Buying a Lot Question

[BCClone]

Construction costs are not going to cheapen up on the aggregate. Certain commodities will, and costs will plateau….but they aren’t going to drop.

I’ve already had steel and lumber drop 5% in the last 4-5 weeks on a project I’m doing.

 

[ricochet]

Thank you all! Great information

One more question, I’ll rephrase slightly.

As I said, we’re thinking we’ll be around a $400K home.
So if I’m looking at homes currently for sale around $400K, in theory I’d be able to buy a lot and build a house for approx that same amount, and with similar home features/finishes, correct?

I know I’m making a lot of assumptions and simplifications, but am I thinking of this the right way?

I'm no expert but I think there is a bit of a premium for building new versus buying used. Not as bad as cars but probably not insignificant. When we built ours I don't think we could have made all the money back if we turned around and sold it six months later.

 

[mynameisjonas]

Thank you all! Great information

One more question, I’ll rephrase slightly.

As I said, we’re thinking we’ll be around a $400K home.
So if I’m looking at homes currently for sale around $400K, in theory I’d be able to buy a lot and build a house for approx that same amount, and with similar home features/finishes, correct?

I know I’m making a lot of assumptions and simplifications, but am I thinking of this the right way?

In theory you should be able to buy a lot and build a $400k house for LESS than $400k. If not you might want to tweak the specs to get there. When the builder owns the lot and carries all the risk, and taking their own construction loans, they’re adding a nice premium there when they sell the finished product. In this case you are the one that is buying the lot and taking care of the financing of the project which will pay your builder as the job is being done. So in theory you should be saving a good chunk by doing it that way.

 

[chadly82]

I have a question for anyone that’s bought a lot and built a house.

I’m looking at a future development and have had some very initial discussions with the owner.
My plan is to buy a lot next year, but not build for another 3-4 years.

So here’s the question: When doing my budgeting, how do I think about the cost of the lot in relation to the house I build, or are they completely separate?

For example, if the lot is $50K and I want to build a $400K house, would my mortgage be for $350K or $400K? Like when I’m looking at $400K homes on Zillow, and I want to build something comparable.
Note, I’ll have the lot paid off before building.

I’ve obviously never built before so just curious how this works.

Does the developer have a requirement to have the build started within a certain period? I used to build homes and would be happy to answer any questions I can but definitely a ton of factors

 

[clonebb]

Some developments will require you build with in a year of purchase. Also once you buy you are responsible for upkeep like mowing.

 

[Donqluione]

I have a question for anyone that’s bought a lot and built a house.

I’m looking at a future development and have had some very initial discussions with the owner.
My plan is to buy a lot next year, but not build for another 3-4 years.

So here’s the question: When doing my budgeting, how do I think about the cost of the lot in relation to the house I build, or are they completely separate?

For example, if the lot is $50K and I want to build a $400K house, would my mortgage be for $350K or $400K? Like when I’m looking at $400K homes on Zillow, and I want to build something comparable.
Note, I’ll have the lot paid off before building.

I’ve obviously never built before so just curious how this works.

Has the developer clearly agreed to sell a lot you? Reason for asking is that most developers won't sell directly to an individual, and especially not prime lots. Usually they sell a package of lots to various builders. So, if you want a particular lot you have to use whichever builder owns (usually holds an option) on that particular lot. Or, your preferred builder needs to try to buy or trade for the lot you want.

Builders in turn usually have set plans to choose from: if you have a "custom" plan, there will be a select few builders willing to do that, and the cost is going to be significantly higher. And you should plan to be much more "hands on" through the process, perhaps not the best way to go for someone who doesn't have experience and expertise. That's because contractors/subs tend to do things the way they've always done it, which is why builders stick to the same set of plans. Doing things the same way doesn't always translate to a custom plan, nor to how YOU want it to be done.

Plus as others have said, it would be common to require that construction occur within a fairly short period of time, such as 2 or 3 years. The developer has obligations that continue until the lots have all been built upon, unless he can pass those on to a builder who still has vacant lots, wouldn't work to pass those on to you.

So, you should clarify whether the developer truly will sell the lot you want, to you personally. Or whether there's been a misunderstanding, that perhaps when he said that he meant that he'd be happy to sell a lot to your builder. And not necessarily the "pick of the litter". Clarification could avoid a lot of disappointment and frustration, not to mention lots of expense.