After the pandemic, there are fewer homes on the market, and property prices have risen. Is building your own home a viable alternative? Follow these four steps to find out the answer.
Step 1: Find Land to Build a Home
Your first task is to find land where you can build a home. You can easily start using online real estate databases such as Realtor.com, Land.com, LandHub.com, and Trulia.com. These sites usually showcase listings from the Multiple Listing Service accessible by licensed real estate agents. Agents will also have access to off-market listings known as “pocket listings.” These properties have an owner willing to sell, but are not publically advertised – so they may be distressed, yet still hold value for someone with a creative vision.
Land listings are typically represented by the seller’s agent, so it would be beneficial to hire a buyer’s agent who can secure the best deal for your budget. Choose someone with experience in land sales rather than regular residential real estate sales.
When selecting land for your home, it’s also important to consider access to services and roads in the area. Here are some other things to check to ensure you can build your dream home on a vacant lot.
- Inquire about zoning regulations.
- Conduct a soil test.
- Check for permit approvals.
Step 2: Build a Team
It is essential to assemble your team before purchasing the land. Your team will help you draft preliminary designs and understand estimated costs. This information will assist you in deciding whether you prefer to buy the land and build or wait to find a resale or a low-priced offer on the market. Builders, carpenters, and other tradespeople will know the current prices for materials, and you should add an additional 30 percent on top of that for last-minute mistakes or upgrades.
You will need to hire an experienced architect or architectural designer in your area. If you won’t be overseeing the entire process, you’ll need a construction project manager who can help you choose potential contractors, check references, and verify permits. Discuss contract and payment options, including whether a fixed-price contract is on the table. This can help you avoid unexpected construction costs.
It is possible to hire a design-build firm that already has an integrated team, but you should be prepared for a budget increase over any quoted prices. Material and labor costs are at an all-time high. Who knows what the approved prices will be after securing title, documents, and permits to start the work?
Step 3: Financing the Purchase
Obtaining financing to purchase the land can be challenging, as many lenders view new construction as a risk. However, there are multiple financing options available if you can provide evidence of construction plans. Accessing and securing this type of financing is different from going to your bank for a typical mortgage loan, so review all terms and conditions as well as repayment schedules carefully.
Work with your agent to submit a written offer to the seller, and be prepared to negotiate. If the owner is out of town or has inherited the land, it may take time to assess the true value of the offer. If you are buying this home to grow your family, be sure that your agent communicates that to the seller, who may think the buyer is a developer trying to make a quick lowball offer. Sellers may be more willing to negotiate on your budget once they know you plan to stay long-term.
Step 4:
4: Starting Construction
This is the most exciting part. You can watch your dream home become a reality. But this usually happens after months, if not years, of actually purchasing the land. Once construction begins, you will need inspectors to approve various parts of the process. There is a lot of paperwork required for basic things like plumbing, dumpster access, and access from the main road, etc.
Some people take time off work to fully participate in the building process. Others rely on their team, but you will face choices regarding fixtures and materials that will definitely come your way. Track the progress of the construction and the actual expenses. Don’t let enthusiasm push you away from your original budget.
Put it all together… After working through these four steps, you will have a good idea of the financial and time commitments associated with building your own home. Now you can compare that with home prices in the market. Is it cheaper to buy or build? Is it better to build or buy? That completely depends on your personal preferences and the cost of available properties that meet your needs: square footage, design, number of rooms and bathrooms. Now you can decide if you have the patience and money needed to embark on a long-term project to build your everlasting home.
Source: https://www.realsimple.com/work-life/money/home-finance/buy-land-build-house-cost
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