If you cannot find the perfect house for sale on the market, consider the option of building a custom home to suit your specific needs. When you make the choice to build a house, there are some major decisions that you will have to make. No matter which house plan you choose and regardless of your real estate experience, there are 3 major things you must do right the first time. House plans can be changed as you build, but these 3 items are not so easy to change without spending a great deal of money:
- Choosing a Building Lot
- Choosing a Builder
- Choosing a Construction Lender
Choosing a Building Lot or Vacant Land
The process begins with finding a vacant building lot or tract of land. Local knowledge of perfect building locations is essential, so be sure to work with a qualified real estate broker. It is obviously very important to choose a location that suits you and your lifestyle, but there are some other more subtle factors.
Consider how important it is for you to be close to shopping, entertainment, parks & recreation, work, school, healthcare and places of worship, etc. Spend time driving back and forth from candidate lots to these places to get a sense of what it will be like to live in a particular location, and do so at different times on different days (and also at night).
Consider access to things like public water and sewer systems. Some lots have access to public systems, but many do not. In either event, you need to know the costs of hooking into public systems and the costs and feasibility of building a septic system and/or having a well drilled if public utilities are not available.
Choose a lot that is suitable for the size and type of house that you want to build. It is important to avoid "overbuilding" or "underbuilding". Specifically, if the neighborhood that you choose is filled with homes in the 3,000 - 4,000 square foot range, you should probably avoid building a 7,000 square foot house in the same neighborhood. The reason is that when you go to sell, and one day you will, you want to get the maximum value from your property. If your house is by far the biggest or smallest in your neighborhood, you will pay the price later in terms of selling price and the amount of time it takes the house to sell.
A local real estate agent can help you make all of these decisions. He or she will be familiar with a variety of different locations and what is on the market. A good agent will also know what is not actively on the market, but available. He or she will have local knowledge of public utilities and the costs of building a septic system or drilling a well. Finally, your local agent can provide you with market data to help you make a strategic decision about where and what to build from an investment standpoint.
Choosing a Builder
Your builder is someone you are going to have an ongoing relationship for about 12 months that will deal with your home and probably one of your biggest investments. There will be some bumps in the road as the process unfolds; and you must have an open and frequent line of communication and share a common goal and vision that goes beyond the blueprints for your new home. Again, your local real estate agent can assist you when it comes to selecting a builder. He or she will have local knowledge about area contractors, their reputation and the quality of their work. Good agents will be able to show you the work of multiple builders even before you begin the selection process. Remember, your local realtor spends most of his or her time listing and showing houses that were built by local builders in the first place. Here are a few basic tips to help choose a builder and keep your project on track:
Get references - and don't hire a builder until you have visited two or three other houses completed by the builder. Ideally, get the address of every house the builder has built in the last 2 or three years and contact several of the owners randomly. Don't expect a perfect report card. Building a house is tough business and it is almost impossible to make a homeowner happy at every turn. Ask what each owner might have done differently if they could build the house all over again.
Building a Custom Home Don't ever miss this meeting - it will keep the project on track, keep costs and changes to a minimum and establish a great working relationship. Make sure that all "change orders" are reviewed and signed during the meeting; and have an agreement that the only changes you will pay for are those that you agree to in writing during the weekly meeting. Above all, make sure that your builder agrees in writing to the weekly meeting as condition of getting paid for the job. Chances are, if you take this advice, you will move into your new house on time and as a happy customer. The builder will be happier at the end also.
Visit the builder's other working job sites to make sure that they run a tight ship. Specifically, look to see if unused materials are organized and protected from the weather. Make sure that there is some evidence of a temporary workspace to review plans. Insure that garbage and construction waste is routinely removed from the job site. Also, investigate to make certain that work begins and ends each day on a regular schedule - same time, every day. If not, it may mean that the job is not a top priority. The rest of us work until 5 pm or later every Friday; and so should your builder's crew. Find out what time work stops on Fridays. Do not pay for your builder's crew to drive to his office at 2 pm every Friday to pick a pay check.
Make it clear to your builder that you expect progress every day of every week. Your money is being used to build a house that you cannot move into until it is completed. A day of inactivity at the site costs you money and you deserve progress in exchange for that money.
Don't expect your builder to have a crystal ball. Do expect some minor deviations from what is planned. You will have fewer surprises cost-wise if you take the time to make sure that every possible item is included in the construction price. Before making a commitment to use any builder, make sure you have a comprehensive list of what is included in the price and what is not included in the price. If you add something extra in mid-stream, that will result in additional time and expense to the builder. Don't expect changes for free. Any change takes time and translates into extra costs. If you do not agree that it is reasonable for the builder to charge you more when you make changes, then you should probably consider buying a house that is already built.
Choosing a Lender
If you are going to finance the construction of your custom home, you will need to get a construction loan. Basically, a construction loan is used to pay for the construction of your custom home. There is closing, and you essentially get a line of credit to match the cost of construction. Each month, you pay interest on the part of that credit line that has been used. As the months go by and construction progresses, your interest payments increase. When the house is completed, the construction loan is closed out and a permanent loan is put in place; and then you begin making regular payments of principal and interest.
It is essential to have the best information before choosing a lender. Your real estate broker will be familiar with the variety of construction loan programs offered by local banks, and they can point you in the right direction with referrals. Here are a few pointers that may make the process easier: Use a local bank if you can. If you use a national mortgage company, it is less likely that they will be familiar with local building practices, local builders, etc. You may also have a harder time getting your loan approved.
Ask if there are different construction loan programs available. If you end up at a bank where you only have one option, keep looking. You need as many options as possible. Banks sometimes have more flexibility with construction loans than with conventional mortgages. In general, bank usually do not "sell" construction loans, so there can be a wide range of construction loan programs available even in one small community.
Check the fees associated with the loan option. The best deal does not always have the lowest interest rate. Make sure that the combination of interest rate and associated fees yields the best deal for you.
Ask if you can just roll your construction loan into a permanent mortgage with the same bank once the home is completed. This saves you money by avoiding a totally separate closing on a permanent loan. Many banks now offer this option to customers - and it can be a great choice.
Conclusion
This is not to say that real estate brokers are absolutely necessary in this process. However, they do have intimate knowledge of all the most important information in their local marketplace when it comes to building a home. In order to make a living, they must know their local market and the details like: where new homes are selling, where the best schools are located, development trends in the community, new developments on the drawing board, the location of proposed roadways and shopping centers, the reputations of local builders, the most competitive construction lenders and much more. Real estate agents are accustomed to getting calls from local builders for advice about where and what kind of spec homes to build in particular market. Don't hesitate to call on a local broker to ask for the same kind of information. A smart broker will be happy to help you, even if there is no money involved in giving out the information. After all, the real estate business is no different than any other service business - it is built on forming relationships.
Our agents are available to assist you in finding the perfect vacant lot for your ideal custom home. Call 800-788-8814 for more information, or request our FREE DVD of the area.
See listings of New Construction in the Pinehurst and Southern Pines area.
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