you want to be sure they are paying their bills. A builder who is behind in payments will most likely encounter delays in receiving materials and will have difficulty keeping a quality crew: a hassle you definitely want to avoid.
Don’t Choose Your Builder Based on Bid: When you’re going over your options, you may notice some builders have a higher bid and some a lower bid. This is not the rank you want to decide by when choosing your builder. A high bid doesn’t ensure an exceptional product and the lower bid could mean that you will be surprised with extra costs as the construction of the home progresses. Typically the low number is used to grab your attention, then the extra expenses will be added later once you’ve already started the building process.
Hire Locally: References are a great way to get an idea of the builders reputation. Do your research and ask around, see who is the best builder in your soon-to-be community. Be sure to get everything in writing between you and your builder and subcontractors. Sometimes conversations are forgotten and it’s best to have everything written down so if there’s ever the need, you have something to reference. A well-established local custom home builder will have plenty of quality subcontractors and suppliers nearby, meaning less costly travels delays or time wasted while waiting for out of town materials or crews to arrive.
Build with Your Future in Mind: When designing your home’s layout, planning ahead is very important if you want to continue living in your custom dream home as you grow older. Not only do you want to take into consideration your current lifestyle, but your lifestyle needs a few years down the road. For example, think about including a shaft that could be converted into an elevator, or a master bedroom on the ground floor into your design ideas.
Avoid Overbuilding: Before finalizing the plans for your home, compare your home plan to others on your block. You don’t want to be the most expensive home on your street; when it comes time to sell, you won’t get your money back.
Don’t Fall for the Latest Trends: Supply your home with technology that will last in the time to come. Invest in products that have been on the market for a year or two. They’re less expensive, more readily available, and initial design flaws have been upgraded so the products are more reliable. State of the art features are nice, but some can quickly become outdated.
Don’t Be Afraid to Hire an Architect: Sometimes coming up with a design plan may be harder than you expect, or maybe you just can’t quite get the exact vision of what you want. Hiring an architect can help you illustrate the design plan and contribute to making your home more elegant. It’s an architect’s job to know exactly how to portray your thoughts into reality and bring the design of your dream home to life.
Setting out on your own to find the lot of your dreams can be a very exciting, but also a very daunting task if you don’t go about it in the right way. As long as you follow the steps above and make the right calls, finding your perfect lot and building your dream home will be a great experience.