I attended a home building seminar for Realtors yesterday sponsored by Lynn and Bill Holley of Holley Development/Holley-Schink Builders. It was great to get a "birds eye view" from a builder. My favorite lesson was the one about price per square foot, because it is the number one question Realtors and builders face.
The problem is that its nearly impossible to give an accurate answer. There are many factors that drive costs from style of the home (ranch vs. 2 story), to level of finishes (granite vs. formica, etc.), roofing systems, quality of mechanicals, appliances, etc. One buyer may only want a basic house, another may want all high end finishes. In today's market, a home with upper end finishes and higher end siding can cost about $130-150/sf without the lot.
Bill and Lynn also offered the following helpful guidelines:
- Get Financing. There are generally two types of loans when you build: a turn key loan where the builder finances the entire project, including the lot and there is a standard closing at the end, and construction loan where the lots is purchased by the buyer and then they hire the builder. Generally the construction loans are interest only loan that converts to conventional when the home is complete. Make sure that your lender is familiar with construction loans. Ask questions about draws, pre-payment penalties, and lock ins.
- Visit many homes. Have your Realtor help you get a sense of what a 14x14 master bedroom looks like, or what a 8x8 foyer feels like. If you already have a home plan picked out, this will help cement your decision. If you are still in a home plan haze, this will help determine your priorities. The more you know about what you want, the better you and your Realtor can communicate these wants, needs and desires to the builder.
- Select a house plan and lot. If you have your heart set on an exposed lower level that requires a certain type of lot. A narrow lot will be best for a two story vs. a sprawling ranch. If your plan takes priority over lot, you may want to bring a builder in early to make sure that home can be built on the lot you have chosen. Or your Realtor can make the offer on the vacant lot contingent on builder approval.
- Get a builder. Pay attention to experience, reputation, and personal rapport. My personal bias is one who pays attention to detail, as in the finer details of a building contract as well as one who will pay attention to the finer details of your home. I also think liking the builder is important because you will work closely over the next few months, and its supposed to be a fun process.
- Select finishes. I like builders who do this before the final building contract because then your personal choices of finishes are actually in the contract. This means fewer change orders and a more accurate depiction of what the final costs will be. Most builders do this as the hole is being dug or plans are being finalized. Just be sure your allowances are accurate, i.e. $4000 may not be enough for appliances if the refrigerator alone is that much.
- Communicate and follow the process. Your contractor should be scheduling meetings with you and/or your Realtor at the building site throughout the process. This will help you feel comfortable with the final product.
There are many other things that can come into play: well & septic systems, subdivision deed restrictions and covenants, landscaping, and builder warranties. Make sure you have someone who is on your side helping you make sure you've thought of it all!
(Again, thanks to Lynn and Bill Holley for helping me lay this out easily for my buyers!)
