How it works…
A new custom home is a very significant investment, and building one will be one of the most exciting things you will do in a lifetime. It’s important to be informed and organized when you begin, so you’ll be sure to enjoy a successful result. The following is a “nuts and bolts” summary of the basics to help you get started.
Let’s Talk Money
How it works: The home price that fits your budget will help you decide on the appropriate community where you will build, and the style of home that works for you. It’s a waste of time to start the process until you have some idea what you can afford.
What to do: Unless you are fortunate enough to have cash in the bank, you will probably need a loan to close on your custom dream home when it is complete. Make an appointment with a good lender. Get qualified! Learn about financing options.
Determine how much money you need for a down payment and exactly how much you can handle for a monthly house payment. Even if you have cash in the bank, your builder and/or any real estate agent you might work with will probably need to see verification of these funds at time of contractual purchase agreement.
Things to consider: There are all kinds of lenders and all kinds of loans available. You may want to talk to a mortgage broker as well as a mortgage banker. There is a lot of information available on the internet. Learn all you can so you have a list of questions when you sit down with a lender.
Now you need to choose a builder and a home site
How it works: Let’s assume that you have chosen a community with home sites developed and ready for building. Many developers sell home sites only to their approved list of builders, so in some cases, the site you like may dictate the builder you decide to work with. Ask! Markets have changed over the recent years and communities often sell directly to homeowners. You might find a home site not yet released for sale and put your name on it. Or you may be planning to build on acreage.
What to do to choose a home site: Visit the sales organization for the community. Request a plat map of the community indicating the home sites available or soon to be available. Get out and walk the sites. And if you are looking at acreage, get out and walk the boundaries and find out what is required for development.
Things to consider when choosing a home site: Are views important to you? How about trees? Do you want morning sun on your driveway or on your patio? How do you feel about a walk-out basement? This will require a site with a slope. Think about the size of the yard. You may need space for entertaining or for children’s toys; or maybe you prefer a smaller site with a small space to maintain. Ask about soil conditions, drainage, zoning, and codes.
What to do to choose a builder: Visit the community of interest. Learn all you can about how home site sales are handled. This is important if home sites are sold only to builders. What are the procedures? Then learn all you can about the builders in the area. To research builders, you can ask for references, check with trade associations, and look up builders’ legal histories in online court records. You should also search out references on your own, rather than relying only on a builder’s list.
MOST IMPORTANTLY – Visit the builder’s web site. See if the photos and style represent what you have in mind for your own home. Ask for homeowner and banking testimonials. When you narrow it down, don’t hesitate to ask for references; then make your decision.
Things to consider when choosing a builder: Does the builder provide a good warranty program? What is covered and for how long? What do homeowners, bankers and contractors say about this builder’s history, stability reputation and follow up? Hopefully nothing will go wrong after you take possession of your new home, but in the event something does, a good builder will be there to make it right for as long as specified in the warranty agreement.
Think about the style of home you want to build
How it works: There are all shapes and sizes of homes, and there are all kinds of styles and decors. Some of this will be dictated by the community where you choose to build. Remember however, that this is your custom dream home, so begin with a written list of your specific wants and needs.
What to do: Make a file of pictures you like from magazines; pull pictures of inside and outside living areas. A great source for this information is the internet: Houzz, Pinterest, and home-builder websites. Drive neighborhoods and take pictures of homes you like. Visit model homes and write down lots of ideas. Nobody knows what your dreams are unless you are prepared to tell them. Your drawings don’t need to be any thing sophisticated, but it will make a rough sketch of the layout you have in mind, and help you later when working with your team of experts.
Things to consider: Ranch or two-story? How many bedrooms do you require? How many garage spaces are necessary? Is it important to have a walk-out basement? Will you want to finish the entire basement? Is it important that you have a formal dining room and/or formal living room? Do you have a piano or a pool table, workout equipment or other large pieces of furniture that must fit into certain rooms? What are your special interests? Do you love to cook? Need wine storage? Do you need a workspace in the garage? Do you want a theatre room, sewing room, studio for painting or music, special entertainment areas? What about outside living areas, outdoor kitchen, patio with views? And do you like contemporary lines, a lodge look, or maybe an old world style?
Location Location Location
How it works: The next step is to determine where you want to live. What type of community or homesite in what part of the city or countryside will most meet your lifestyle requirements and provide you with the most happiness? There are a limited number of developed communities where custom homes are being built, so this may require some early research before you start driving. Some communities sell home sites only to builders. Other communities will sell a home site directly to a homeowner. Ask!!
Another alternative is to purchase undeveloped acreage. In this case, you will need a team of professionals to assist you in bringing in utilities for your new home an working with the city and county involved for the necessary permits.
The last alternative is community where one builder builds the same floor plan again and again in the community. This might work for you, but you won’t be building a custom home. The internet is a good source of information.
What to do: Drive the streets in the communities. See if you like the feel of the neighborhood. Talk to people who live there. Ask questions about their likes and dislikes. This is a good time to inquire about builders as well.
Things To Consider: Where do you work? Where will your children go to school? Are you willing to commute in exchange for more acreage, better views, cleaner air, and/or trees? What amenities do you enjoy? What conveniences does your family require? What is nearby, i.e. medical facilities, leisure facilities, shopping, parks, hiking/biking trails, etc.? You might also consider the potential for resale if you think you may move again in the near future.
The Building Process
How it works: It’s time to sit down with your builder and review your sketches, and list of wants and needs. If you already have architectural plans, you are a step ahead. Either way, the builder will have someone on staff who can design new plans or help modify your existing plans to fit the appropriate home site.
You may expect to pay a non-refundable deposit (this deposit will usually be applied to your total home price) to have working drawings prepared. The plans are then put out to the subcontractors for bid. Once all the bids are in, a price can be determined.
It is not uncommon when building a custom home to pay cost plus a percentage for the final sales price. When you give the go ahead and it’s time to break ground, a contractual agreement will be signed by you and the builder. You will likely pay another non-refundable deposit at this time; and as before, this money will go toward your final closing price.
It will take around 120 days to build a custom home (possibly more), depending on the number of changes that are made. There are always some changes – expect it! When you make changes, the purchase agreement needs to be amended and the price changed; or in some cases, you will pay an additional deposit for the custom change. Be sure you understand the change-order procedure at time of contractual agreement.
When the home is complete, the builder will obtain a certificate of occupancy from the county building department. Then, the builder will invite you to a homeowner’s orientation meeting where you will learn how your home functions and how to maintain it. This meeting is often referred to as the “walk through.” This is the appropriate time to ask lots of questions.
A final settlement date will be made where you will sign closing papers, including loan documents if you are financing the new home. (This step may vary depending on whether you or the builder owned the home site when your relationship began.) You take title at closing and you will leave with keys to your new dream home! Congratulations!!!
What to do: Visit the building site often during construction. Watch for things that you might not understand or you want to change. Remember however, that you can’t negotiate with the subcontractors; you will need to visit with your builder and/or architect regarding any changes.
Within the time frames provided by the builder, visit showrooms for appliances, plumbing fixtures, tile, hardwood, carpet, light fixtures, and any other items that require your decisions.
Communicate with the builder regarding forecasted completion and closing dates. Work with your lender if you are getting a new home loan to be sure all is in order by closing time. Start thinking about a moving company and arrange for your personal items and furniture to be moved. Never move any of your belongings into the home before you take possession. There is no homeowner’s insurance to protect you.
What your builder will do: Whether there is a construction loan in your name or in the builder’s name, or you are paying cash, your builder will usually pay all the subcontractors as the work is properly completed. Then the builder will submit reports of invoices paid to the lender (or to your source of cash), and request appropriate funding. It is the builder’s job to provide the appropriate insurance for the job site, qualify and supervise the subcontractors, and obtain all required permits.
The builder will research and recommend the most efficient and economic products and guide you in selecting decorator items like tile, carpet, light fixtures and more. Your builder will provide a warranty program at closing.
That pretty much wraps it up!
In summary, my best advice is to contract with a team of experts, experienced people you can trust, then relax, enjoy the building experience, and have fun planning your new lifestyle in your wonderful new custom home.